Gujarat H.C : Provisions of S.151(2) of the Income Tax Act are complied with when actual satisfaction was taken of Commissioner only

High Court Of Gujarat

Mayurbhai Mangaldas Patel vs. ITO

Akil Kureshi & B.N. Karia, JJ.

R/Tax Appeal No. 29 of 2018 With OJCA/1/2018

19th March, 2018

Counsel appeared:

Hardik V Vora (7123) for the Petitioner. : Mauna M Bhatt (174) for the Respondent.

Akil Kureshi, J:

1. The assessee has filed this appeal challenging the judgment of Income Tax Appellate Tribunal raising the following questions for our consideration :

“(1) Whether on facts and in law, the Income Tax Appellate Tribunal is right in holding that provisions of S.151(2) of the Income Tax Act are complied with when actual satisfaction was taken of Commissioner only?

(2) Whether on facts and in law, the additional commissioner is said as satisfied on the reasons recorded when after signing approval sheet as satisfied, he forwarded it for approval of higher authority?

(3) Whether on facts and in law, the Income Tax Appellate Tribunal is right in holding that provisions of S.151(2) are complied with when Assessing Officer has sent form for approval of Commissioner only which was routed through Addl. Commissioner?

(4) Whether on facts and in law, the Income Tax Appellate Tribunal is right in not following its own decisions?

(5). Whether on facts and in law, the Income Tax Appellate Tribunal is right in observing that irregularity of taking sanction for issue of notice u/s 151 is curable defect u/s 292B of the Income Tax Act?”

Though multiple questions are raised, one single issue that arises in the appeal is whether the requirement of subsection) of section 151 of the Act were satisfied before issuance of notice under section 148 of the Act.

Case of the assessee is that the authority competent referred to in sub-section(2) of section 151 was the Joint Commissioner, instead in the present case, higher authority i.e. Commissioner was approached and necessary sanction/approval was granted by him which would vitiate the initiation of proceedings for reassessment. The Tribunal however took the view that even the Joint Commissioner had granted such approval. Merely because the Commissioner had also applied his mind, would not vitiate the proceedings.

In this background, counsel for the appellant drew our attention to the necessary approval order which is verbatim reproduced by the Tribunal in the impugned judgment. He relied on the judgment of Supreme Court in case of Anirudhsinhji Karansinhji Jadeja v/s. State of Gujarat reported in AIR 1995 SC 2390 and on the judgment of Delhi High Court in case of Commissioner of Income-tax v. SPL’s Siddhartha Ltd reported in (2012) 17 taxmann.com 138 (Delhi).

On the other hand, learned counsel for the Revenue opposed the appeal contending that the Tribunal has appreciated facts properly and found that conditions of sub-section(2) of section 151 are satisfied.

The approval is granted in printed proforma which contains as many as 13 entries. Entries no. 1 to 11 referred to relevant informations concerning the case on hand, such as, income of the assessee, his PAN number, order of assessment in question, etc.. Entry no.11 pertains to reasons for the formation of belief that income chargeable to tax had escaped assessment. Entry no.12 reads as under :

“Whether the Addl. Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice u/s. 148”

In response to this question, the Joint Commissioner had made the following remarks in his own handwriting : “I am satisfied with the reasons recorded by the AO.”
Below this, he had put his signature with date of 28.3.2011.

7. It is true that this form contained entry no.13 which read as under :

“Whether the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice u/s.148”.

Against this, the Commissioner of Income-tax also had remarked that he was satisfied that notice under section 148 was required to be issued.

It is thus undisputable that Joint Commissioner had expressed his satisfaction that it was a fit case for issuing notice of reopening of the assessment. This was on the basis of reasons recorded by the Assessing Officer which were also furnished to him. His satisfaction and approval was therefore, complete.

Sub-section(2) of section 151 provides that in cases specified therein, no notice under section 148 of the Act would be issued by an Assessing Officer who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by the Assessing Officer that it is a fit case for issuance of such notice. Clearly thus, this requirement was fulfilled.

The legal proposition is that when the statute casts a duty on a certain administrative officer, the same must be performed by him and the satisfaction arrived at even by the higher authority would not be sufficient. However, in the present case, there was no lack of satisfaction or exercise of power by the Joint Commissioner. He in clear terms, expressed his satisfaction that on the basis of the reasons recorded by the Assessing Officer, it was a fit case for issuance of notice under section 148 of the Act. Merely because the papers were thereafter for some erroneous reason also placed before the Commissioner who also recorded his similar satisfaction would not take away anything from the previous conclusion.

In case of Anirudhsinhji Karansinhji Jadeja (supra), the sanction to be granted under the Terrorist and Disruptive Activities (Prevention) Act, 1987 had to be done by the D.S.P. Instead of exercising such powers, he made a report to the Additional Chief Secretary and asked his permission to proceed under the TADA Act. This was clearly found in breach of statutory requirement by the Supreme Court. Relying upon and referring to this judgment of Supreme Court, Delhi High Court in case of SPL’s Siddhartha Ltd (supra), quashed the notice of reopening of assessment, in which satisfaction, as referred to in section 151 of the Act, was arrived at by the Commissioner, though the proper authority was Joint Commissioner. It was a case where the Joint Commissioner had not recorded any such satisfaction but merely placed the file before the Commissioner for his view. Both these cases are therefore, clearly distinguishable. In the result Tax Appeal and Civil Application are dismissed.

[Citation : 407 ITR 238]