2021 (7) TMI 698 - HC - Income Tax

High Court rules in favor of assessee due to incorrect sanction in income tax assessment reopening case

Pr. Commissioner of Income Tax (Central) -3 Versus Suresh Kumar Gupta

The High Court ruled in favor of the assessee in a case challenging the incorrect sanction obtained for reopening assessments under Section 148 of the ... Reopening of assessment u/s 147 - validity of sanction granted by the learned CIT u/s 151 - HELD THAT:- The argument advanced before us is contrary to the case set up by the appellant before the statutory Authorities below, inasmuch as it was argued before the Commissioner, Income Tax (Appeals) as well as the Income Tax Appellate Authority that though sanction was mandatory in the present cases, it had been granted by the Commissioner of Income Tax and not by the Joint Commissioner of Income Tax. It was not urged before the statutory Authorities below that no sanction was required in the present cases as the initial assessments had been completed under Section 143(1) of the Act and the notices for Re-assessments under Section 148 had been issued within four years period. Since the foundational facts sought to be urged in the present appeals are diametrically opposite to the case set up by the appellant before this Court and the statutory Authorities below, this Court is of the view that it is not a fit case where appeals should be entertained under Section 260A of the Act. Moreover, if the facts now urged before this Court are true and correct, then the respondents should have brought the said facts to the notice of the statutory Authorities below by filing appropriate applications. Issues:1. Incorrect sanction obtained for reopening of assessment.2. Interpretation of Section 151 of the Income Tax Act.3. Competency of authority for granting sanction.4. Dismissal of appeals due to contradictory arguments.Issue 1: Incorrect sanction obtained for reopening of assessmentThe High Court examined the appeals challenging the order passed by ITAT dated 21st December, 2018, regarding the sanction granted by the CIT for issuing notices under Section 148 of the Income Tax Act. The Court noted that the assessing officer had obtained sanction from the CIT instead of the Joint Commissioner of Income Tax, as required by law. Citing the decision in CIT vs. Soyuz Industrial Resources Ltd, the Court held that the sanction should have been obtained from the Joint Commissioner. Consequently, the Court ruled in favor of the assessee, allowing all four appeals and holding that the orders passed by the assessing officer were not sustainable.Issue 2: Interpretation of Section 151 of the Income Tax ActThe Court analyzed Section 151 of the Income Tax Act, which specifies the authority required for issuing notices under Section 148. It differentiated between cases falling under Section 143(3) or Section 147 and those falling under other circumstances. The Court emphasized the importance of following the statutory provisions as mandated by the Act. It rejected the Revenue's argument that cases covered under the proviso to Section 147(1) should be approved by higher-ranking officers, stating that such an interpretation would render Section 151(2) superfluous. The Court invoked the principle that statutory mandates must be followed precisely, concluding that the original assessment in the case was completed under Section 143(1), hence requiring approval from the Joint Commissioner.Issue 3: Competency of authority for granting sanctionThe Court highlighted the necessity of obtaining sanction from the appropriate authority as per Section 151 of the Act. It clarified that in cases where the original assessment is completed under Section 143(1), the competent authority for granting sanction is the Joint Commissioner. The Court emphasized that the statutory provisions must be strictly adhered to, and any deviation could render the notice invalid. By upholding the decision in CIT vs. Soyuz Industrial Resources Ltd, the Court reiterated the significance of obtaining sanction from the correct authority to ensure the validity of the assessment process.Issue 4: Dismissal of appeals due to contradictory argumentsThe Court addressed the contradictory arguments presented by the appellant, noting a variance between the arguments made during the appeal and those presented before the statutory Authorities. The Court found that the case set up before the Authorities differed from the arguments raised during the appeal process. Due to this inconsistency, the Court dismissed the appeals, stating that it was not a suitable case for further consideration under Section 260A of the Act. The Court emphasized the importance of presenting consistent and accurate facts throughout the legal proceedings to maintain the integrity of the case.This detailed analysis of the judgment provides insights into the issues surrounding incorrect sanction for reopening assessments, the interpretation of relevant legal provisions, the competency of authorities for granting sanction, and the impact of contradictory arguments on the outcome of the appeals.