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2018 Supreme(Del) 373
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. RAVINDRA BHAT, VINOD GOEL, JJ.
Commissioner of Income Tax Delhi IV – Appellant
Versus
Gee Kay Finance & Leasing Co. Ltd. – Respondent
ITA 935 of 2009
Decided On : 08-02-2018
For the Appellant : Mr. Raghvendra Singh
For the Respondents: Dr. Rakesh Gupta, Ms. Somil Agarwal, Ms. Monika Ghai & Mr. Rohit Kumar Gupta
The central legal point established in the judgment is the requirement for approval by higher authorities for notices issued under Section 148 of the Income Tax Act beyond 4 years from the end of the relevant assessment year.
Headnote:
Income Tax - Notice Issued under Section 148 - Income Tax Act, 1961, Section 151(1) - Summary: The court discussed the interpretation of Section 151(1) of the Income Tax Act, 1961, particularly in relation to the approval required for the issuance of notice under Section 148. The court analyzed the amendments to the section and the changes in the structure of the provision over the years. It highlighted the different interpretations of the provision by the Calcutta High Court and the Revenue authorities, ultimately siding with the broader interpretation followed by the Calcutta High Court. The judgment emphasized the requirement for approval by higher authorities for notices issued beyond 4 years from the end of the relevant assessment year.
Fact of the Case:
The assessee's return declared a loss, which was later subjected to scrutiny assessment. A notice was issued under Section 148 of the Income Tax Act, leading to re-assessment. The assessee challenged the re-opening, arguing that the Assessing Officer proceeded without the necessary approval of the Commissioner of Income Tax as required by Section 151(1). The ITAT allowed the assessee's appeal based on the judgments of the Calcutta High Court and the Allahabad High Court.
Finding of the Court:
The court found in favor of the assessee, holding that the notice issued under Section 148 of the Income Tax Act beyond four years after the end of the relevant assessment year was bad in law as the necessary approval of the Chief Commissioner or Commissioner of Income Tax had not been obtained by the Assessing Officer.
Issues: The main issue was whether the notice issued under Section 148 of the Income Tax Act was valid without the necessary approval of the Chief Commissioner or Commissioner of Income Tax as per the provisions of Section 151(1).
Ratio Decidendi: The court's decision was based on the interpretation of Section 151(1) and the requirement for approval by higher authorities for notices issued beyond 4 years from the end of the relevant assessment year.
Final Decision: The appeal failed and was accordingly dismissed in favor of the assessee.
S. RAVINDRA BHAT, J.
1. The question of law framed for this appeal – on 09.10.2009 is as follows:
“1. Whether ITAT was correct in law in holding that the notice issued by the Assessing Officer u/s 148 of the Act beyond the 04 years after the end of relevant assessment year was bad in law as the necessary approval of Chief Commissioner or Commissioner of Income Tax as per the provisions of Section 151 (1) of the Act had not been obtained by the Assessing Officer?”
2. The facts in brief are:
The assessee’s return declared a loss, filed on 25.11.1997 was processed under Section 143(1); later a scrutiny assessment was completed on 30.03.2000 at a loss of Rs. 29,94,053/-. A notice was issued under Section 148 of the Income Tax Act, 1961 (hereafter referred to as “the Act”) on 26.03.2003 leading to re-assessment. After rejecting the assessee’s challenge to the re-opening, the AO proceeded to complete the re-assessment and added back substantial amounts under Section 68 of the Act (to the tune of Rs. 2,71,62,000/-) and completed the assessment. The CIT(A) affirmed the order of the Assessing Officer. The assessee appealed contending that the issuance of notice under Section 148 of the Act, was without jurisdiction as the concerned Assessing Officer (the Deputy Commissioner of Income Tax) proceeded to re-open the assessment without the sanction of the Commissioner of Income Tax, as required by Section 151(1). This contention found approval by the ITAT. The ITAT relied upon the judgment of the Calcutta High Court in East India Hotels Ltd. v. Deputy Commissioner of Income Tax (1993) 204 ITR 435. Reliance was also placed upon the judgment of the Allahabad High Court in Dr. Shashi Kant Garg v. Commissioner of Income Tax (2006) 285 ITR 158. Following the ratio in the judgments of the two High Courts, the ITAT allowed the assessee’s appeal.
3. Counsel for the Revenue relies upon various amendments effected to Section 151 of the Act – through the Direct Tax Laws (Amendment) Act, 1987 (with effect from 01.04.1989); Finance Act, 1990 (with effect from 01.04.1990); and Finance (No.2) Act, 1998 (with effect from 01.10.1998). It is pointed out that before the 1989 amendment, the structure of the provision (Section 151 of the Act) was entirely different. It was also the Board which could grant approval to any Assessing Officer, as a condition precedent for issuance of notice in the event of expiry of 8 years from the end of the relevant assessment year. In other cases, after 4 years of such expiry, the Chief Commissioner or Commissioner had to be satisfied that the reasons of the AO, were justified. With the 1989 amendment, urged counsel for the Revenue, the position changed and notices could be issued by Assessing Officers of the rank of Assistant Commissioner or Deputy Commissioner, suo moto, without the approval of a higher official provided it was within the period of four years from the end of the assessment year. It was urged that in cases of assessments completed by Assistant Commissioners/Deputy Commissioners, there was no need for obtaining approval of the Chief Commissioner/Commissioner. Emphasis was placed upon the expressions “no such notice” and “Assessing Officer aforesaid” to say that it was only in the event of completed assessments by AOs, below the rank of Deputy Commissioner/ Assistant Commissioner that sanction or approval was necessary. It was submitted that this statutory position remained more or less unchanged except that in the case of Section 151(1), after the amendment of 1998 [Finance (No. 2) Act of 1998 with effect from 01.10.1998] approval of the Joint Commissioner was necessary, wherever completed assessments were made by officers below the rank of Assistant Commissioner or Deputy Commissioner.
4. Mr. Raghvendra Singh, learned counsel who argued for the Revenue submitted that the interpretation placed by the
