Case Law Details
Ganesh Umanath Nayak Vs ITO (ITAT Mumbai)
ITAT Mumbai held that reopening of assessment unsustainable as there is no satisfaction of the competent authority before issuance of notice under section 148 of the Income Tax Act.
Facts- The assessee in appeal has challenged the validity of assessment order on the ground of jurisdiction as well as on merits of the addition.
Assessee submits that the assessment for A.Y. 2008-09 in the case of assessee was reopened beyond the period of four years. As per the provisions of the Act, AO was required to take approval from the Competent Authority u/s.151 of the Act before issuing notice u/s. 148 of the Act . Assessee referred to the notice u/s. 148 of the Act at page No.1 of the Paper Book to highlight that in the notice received by the assessee, it is not mentioned that necessary satisfaction of the CIT has been received. The assessee thereafter, referred to the reasons recorded at page -2 of the Paper Book to show, there is no mention of approval from CIT in the reasons recorded. The assessee submits that the notice issued u/s. 148 of the Act lacks jurisdiction, hence, the reassessment is liable to be quashed on this ground alone.
Conclusion- The primary submission of the assessee challenging the validity of notice issued u/s. 148 is that there is no satisfaction of the competent authority before issuing notice u/s. 148 of the Act. Undisputedly, the Assessing Officer has reopened the assessment for Assessment Year 2008-09 beyond period of four years. Approval/satisfaction from the Competent Authority as specified under the Act was mandatory before issuing notice u/s. 148 of the Act. In the absence of satisfaction, notice issued u/s. 148 of the Act suffers from inherent incurable defect, hence, proceedings arising from defective notice are vitiated. Sufficient opportunity was granted to the Revenue to rebut the contentions raised by the assessee. The Revenue failed to furnish report from the Assessing Officer controverting the arguments raised by the ld. Authorized Representative for the assessee assailing validity of the notice. In the absence of any documentary evidence to show that approval /satisfaction was obtained from Competent Authority before issuing notice u/s. 148 of the Act, the notice u/s. 148 is held to be bad in law/invalid, consequently, proceedings arising there from are vitiated.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals) -34, Mumbai[in short ‘the CIT(A)] dated 31/01/2020 for the Assessment Year 2008-09.
2. This appeal is time barred by 343 days. The assessee has filed an application seeking condonation of delay and explaining reasons causing delay in filing of the appeal. At the outset the ld.Counsel for the assessee submits that the delay in filing of the appeal has been caused due to Covid-19 Pandemic. The ld.Counsel for the assessee submits that the impugned order dated 31/01/2020 was received by the assessee on 03/02/2020. Before the appeal could be filed within the prescribed period of limitation, nationwide lockdown was declared on account of COVID-19 Pandemic. The assessee filed appeal Online on 09/08/2020. To support his contention ld.Counsel for the assessee furnished a copy of e-mail dated 09/08/2020 addressed to the Registrar, Income Tax Appellate Tribunal, Mumbai. The ld.Counsel for the assessee pointed that the assessee had furnished Form No.36, copy of challan to show payment of Fee Rs.10,000/-, copy of the impugned order passed by CIT(A) and the copy of assessment order passed u/s. 143(3) of the Income Tax Act, 1961 [ in short ‘the Act’]. The ld.Counsel for the assessee pointed that the appeal in physical was filed on 12/03/2021. We have examined the documents on record and perused the application for condonation of delay. The delay in filing of the appeal is on account of COVID -19 Pandemic. Though the assessee had furnished relevant documents viz. Form -36, grounds of appeal, copy of CIT(A) order and the assessment order through e-mail on the official e-mail ID of Mumbai Benches, but the appeal could be filed physically on 12/03/2021. The Hon’ble Supreme Court of India , taking suo-motu cognizance of the hardship caused by the pandemic extended limitation period under general and special laws.[Cognizance for Extension of Limitation, In re, 132 taxamann.com 123] This appeal has been filed within the extended period of limitation, hence, there is no delay in filing of the appeal.
3. The assessee in appeal has challenged the validity of assessment order on the ground of jurisdiction as well as on merits of the addition.
4. Shri Ashwin Chhag appearing on behalf of the assessee submits that the assessment for Assessment Year 2008-09 in the case of assessee was reopened beyond the period of four years. As per the provisions of the Act, the Assessing Officer was required to take approval from the Competent Authority u/s.151 of the Act before issuing notice u/s. 148 of the Act . The ld. Authorized Representative for the assessee referred to the notice u/s. 148 of the Act at page No.1 of the Paper Book to highlight that in the notice received by the assessee, it is not mentioned that necessary satisfaction of the CIT has been received. The ld. Authorized Representative for the assessee thereafter, referred to the reasons recorded at page -2 of the Paper Book to show, there is no mention of approval from CIT in the reasons recorded. The ld. Authorized Representative for the assessee submits that the notice issued u/s. 148 of the Act lacks jurisdiction, hence, the reassessment is liable to be quashed on this ground alone. In support of his submission, the ld. Authorized Representative for the assessee placed reliance on the decision in the case of CIT vs. Vikas Promoters Pvt. Ltd., 277 ITR 337 (Del).
4.1 The ld. Authorized Representative for the assessee further submits that the Assessing Officer while issuing notice u/s. 148 of the Act has violated the provisions of section 149(1) (b) of the Act. He pointed that where the assessment has been reopened beyond four years it is obligatory on the part of Assessing Officer to mention that the income escaped in the assessment is above Rs.1.00 lakh. The Assessing Officer has neither mentioned this fact in the notice nor in the reasons recorded for reopening. In support of this argument, the ld. Authorized Representative for the assessee placed reliance on following decisions.
(i) Mahesh Kumar Gupta, Vs CIT 363 ITR 300 (All)
(ii) Usha Agarwal vs ITO in ITA No.167/Agra/2018 for A.Y.2007-08 decided on 19/06/2018.
4.2 The third argument raised by ld. Authorized Representative for the assessee challenging validity of notice issued u/s. 148 of the Act is that the notice u/s.148 of the Act has been issued by one Assessing Officer and the assessment has been made by another. The requirement of the law is that the assessment order should be passed by the same Assessing Officer who has issued the notice. The ld. Authorized Representative for the assessee further submitted that the Assessing Officer who has passed the assessment order had no jurisdiction over the assessee as there is no order u/s. 127 of the Act for the transfer of the jurisdiction. Hence, in the absence of valid jurisdiction the assessment order is null and void. In support of this argument the ld. Authorized Representative for the assessee placed reliance on following decisions:
(i) CIT vs. Lalit Kumar Pardia, 184 com 213 (Bom)
(ii) ITO vs. NVS Builders Pvt. Ltd., in ITA No.3729/Del/2012 A.Y. 2006-07 decided on 08/03/2018.
(iii) Ashish B. Sanghvi vs. ITO in ITA No.329/Mum/2019, A.Y. 2015-16 decided on 21/05/2019.
4.3 Challenging the addition of Rs.8,33,290/- u/s. 69A of the Act on merits, the ld. Authorized Representative for the assessee submits that the assessee had received Rs.7.00 lacs in cash from his wife for payment of furniture work. The wife of the assessee is working as Pilot in Air India. The assessee had furnished bank statement of his wife during assessment proceedings and even before the CIT(A). However, the CIT(A) and the Assessing Officer did not accept the explanation furnished by the assessee. The ld. Authorized Representative for the assessee further submitted that a sum of Rs.5.35 lacs is reflected in the books of assessee. The Assessing Officer failed to verify the same. The assessee had furnished all the details but the Assessing Officer brushed aside the same and made the addition. The ld. Authorized Representative for the assessee contended that the Assessing Officer accepted the income but was not willing to accept the transaction. The ld. Authorized Representative for the assessee prayed for quashing the assessment order.
5. Per contra, Shri R.A.Dhyani representing the Department vehemently defended the assessment order and the validity of the assessment. The Ld. Departmental Representative submits that the assessee for the first time has raised the issue challenging validity of assessment notice. No objection whatsoever was raised by the assessee challenging jurisdiction of Assessing Officer or raised objection on satisfaction /approval from the CIT for issuing notice. The ld. Departmental Representative vehemently asserted that the assessee is now raising this trivial issues pointing defects in the notice at second appellate stage as the assessee is not having a strong case on merit. The ld. Departmental Representative strongly objected to the new ground raised in appeal challenging the validity of assessment / notice u/s. 148 of the Act.
5.1 On merits of the issue, the ld. Departmental Representative vehemently placed reliance on the assessment order para 10.1 and para 10.2 and the order of CIT(A).
6. Rebutting the argument made on behalf of the Department/ respondent, the ld. Authorized Representative for the assessee submits that the jurisdictional issue can be raised at any stage. He admitted that the validity of notice and assessment order was not challenged before the authorities below and the issue has been raised for the first time before the Tribunal. The ld. Authorized Representative for the assessee submits that it is a legal ground hence, can be raised at any stage. No fresh documents are required to be furnished for adjudicating the legal issue. In support of his submissions the ld. Authorized Representative for the assessee placed reliance on the case of National Thermal Power Company (NTPC), 229 ITR 383(SC)
7. We have heard the submissions made by rival sides and have examined the orders of authorities below. In ground No.1 of appeal, the assessee has challenged validity of reassessment proceeding. The primary contention of the assessee is that the notice has been issued u/s. 148 of the Act without the satisfaction of CIT. The copy of notice u/s. 148 dated 02/05/2013 served on the assessee is at page 1 of the Paper Book. A perusal of the same reveals that the notice is in pre-printed Performa. The details of the concerned CIT from whom necessary satisfaction was obtained has not been mentioned in the notice. During the course of hearing on 04/07/2022, the D.R sought time to seek report from the Assessing Officer with respect to the objection raised by the assessee on approval / satisfaction from the concerned authority at the time of issuance of notice u/s. 148 of the Act and also report to the effect that the Assessing Officer who has passed the assessment order had valid jurisdiction. One month time was allowed to the D.R for furnishing the said report and the appeal was adjourned to 3/08/2022. On the said date the D.R failed to produce the report from Assessing Officer. The D.R sought time to check status of report, however, on the next date i.e. 04/08/2022 the D.R expressed inability to get the report from the concerned Assessing Officer. The appeal was taken as heard on that day. Thereafter, the appeal was re-fixed for clarification on 25/11/2022. The Revenue still failed to furnish report from the Assessing Officer and finally the appeal was taken as heard on 23/12/2022.
8. The primary submission of the assessee challenging the validity of notice issued u/s. 148 is that there is no satisfaction of the competent authority before issuing notice u/s. 148 of the Act. Undisputedly, the Assessing Officer has reopened the assessment for Assessment Year 2008-09 beyond period of four years. Approval/satisfaction from the Competent Authority as specified under the Act was mandatory before issuing notice u/s. 148 of the Act. In the absence of satisfaction, notice issued u/s. 148 of the Act suffers from inherent incurable defect, hence, proceedings arising from defective notice are vitiated. Sufficient opportunity was granted to the Revenue to rebut the contentions raised by the assessee. The Revenue failed to furnish report from the Assessing Officer controverting the arguments raised by the ld. Authorized Representative for the assessee assailing validity of the notice. In the absence of any documentary evidence to show that approval /satisfaction was obtained from Competent Authority before issuing notice u/s. 148 of the Act, the notice u/s. 148 is held to be bad in law/invalid, consequently, proceedings arising there from are vitiated. The assessee succeeds on ground No.1 of the appeal.
9. Since, jurisdictional issue has been decided in favour of the assessee, the ground No.2 assailing additions on merit has become academic, therefore, is left open at this stage.
10. In the result, assessment order is set aside and appeal of the assessee is allowed.
Order pronounced in the open Court on Friday the 17th day of March, 2023.
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