2024 (3) TMI 1004 - AT - Income Tax

AO's section 148 notice invalid without proper section 151(1) approval from Principal Chief Commissioner after four years

ITAT Indore held that the AO's notice u/s 148 was invalid due to lack of proper approval under section 151(1). The AO had obtained approval from Joint ... Validity of reopening of assessment u/s 147 - Sanction for issue of notice u/s 151 - as alleged illegal approval u/s 151 obtained by AO from inappropriate authority - assessee’s stand is that the AO issued notice after expiry of four years from end of relevant assessment-year which could have been done only after taking approval from Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner u/s 151(1) but since the AO has failed to do so, the notice is violative of section 151(1) but it was obtained from Joint Commissioner. HELD THAT:- If the AO wants to issue notice after expiry of four years, this can be done only under the approval of Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. The language does not give any scope or flexibility to AO to obtain approval within four years from lower-authority u/s 151(2), keep such approval in file and subsequently issue notice after four years without taking approval from higher authority u/s 151(1). AR is very much correct in submitting that if such an approach is allowed to AO, this would be a clear circumvention as well as defiance and violation of section 151(1) made by Parliament. We may be hastened to add here that although in present appeal, the Ld. DR is supporting AO’s approach just to save this case of department but otherwise even the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner would not accept such approach of AO and they would certainly say that such approach of AO is unauthoritative and invalid. We may also add here that the AO was having time to issue notice uptill 31.03.2022, therefore the AO could very well obtain a fresh approval from Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner u/s 151(1) and issue notice to assessee after four years even though he had taken earlier approval u/s 151(2) from Joint Commissioner. In that case, there would have not been any lapse. But the AO has not done so. Therefore, in the present case, we agree with Ld. AR’s pleading that the AO was not having a valid approval from a competent authority as required u/s 151(1), hence the notice issued u/s 148 suffers from an invalidity. Applicability of Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 dated 31.03.2020 [“TOLA”], there was an extension of time-limit - As relied on JM Financial and Investment Consultancy Services Private Limited[2022 (4) TMI 1446 - BOMBAY HIGH COURT] we are of the considered view that the TOLA is not appliable and in any case, the TOLA has not amended section 151. Hence, the revenue’s claim that its case is protected by TOLA is meritless and liable to rejected. Protection of section 292BB - Section 292BB has a limited application, it operates in only one of the three situations mentioned in (a), (b) or (c) which are basically situations of ir-regularity in “service” of notice. In present case of assessee, the AO has issued notice u/s 148 without having a valid approval u/s 151(1) which is not at all covered by section 292BB. Therefore, the Ld. DR’s pleading that the revenue has protection of section 292BB is meritless and liable to be rejected. AO has issued notice u/s 148 without having a valid approval mandated by section 151(1). Being so, we are of considered view that the revenue’s case is suffering from jurisdictional defect and the entire proceeding u/s 148 / 147 undertaken by AO is illegal and unsustainable. Decided in favour of assessee. Issues Involved:1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.2. Merits of the additions/adverse conclusions made by the Assessing Officer (AO).Summary:Issue 1: Legality of the Notice Issued Under Section 148The assessee challenged the legality of the notice issued under Section 148 and the subsequent assessment order under Section 147 on the grounds of illegal approval under Section 151. The assessee argued that the AO issued the notice after the expiry of four years from the end of the relevant assessment year, without obtaining the required approval from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as mandated by Section 151(1).The Tribunal found merit in the assessee's argument, noting that the AO issued the notice on 30.03.2021 based on an approval dated 23.10.2019 from the Joint Commissioner, which is valid only within four years under Section 151(2). The Tribunal emphasized that Section 151(1) requires approval from higher authorities if the notice is issued after four years, and the AO's failure to obtain such approval rendered the notice invalid.The Tribunal also rejected the revenue's argument that the notice was saved by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA), citing decisions from the Hon'ble Mumbai High Court which clarified that TOLA does not amend the provisions of Section 151.Furthermore, the Tribunal dismissed the revenue's reliance on Section 292BB, which deals with irregularities in the service of notice, finding it inapplicable to the issue of invalid approval.Consequently, the Tribunal quashed the AO's order, deleted the additions made, and directed the AO to allow depreciation on the full value of assets in subsequent years.Issue 2: Merits of Additions/Adverse Conclusions by AOSince the Tribunal quashed the AO's order on the grounds of invalid notice, it did not adjudicate the other grounds raised by the assessee regarding the merits of the additions/adverse conclusions.Result:- Assessee's Appeal: Allowed.- Revenue's Appeal: Dismissed.