Case Law Details
ITO Vs Rajaram Ramswarup Jaju (ITAT Pune)
The Revenue filed an appeal before the Income Tax Appellate Tribunal (ITAT), Pune, against the order of the Commissioner of Income Tax (Appeals) [NFAC] for Assessment Year (AY) 2016-17. The assessee also filed a cross objection. The assessee was engaged in the business of extracting cotton seed wash oil and trading edible oil, oil cake, cotton seed, wheat, jowar, soybean, tur, chana and other commodities through its proprietorship concern, M/s Jaju Industries. It had filed its return declaring total income of ₹13,77,900. The assessment was reopened after information that cash deposits of ₹55,30,281 had been made in the assessee’s bank account during the financial year 2015-16. Following the reopening, the Assessing Officer (AO) issued a notice under Section 148 and subsequently completed the reassessment under Sections 147, 144 and 144B after the assessee failed to respond to notices seeking details of the cash deposits. The AO treated the cash deposits as unexplained money under Section 69A and assessed the total income at ₹69,08,181.
Before the Commissioner (Appeals), the assessee raised several grounds along with additional grounds. The Commissioner (Appeals) allowed the appeal on one additional ground without adjudicating the remaining grounds. The Revenue challenged that order before the Tribunal, while the assessee filed a cross objection raising seven grounds.
The Tribunal first considered the assessee’s cross objection. It condoned a delay of 61 days in filing the cross objection after accepting the assessee’s explanation that it became aware of the Department’s appeal only upon receiving the hearing notice and thereafter promptly filed the cross objection.
The Tribunal then examined the legal ground challenging the validity of the reassessment proceedings. The assessee contended that the notice under Section 148 and the proceedings under Section 148A were invalid because the mandatory prior approval under Section 151 had not been obtained from the competent authority. It was argued that since the reassessment related to AY 2016-17 and the notice under Section 148 had been issued on 17.06.2021, more than three years had elapsed from the end of the relevant assessment year. Therefore, under Section 151(ii), approval was required from the Principal Chief Commissioner of Income Tax (Pr. CCIT), whereas the approval had actually been granted by the Principal Commissioner of Income Tax (Pr. CIT).
The Tribunal referred to Section 151 and observed that where reassessment is initiated within three years from the end of the relevant assessment year, approval is to be obtained from the Principal Commissioner or Commissioner. However, where more than three years have elapsed, approval must be obtained from the Principal Chief Commissioner or the specified higher authority under Section 151(ii). On examining the notice under Section 148, the Tribunal found that the approval had been granted by the Principal Commissioner of Income Tax-1, Nashik, despite the reassessment having been initiated after the expiry of three years.
The Tribunal relied on the judgment of the Bombay High Court in Siemens Financial Services Pvt. Ltd. v. DCIT, which held that obtaining sanction from the correct authority under Section 151 is a jurisdictional requirement and that failure to comply with this mandatory requirement renders the reopening invalid. It also referred to the Bombay High Court’s subsequent decision in Gigantic Mercantile (P.) Ltd. v. ACIT and noted the assessee’s reliance on the Supreme Court’s observations in Union of India v. Rajeev Bansal regarding the necessity of obtaining approval from the specified authority under the amended provisions of the Act.
Respectfully following these judicial precedents, the Tribunal held that the approval for issuance of the notice under Section 148 had not been obtained from the authority prescribed under Section 151(ii). Consequently, the reassessment proceedings were held to be invalid, and the reassessment order was declared void ab initio. Having quashed the reassessment proceedings, the Tribunal held that the remaining grounds raised in the cross objection had become academic and did not require adjudication. The cross objection was therefore partly allowed.
Since the reassessment order itself had been declared invalid, the Tribunal held that the Revenue’s appeal had become infructuous and dismissed it. Accordingly, the Revenue’s appeal was dismissed, while the assessee’s cross objection was partly allowed.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the Revenue is directed against the order dated 15.07.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2016-17. The assessee is also in cross objection bearing Cross Objection No.35/PUN/2024.
2. Facts of the case in brief are that the assessee is engaged in the business of extracting cotton seed wash oil and trading edible oil, oil cake, cotton seed, wheat, Jwari, Soyabean, Toor, Chana, etc., through its proprietorship, “M/s Jaju Industries”. The assessee filed his return of income for the year under consideration on 10.10.2016 declaring total income of Rs.13,77,900/-. The case was reopened u/s 148 of the IT Act based on the ground that the assessee had deposited cash amounting to Rs.55,30,281/- in his bank account maintained with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. during the financial year 2015-16. Considering this information, the Assessing Officer initiated reassessment proceedings u/s 147 of the IT Act for the Assessment Year 2016-17. Following the initiation of proceedings, a notice u/s 148 dated 17.06.2021 was issued by the AO, in accordance with the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, and as per subsequent Notification No.38 dated 27.04.2021, which extended the time limit for issuing notices u/s 148 to 30.04.2021 and 30.06.2021, respectively, requiring the appellant to file a return of income. In response to the aforesaid notice, the appellant did not file any return of income. During the assessment proceedings, various notices u/s 142(1) of the IT Act were issued by the Assessing Officer to the assessee on multiple dates, requiring the submission of relevant details concerning the cash deposited by the assessee in his bank account along with its source; however, the assessee failed to furnish any information. Given the assessee’s non-compliance and failure to provide the requested information, the Assessing Officer proceeded to conclude the assessment based on best judgment u/s 147 r.w.s. 144 and 144B of the IT Act. Consequently, the total cash deposits made by the assessee in the bank account were added to its returned income u/s 69A of the IT Act, and the total income of the assessee was assessed at Rs.69,08,181/- vide assessment order dated 12.05.2023.
3. Before Ld. CIT(A)/NFAC, the assessee has raised 7 grounds of appeal and two additional grounds of appeal. Ld. CIT(A)/NFAC adjudicated only additional ground no.2 and allowed the appeal of the assessee and ground nos.1 to 7 and additional ground no.1 were not adjudicated having been rendered academic since the appeal was already allowed on additional aground no.2. It is this order against which the Revenue is in appeal before this Tribunal as well as the assessee has also filed cross objection raising as many as 7 grounds.
4. First we shall take up cross objection filed by the assessee for adjudication.
C.O. No.35/PUN/2024 – By Assessee :
5. There is a delay of 61 days in filing of the above cross objection before this Tribunal. In this regard, the assessee has filed an application for condonation of delay supported by an affidavit. In this regard, it was submitted by Ld. AR that the intimation of second appeal filed by the Department before the Tribunal was not known to the assessee. It was only when the assessee received notice of hearing on 09.12.2024 via Registered Post, the assessee came to know about the appeal filed by the Department and immediately contacted his Chartered Accountant who suggested to file this cross objection. It was further submitted that above delay of 61 days was unintentional and due to the fact of having no knowledge of filing of appeal by the Department. Accordingly, it was prayed to condone the delay and admit the cross objection for adjudication. Ld. DR requested before the Bench not to condone the delay and requested to dismiss the same. In this regard, we find that the application for condonation of delay has been filed which is duly supported by an affidavit and we are satisfied with the reasons mentioned in the application for condonation of delay and we are of the considered opinion that the assessee was prevented by reasonable cause in not filing the cross objection within the time limit prescribed by the Statute. Accordingly, we condone the delay of 61 days and admit the cross objection for adjudication.
6. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is justified. However, it was also submitted that the assessee has raised legal ground no.2 before Ld. CIT(A)/NFAC which was not decided by him since the appeal of the assessee was decided on additional ground no.2 and, therefore, Ld. CIT(A)/NFAC has not adjudicated all other grounds including ground no.2 raised before him by the assessee. Now, before us Ld. AR of the assessee has raised 7 ground in his cross objection including ground no.1 which was also raised before Ld. CIT(A)/NFAC as ground no.2 in the memo of appeal Form No.35. In this regard, Ld. AR further submitted that ground no.1 raised in the cross objection is a legal ground which reads as under:-
“1. Under the facts and circumstances of the case and in law, the order issued under section 148A(b) of the Act and notice issued under section 148 of the Act are bad in law as the AO has not taken prior approval of the appropriate specified authority as specified in section 151 of the Act. Hence the reassessment proceedings are liable to be quashed.”
7. With regard to the above ground no.1, Ld. AR submitted before us that the Assessing Officer has not taken prior approval of the appropriate authority as specified in section 151 and, therefore, the order passed u/s 148A(b) and notice issued u/s 148 are bad in law & consequently the reassessment order passed is also illegal. Accordingly, it was requested that the reassessment proceedings are liable to be quashed.
8. With regard to the above ground no.1 raised by the assesse in his cross objection, Ld. DR appearing from the side of the Revenue submitted before us, that no such irregularity has taken place, therefore, the ground raised by the assessee needs to be dismissed.
9. With regard to the above ground no.1 raised by the assessee in his cross objection, we find that prior to issue of notice u/s 148, the Assessing Officer is required to take prior approval of the appropriate authority as specified in section 151 of the IT Act. In this regard, we refer to relevant provision of section 151, which are as under :-
“[Sanction for issue of notice.
151. Specified authority for the purposes of section 148 and section 148A shall be.
i. Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year,
ii. Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.]”
10. From perusal of the above section, it is crystal clear that if the case is reopened within 3 years from the end of the relevant assessment year, the approval u/s 151(i) is to be obtained from the Pr. Commissioner of Income Tax and if the case is being reopened after 3 years from the end of the relevant assessment year, the approval u/s 151(ii) is required to be obtained from Pr. Chief Commissioner of Income Tax. In the instant case in hand, we find that the period involved is assessment year 2016-17 and the notice u/s 148 was issued on 17.06.2021 i.e. after three years from the end of relevant Assessment Year. Therefore, it is apparent that the case is reopened after 3 years and accordingly the approval was required to be obtained as per section 151(ii) from Pr. Chief Commissioner of Income Tax. In this regard, we find that the approval in the instant case was obtained from Pr. Commissioner of Income Tax. It was obviously not correct since the case was reopened after 3 years from the end of the relevant assessment year, the approval as per section 151(ii) was required to be obtained from Pr. Chief Commissioner of Income Tax. In support of this contention, Ld. AR has produced copy of notice issued u/s 148 of the Act on page no.28 of the paper book, wherein it has been specifically mentioned at Sr. No.3 that this notice is being issued after obtaining the prior approval of the Pr.CIT-1, Nashik accorded on 20.07.2022 vide Reference No.NSK/Pr.CIT-1/Appr. u/s148/Range-1, Abd./2022-23/1476. Accordingly, we find force in the arguments of Ld. Counsel of the assessee that the approval to issue notice u/s 148 was not obtained from appropriate authority and therefore, the consequential reassessment order is illegal and void ab initio since the approval was not obtained from appropriate authority. In this regard, Ld. Counsel of the assessee further relied on the order passed by Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (Civil Appeal No.8629/2024) wherein Hon’ble Supreme Court has continuously emphasized the necessity for obtaining approval from the specified authority as mandated under the amended provisions of the IT Act. Ld. Counsel of the assessee further relied on the judgement passed in the case of Siemens Financial Services Pvt. Ltd. vs. DCIT, Circle-8(2)(1), Mumbai (WP No.4888 of 2022) dated 25.08.2023 wherein Hon’ble Bombay High Court has held as under :-
“As held by this court in J. M. Financials (Supra), Sidhmicro Equities (P) Ltd. (Supra) and confirmed by the Apex Court that any notice issued without the sanction of the correct sanctioning authority will be invalid. This court in Godrej Industries Limited v. DCIT 16 has held that an assessment can be reopened under section 147 and 148 of the Act only on the jurisdictional preconditions being satisfied strictly. This Court held that sanction of a superior officer to the reasons recorded in terms of section 151 should be obtained before issuing the notice under section 148 of the Act and all jurisdictional requirements are required to be satisfied cumulatively and even if one of the numerous jurisdictional requirements necessary for issuing the notice under section 148 of the Act are not satisfied, the reopening of an assessment would fail. Hence, in the present facts also since the approval of the specified authority in terms of section 151(ii) of the Act is a jurisdictional requirement and in the absence of complying with this requirement, the reopening of assessment would fail.”
11. Respectfully following the above decision passed by Hon’ble Bombay High Court (supra), which was also followed in subsequent judgement passed by Hon’ble Bombay High Court in the case of Gigantic Mercantile (P.) Ltd. vs. ACIT, 165 taxmann.com 646 (Bombay), we allow the ground no.1 raised in the cross objection filed by the assessee and hold that the reassessment order passed by the Assessing Officer is not correct since the notice issued u/s 148 for which the approval was not obtained from the appropriate authority according to the provisions of section 151(ii) of the IT Act. Thus, this ground no.1 raised by the assessee in cross objection is allowed.
12. The assessee has also raised ground nos.2 to 7 in his cross objection. Since we have already declared the reopening of the assessment as invalid, the consequential reassessment order also becomes void ab initio & non-est, therefore, these ground nos.2 to 7 becomes only academic hence not required to be adjudicated, therefore, dismissed as such.
13. In the result, the cross objection filed by the assessee in C.O. No.35/PUN/2024 is partly allowed.
ITA No.1882/PUN/2024 – By Revenue :
14. Since we have already decided the cross objection of the assessee wherein the reassessment order has been declared as invalid and void ab initio, the appeal filed by the Revenue becomes infructuous hence dismissed.
15. In the result, the appeal filed by the Revenue in ITA No.1882/PUN/2024 is dismissed.
16. To sum up, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is partly allowed, as indicated above.
Order pronounced on 07th day of March, 2025.
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