2020 (1) TMI 1673 - AT - Income Tax

AO's reassessment notice under Section 148 beyond four years without Commissioner approval renders revision under Section 263 invalid

M/s Charm Vincom Pvt Ltd Versus ITO, Ward-3 (1), Kolkata

ITAT Kolkata held that revision u/s 263 was invalid when the underlying reassessment order u/s 147/143(3) was void ab-initio. The AO issued notice u/s 148 ... Validity of Revision u/s 263 when original assessment itself passed u/s 147/143(3) was bad in law and ab-initio-void - reopening beyond period of four years with no approval of the Commissioner or authorities specified in Section 151(1) - assessee argued as AO desires to reopen after the expiry of a period of four years from the end of the relevant assessment year, he could have issued notice u/s 148 of the Act only after taking approval from either Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner - HELD THAT:- As per sub-Section (1) of Section 151, no notice could have been issued u/s 148 of the Act by an AO, after the expiry of four years from the end of relevant assessment year unless the Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner is satisfied, on the reasons recorded by such AO, that it is a fit case for issue of such notice When the statute mandates the satisfaction of a particular functionary/authority for the exercise of a power, the satisfaction must be of that authority. So since the satisfaction/approval is not of any of the authorities given in sub-Section (1) of Section 151 of the Act, the notice issued by AO u/s 148 of the Act is without jurisdiction as a consequence the re-assessment framed by AO is null in the eyes of law and bad in law. Since the re-assessment order itself is bad in law and is non-est in the eyes of law, since the AO could not have issued the notice intimating the reopening u/s 148 without the approval of the Commissioner or authorities specified in Section 151(1) of the Act, the AO does not have the jurisdiction to issue the notice u/s 148 of the Act. Therefore the AO’s order itself is without jurisdiction and is null in the eyes of law. Thus impugned order of the Pr. CIT which is challenged before us is admittedly stemming from the order of the AO which we have already held to be null in the eyes of law. Therefore all consequential action on the basis of the order of AO is also null in the eyes of law. This is based on the legal maxim “Sublato Fundamento Credit Opus” meaning in case a foundation is removed, the super structure falls. In Badrinath Vs. TamilNadu[2000 (9) TMI 1044 - SUPREME COURT] as held that once the basis of proceedings is gone all consequential order and acts would fall in the ground automatically which is applicable to judicial and quasi judicial proceedings. Decided in favour of assessee. Issues:1. Jurisdiction of the Assessing Officer to issue notice u/s 148 of the Income Tax Act.2. Validity of re-assessment order passed by the Assessing Officer.3. Legality of the order passed by the Principal Commissioner of Income Tax under section 263 of the Act.Analysis:1. The first issue revolves around the jurisdiction of the Assessing Officer (AO) to issue a notice u/s 148 of the Income Tax Act beyond four years from the end of the relevant assessment year. The appellant contended that the AO lacked the authority to reopen the assessment without approval from specific higher authorities as mandated by Section 151 of the Act. The Tribunal observed that the approval granted by the Additional Commissioner of Income Tax Range-3 did not meet the statutory requirement, rendering the reopening of the assessment invalid. Citing relevant case laws, the Tribunal emphasized that when a statute prescribes a specific manner for exercising a power, deviations are impermissible, leading to the nullification of the re-assessment order.2. The second issue pertains to the validity of the re-assessment order passed by the AO. The Tribunal found that since the notice issued u/s 148 was without jurisdiction due to the lack of proper approval, the subsequent re-assessment order dated 05.12.2016 was deemed null and void in the eyes of the law. Relying on legal principles that mandate adherence to statutory provisions, the Tribunal concluded that the AO's order lacked jurisdiction, rendering it non-existent and legally unsustainable.3. The final issue concerns the legality of the order passed by the Principal Commissioner of Income Tax under section 263 of the Act. Since the impugned order was based on the nullified re-assessment order, the Tribunal held that all consequential actions stemming from the AO's order were also null in the eyes of the law. Citing legal maxims and precedents, the Tribunal emphasized that once the foundation of proceedings is flawed, all subsequent orders and acts become invalid. Relying on earlier decisions of the Tribunal, the impugned order of the Principal Commissioner was quashed, and the appeal of the assessee was allowed, highlighting the importance of adherence to procedural and jurisdictional requirements in tax assessments.