Section 147, 148 & 151 of the Income Tax Act, 1961 — Reassessment — It is 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. The Chief Commissioner of Income tax is not the officer specified in section 151, thus, there is a breach of requirement of section 151(2) regarding sanction for issuance of notice under section 148, consequently, the notice and order under section 147 cannot be sustained in law.[2019] 52 ITCD 113 (BOM)
Facts: The assessee is a company registered under the Companies Act engaged in the business of manufacture and marketing of fabrics. Assessee filed its return of income for the assessment year 2014-15 on 22 September 2014 declaring nil income. The assessee's case was selected for scrutiny assessment vide notice dated 18 September 2015. On 7 April 2016, the Assessing Officer issued notice under section 142(1) calling upon the Petitioner to submit certain details regarding share application money received by the Petitioner. The Assessing Officer thereafter passed an assessment order on 1 September 2016 under section 143(3) accepting the income offered by the Petitioner. The Assessing Officer issued a notice on 26 February 2019 under section 148 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 replied to the said notice stating that the return originally filed by it be treated as return filed in response to the notice. The Petitioner also requested that a copy of reasons to be supplied to it, which was supplied to the Petitioner. The Petitioner submitted its objections. The Assessing Officer rejected the objections and passed the impugned order on 15 July 2019 proceeding to reopen the assessment. Hence, the present petition.
Held, that as per the provisions of section 151(2), a sanction to issue notice for reopening under section 148 has to be given by the Joint Commissioner of Income Tax in case the reassessment is sought to be done before four years. Under section 2(28C), a Joint Commissioner also means Additional Commissioner of Income Tax. In the present case, the Assessing Officer submitted a proposal to the Principal Chief Commissioner of Income Tax for reopening the assessment under section 148 on 6 February 2019. A copy of the proposal placed on record shows that it bears Inward Stamp of the Additional Commissioner of Income Tax, Mumbai.Two questions arise. Firstly, whether the communication dated 13 February 2019 accords a final approval. This question we answer in the negative. Though the words "I feel that this is a fit case" are used in the communication, the further part of the communication seeks an approval of the Chief Commissioner of Income Tax, Therefore, this opinion was subject to the approval of the Chief Commissioner of Income Tax. The communication dated 13 February 2019 cannot, therefore, be considered as a final sanction. The next question arises is whether the sanction granted by the Chief Commissioner of Income Tax would fulfill the requirement of section 151. It is 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 case of Ghanshyam K. Khabrani v. Asst. CIT  (2012) 346 ITR 443 (Bom) and CIT v. Aquatic Remedies P.Ltd. (2018) 406 ITR 545 (Bom.) 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 under section 148 of the Act. Consequently, the impugned notice and the impugned order cannot be sustained in law. The Petitioner, therefore, is entitled to succeed. Accordingly, the impugned notice dated dated 26 February 2019 and the impugned order dated 15 July 2019 are quashed and set aside. The petition is disposed of accordingly.