DCIT-4 vs. M/s Khushbu Industries; Date of order: 19th October, 2016; [ITA. No. 371/Lkw/2016; A.Y.: 2008-09; Lucknow ITAT] Section 151 – Income escaping assessment – Sanction for issue of notice – Section 151(2) mandates that sanction to be taken for issuance of notice u/s 148 in certain cases has to be of Joint Commissioner, reopening of assessment with approval of Commissioner is unsustainable

11.Pr.
CIT-2 vs. M/s Khushbu Industries [Income tax Appeal No. 1035 of 2017] Date
of order: 11^th November, 2019 (Bombay
High Court)

DCIT-4
vs. M/s Khushbu Industries; Date of order: 19^th October, 2016; [ITA.
No. 371/Lkw/2016; A.Y.: 2008-09; Lucknow ITAT]

Section
151 – Income escaping assessment – Sanction for issue of notice – Section
151(2) mandates that sanction to be taken for issuance of notice u/s 148 in
certain cases has to be of Joint Commissioner, reopening of assessment with
approval of Commissioner is unsustainable

The
assessee filed the return of income u/s 139(1) of the Act on 30^th
September, 2008 declaring an income of Rs. 7,120. The notice u/s 148 was issued
by the Income Tax Officer-1(2), Lucknow who did not have jurisdiction over the
assessee. The jurisdiction lay with the Dy. C.I.T., Range-4, Lucknow, who
completed the assessment proceedings u/s 147 read with section 143(3) of the
Act.

Being aggrieved by
the order of the AO, the assessee company filed an appeal to the CIT(A). The
CIT(A) held that the AO has not taken approval in accordance with the provisions of section 151(2) before issue of
notice u/s 148 of the Act. In the present case, as per section 151(2) of the
Act, if the case is to be reopened after the expiry of four years the approval
/ satisfaction should be only of the Joint Commissioner of Income Tax. But here
it was reopened and notice u/s 148 issued on the approval of the Commissioner
of Income Tax who is a different authority than the Joint Commissioner of
Income Tax as per section 2 of the Act. For this reason, the notice issued u/s
148 is bad in law and liable to be quashed. The approval granted by the
administrative authorities under whom the said AO worked also did not have
valid jurisdiction over the appellant to grant the said approval u/s 151.
Hence, it was held that the reassessment on the basis of an illegal notice u/s
148 was not sustainable.

Aggrieved
by the order of the CIT(A), the Revenue filed an appeal to the Tribunal. The
Tribunal held that the reopening proceedings u/s 148 are bad because the
necessary sanction / approval had not been obtained in terms of section 151 of
the Act. The impugned order of the Tribunal records that the sanction for
issuing the impugned notice had been obtained from the Commissioner of Income
Tax when, in terms of section 151, the sanction had to be obtained from the Joint
Commissioner of Income Tax. Thus, in the absence of sanction / approval from
the appropriate authority as mandated by the Act, the reopening notice itself
was without jurisdiction.

Now
aggrieved by the order of the ITAT, the Revenue appealed to the High Court. The
Court observed that the Commissioner of Income Tax is a higher authority;
therefore the sanction obtained from him would meet the requirement of
obtaining sanction from the Joint Commissioner of Income Tax in terms of
section 151 of the Act will no longer survive. This is in view of the decision
of the Court in Ghanshyam K. Khabrani vs. Asst. CIT (2012) 346 ITR 443
(Bom.) which held that where the Act provides for sanction by the Joint
Commissioner of Income Tax in terms of section 151, then the sanction by the
Commissioner of Income Tax would not meet the requirement of the Act and the
reopening notice would be without jurisdiction. In view of the above, the
appeal was dismissed.