Reassessment – Sections 147, 148 and 151 of ITA, 1961 – Where A.O. issued reassessment notice on basis of sanction granted by Chief Commissioner – Since Chief Commissioner was not specified officer u/s 151(2) to grant such sanction, impugned notice was to be quashed

14. Miranda Tools (P) Ltd.
vs. ITO

[2020] 114 taxmann.com 584
(Bom.)

Date of order: 14^th
November, 2019

A.Y.: 2014-15

Reassessment – Sections 147, 148
and 151 of ITA, 1961 – Where A.O. issued reassessment notice on basis of
sanction granted by Chief Commissioner – Since Chief Commissioner was not
specified officer u/s 151(2) to grant such sanction, impugned notice was to be
quashed

The petitioner is a company
engaged in the business of manufacture and marketing of fabrics. The petitioner
filed its return of income for the A.Y. 2014-15 on 22^nd September,
2014 declaring NIL income. The assessment was completed u/s 143(3) of the
Income-tax Act, 1961 by an order dated 1^st September, 2016.
Thereafter, on 26^th February, 2019, the A.O. issued a notice u/s 148
of the Act on the ground that he has reason to believe that the income
chargeable to tax in respect of share application money for the relevant
assessment year has escaped assessment. The petitioner submitted its
objections. The A.O. rejected the objections.

The assessee filed a writ
petition and challenged the reopening of the assessment. The Bombay High Court
allowed the writ petition and held as under:

‘i) As per the provisions of section 151(2) of the Act, a sanction to
issue notice for reopening u/s 148 of the Act has to be given by the Joint
Commissioner of Income Tax in case the reassessment is sought to be done before
(or within) four years. Under section 2(28C) of the Act, a Joint
Commissioner also means Additional Commissioner of Income Tax. In the present
case, the A.O. submitted a proposal to the Principal Chief Commissioner of Income
Tax for reopening the assessment u/s 148 on 6^th February, 2019.

ii) The question arises whether the sanction granted by the Chief
Commissioner of Income Tax would fulfil the requirement of section 151. It has
long been settled that when the statute mandates the satisfaction of a
particular authority for the exercise of power, then it has to be done in that
manner only. Adopting this principle, the Division Benches of this Court in the
cases of Ghanshyam K. Khabrani vs. Asstt. CIT [2012] 20 taxmann.com
716/210 Taxman 75 (Mag.)/346 ITR 443 and CIT vs. Aquatic Remedies
(P) Ltd. [2018] 96 taxmann.com 609/258 Taxman 357/406 ITR 545 have held
that sanction for issuance of reopening notice has to be obtained from the
authority mentioned in section 151 and not from any other officer, including a
superior officer. In the present case the Chief Commissioner of Income tax is
not the officer specified in section 151 of the Act. There is thus a breach of
requirement of section 151(2) of the Act regarding sanction for issuance of
notice u/s 148 of the Act. Consequently, the impugned notice and the impugned
order cannot be sustained in law. The petitioner, therefore, is entitled to
succeed.