2018 (11) TMI 1917 - AT - Income Tax

Assessment Orders Quashed Due to Lack of Proper Approval

The Tribunal found that the approvals obtained from the Additional Commissioner lacked the necessary satisfaction as mandated by section 151 of the Income ... Reopening of assessment - approval under section 151 as condition precedent to reopening under section 148 - independent satisfaction of the designated authority - jurisdictional defect vitiating reassessment - admission of new jurisdictional ground before the Tribunal - quashing of assessment for lack of proper approvalAdmission of new jurisdictional ground before the Tribunal - reopening of assessment - Application for admission of additional grounds challenging the validity of reopening on the basis that no proper approval under section 151 was recorded was admitted. - HELD THAT: - The Tribunal held that the requirement of approval under section 151 is a jurisdictional pre condition to the reopening of assessment under section 148 where such reopening is after four years. The objection to absence of proper approval goes to the root of jurisdiction and does not require fresh investigation of facts or discovery of new material. Reliance on the principle that a jurisdictional defect affecting taxability may be raised for the first time before the second appellate authority was accepted and, accordingly, the additional ground was admitted for adjudication on merits. [Paras 3]The additional ground challenging the validity of reopening for want of proper approval under section 151 is admitted and adjudicated on merits.Approval under section 151 as condition precedent to reopening under section 148 - independent satisfaction of the designated authority - jurisdictional defect vitiating reassessment - quashing of assessment for lack of proper approval - Whether the approvals recorded by the Additional Commissioner satisfy the statutory requirement and whether assessments validly reopened under section 148 survive. - HELD THAT: - On examination of the approval proformas, the Tribunal found that the Additional Commissioner had not recorded any independent satisfaction on the reasons furnished by the Assessing Officer; entries merely consisted of a signature without an objective application of mind indicating satisfaction. The Tribunal followed authoritative decisions holding that the designated authority must apply independent mind and record satisfaction objectively, and that a mechanical or conclusory endorsement does not fulfil the statutory requirement. Since notices were issued after four years, the proviso to the relevant provision required such recorded satisfaction. In absence of proper approval, the Assessing Officer acted without jurisdiction and the reopening was vitiated. The Tribunal therefore quashed the assessment orders. The Tribunal observed that if, upon re verification, the Assessing Officer discovers material showing proper approval, the Revenue may apply for recall of the order within the statutory time. [Paras 4, 6, 7, 8, 9]Approvals are held to be inadequate; assessments reopened by notices issued after four years are quashed for want of proper approval under section 151.Final Conclusion: All appeals are allowed; the assessment orders framed after reopening are quashed for lack of proper approval by the Additional Commissioner, subject to the liberty of the Revenue to seek recall if proper approval material is subsequently produced within the time permitted by law. Issues involved:1. Approval requirement under section 151 of the Income Tax Act for reopening assessments.2. Validity of assessment orders based on the satisfaction of the Additional Commissioner.3. Consideration of case law in determining the sufficiency of approval for reopening assessments.Detailed Analysis:1. The primary issue in this case pertains to the requirement of proper approval under section 151 of the Income Tax Act for reopening assessments. The Assessee contended that assessments were not sustainable as the Additional Commissioner did not provide proper approval before reopening the assessments. The Assessee cited the judgment of the Hon’ble Supreme Court in the case of NTPC, emphasizing that jurisdictional issues can be raised even before the second appellate authority. The Assessee submitted details obtained under the RTI Act to support the lack of proper approval. The Revenue argued that the Assessee did not raise this objection before the ld.CIT(A), questioning its admissibility before the Tribunal.2. The Tribunal acknowledged the jurisdictional importance of obtaining proper approval before reopening assessments under section 151 of the Act. It was noted that if the AO did not follow the prescribed procedure, the assessments would be considered without jurisdiction. The Tribunal admitted the ground of appeal related to the lack of proper approval and proceeded to evaluate the case on its merits.3. The Tribunal then analyzed the merit of the case concerning the sufficiency of the Additional Commissioner's satisfaction for authorizing the reopening of assessments. The Assessee argued that the Additional Commissioner's mere signature without any explicit satisfaction did not meet the legal requirements. Citing relevant case laws such as CIT Vs. Goyanka Lime & Chemicals Ltd., the Assessee contended that such incomplete satisfaction did not render the assessment orders sustainable. The Tribunal considered the observations of the Hon’ble Gujarat High Court and the Hon’ble Madhya Pradesh High Court, emphasizing the importance of objective satisfaction by the approving authority.4. After careful consideration of the arguments and case laws presented, the Tribunal found that the approvals obtained from the Additional Commissioner lacked the necessary satisfaction as mandated by section 151 of the Act. Referring to authoritative judgments, the Tribunal concluded that the assessment orders were not sustainable due to the absence of proper approval. Consequently, all assessment orders were quashed, granting relief to the Assessees. The Tribunal also allowed the Revenue the opportunity to apply for a recall of the order if new material demonstrating proper approval emerged during re-verification by the AO.In conclusion, the Tribunal's judgment focused on the critical procedural requirements under section 151 of the Income Tax Act for reopening assessments and emphasized the necessity of obtaining proper approval with objective satisfaction from the approving authority to ensure the validity of assessment orders.