2014 (7) TMI 378 - AT - Income Tax

Invalid reassessment under Section 148 upheld for AY 2004-05 due to lack of proper approval

Deputy Commissioner of Income Tax Versus M/s. Central Warehousing Corporation

The Tribunal upheld the CIT(A)'s decision, deeming the reassessment under Section 148 invalid for the assessment year 2004-05. The Tribunal found that the ... Validity of reopening of u/s 147 of the Act – Change of opinion – Reassessment initiated on the basis of audit objection - Held that:- The decision in CIT Vs. SPL’s Siddhartha Ltd. [2011 (9) TMI 640 - DELHI HIGH COURT] followed – u/s 151 of the Act, it was only the JCIT who could grant the approval for issue of notice u/s 148 - The approval was not granted by the Joint Commissioner - the legislature has provided that where the AO is of the rank of AC or DC and original assessment was completed under Section 143(3), the notice for reopening of assessment cannot be issued unless the JCIT is satisfied on the reasons recorded by the AO - as per Section 151(1), the approval of JC was required while the AO has taken the approval of CIT which cannot be said to be valid in view of the specific provisions of Section 151(1) – thus, reopening of assessment u/s 148 was invalid and the order of the CIT(A) is upheld – Decided against Revenue. Issues:Validity of reassessment under Section 147 based on change of opinion and audit objection.Analysis:The appeal before the Appellate Tribunal ITAT Delhi concerned the validity of reassessment for the assessment year 2004-05. The assessee, a Government of India undertaking, had initially filed a return declaring total income at nil, with the assessment completed under Section 143(3) on 29th October 2006. Subsequently, the assessment was reopened under Section 148 by a notice dated 28th March 2008. The learned CIT(A) deemed the reassessment invalid citing two reasons: it was based on a change of opinion and initiated on the basis of an audit objection. The Revenue challenged this decision before the Tribunal.During the proceedings, the learned DR supported the Assessing Officer's order, while the counsel for the assessee relied on the CIT(A)'s decision. The counsel argued that the reopening was invalid as the Assessing Officer obtained permission from the Commissioner of Income Tax, New Delhi, instead of the required Joint Commissioner of Income Tax. The counsel referenced relevant case law to support this contention.The Tribunal, after considering the submissions and relevant material, referred to the decision of the Hon'ble Jurisdictional High Court in a similar case. The High Court had held that under Section 151 of the Income Tax Act, only the Joint Commissioner or Additional Commissioner could grant approval for issuing a notice under Section 148. Since the approval in this case was obtained from the Commissioner of Income Tax, it was deemed invalid. The Tribunal noted that the notice for reopening mentioned obtaining necessary satisfaction from the Commissioner of Income Tax, not the Joint Commissioner as required by law.Furthermore, the Tribunal highlighted that as per Section 151(1) of the Act, if the Assessing Officer is of the rank of Assistant Commissioner or Deputy Commissioner and the original assessment was completed under Section 143(3), the approval of the Joint Commissioner of Income Tax is mandatory for reopening assessment. In this case, the approval was taken from the Commissioner of Income Tax, making the reopening invalid. The Tribunal also agreed with the CIT(A)'s finding that the reassessment was based on a mere change of opinion and an audit objection, which is impermissible in law. The Tribunal supported this view by referencing various decisions of the Hon'ble Apex Court and Jurisdictional High Court.Ultimately, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal and deeming the reopening of assessment under Section 148 as invalid. The decision was pronounced in open court on 13th June 2014.