Tax authorities can initiate afresh proceeding if earlier proceeding was invalid

K K Agarwal and Sons HUF Vs ITO (Calcutta High Court)

Tax authorities can initiate afresh proceeding if earlier proceeding was invalid as per law

The Hon’ble Calcutta High Court (“the High Court”) in the case of M/s. KK Agarwal and Sons HUF v. Income Tax Officer (WPA 25770 of 2022) dated December 14, 2022, held that Income Tax authorities can initiate afresh proceedings if the previous proceeding were invalid as per law.

Facts:

M/s. KK Agarwal and Sons HUF (“the Petitioner”) was issued a Notice under Section 148A(b) of the Income Tax Act, 1961 (“the IT Act”) for initiating assessment for the Financial Year 2015-16. The Notice was issued by the Principal Commissioner of Income Tax (“the PCIT”) who did not have the jurisdiction to issue the Notice for initiating assessment after the lapse of 3 Assessment Years. Thereafter, the proceedings were initiated by the tax authorities.

The Petitioner filed the Writ Petition l before the High Court, contending that, since the PCIT did  not have the jurisdiction to issue the Notice, therefore, the Notice itself along with all subsequent proceeding would become invalid as per law.

Issue:

1. Whether the PCIT can issue Notice under Section 148A(b) of the IT Act for the period beyond his jurisdictional power?

2. Whether the tax authorities can initiate afresh proceeding, ones the previous proceeding was quashed on the ground being invalid as per law?

Held:

The High Court held that:

• The Approval was granted by the PCIT for issuing notice under section 148A(b) of the IT Act. However, the PCIT was not the competent authority under Section 151(ii) of the IT Act for issuing notice. Therefore, such approval was not sustainable in the eyes of law. Therefore, the Notice and subsequent proceeding are liable to be quashed.
• Further, the impugned Notice and subsequent proceedings does not bar Income Tax authorities to initiate any fresh proceeding in accordance with law.

By saying so, the appeal filed by the Petitioner was disposed by the High Court.

Relevant Provisions:

Section 148A(b) of the IT Act

The Assessing Officer shall, before issuing any notice under section 148,-

(b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

Section 151 of the IT Act

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 

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

Pursuant to the order of this Court dated 30^th November, 2022, Mr. Dutt learned advocate appearing for the respondent has filed a written instruction with supporting documents on the issue of approval taken by the appropriate authority on issuance of notice under Section 148A(b) of the Income Tax Act, 1961.

It is the case of the petitioner that the assessment year involved for reopening of the assessment is assessment year 2016-2017 and the appropriate authority for grant of approval in such case are the authorities under Section 151(ii) of the Income Tax Act, 1961.

It appears from record and instruction submitted by Mr. Dutt that in this said case approval has been granted by principal CIT -9, Kolkata who is not the authority falls under Section 151(ii) of the Act as such the approval in this case is not an authority authorized under the law and such approval is not sustainable in law and in view of this factual and legal position the impugned notice under Section 148A(b) of the Act and all subsequent proceedings are not sustainable in law and accordingly quashed.

However, quashing of the impugned notice and subsequent proceedings will not be a bar on the part of the Income Tax authorities concerned to initiate any fresh proceeding in future in accordance with law.

With this observation and direction this writ petition being WPA 25770 of 2022 stands disposed of.

Let the record produced by Mr. Dutt be kept with the record.

****

(Author can be reached at info@a2ztaxcorp.com)