Commissioner of Income Tax vs Smt. Reshma Arif

The appeal is admitted on the question Nos. 1 and 2 as framed in the memo of appeal and is being heard with the consent of the parties.

Heard Shri Shambhu Chopra, Learned Counsel for the appellant and Shri S.D. Singh for the respondent.

This appeal under s. 260A of the IT Act, 1961 (hereinafter called the "Act, 1961") has been filed against the judgment and order of the Tribunal, Lucknow Bench, Lucknow, dt. 21st Sept., 2007 in ITA No. 6/Luck/2006 and CO No. 11/Luck/2006 for the asst. yr. 1995-96. The assessment was made for the year in question by order of the AO dt. 28th March, 2002. A notice under s. 148 of the Act, 1961 dt. 22nd May, 2000 was issued by the AO with the previous approval of the Jt. CIT. The AO completed the assessment and issued notice of demand and challan. Assessee filed an appeal before the CIT(A) which was disposed of appeal was filed by the Revenue before the Tribunal against which cross-objection was filed by the assessee. The assessee in her cross-objection raised a ground that initiation of reassessment proceedings under s. 147/148 of the Act, 1961 was without jurisdiction on the ground that necessary sanction as required by s. 151(2) of the Act, was not obtained and notice under s. 148 of the Act has been issued by the ITO. The Tribunal relying on a judgment of this Court in Dr. Shashi Kant Garg Vs. Commissioner of Income Tax, Additional Commissioner of Income Tax, Range-2 (formerly Jt. Commissioner of Income Tax, Range) and Income Tax Officer, , held that notice having been issued by the AO entire proceedings is vitiated. The Tribunal observed in para 7 which is to the following effect:

In the instant case, the notice under s. 148 has been issued by the ITO, Ward-3(1), Kanpur and not by the Jt. CIT. In view of the decision of the Hon''ble Allahabad High Court (supra), the jurisdiction was not correctly assumed by the AO before issuing notice and hence, all subsequent proceedings are quashed for want of jurisdiction. Accordingly, we quash the reassessment proceedings.

The Tribunal came to the conclusion that the jurisdiction was not correctly assumed by the AO, hence all proceedings were quashed. Revenue has filed the appeal against the said judgment and order of the Tribunal dt. 21st Sept., 2007. In the present case, there was a approval dt. 8th May, 2010 by Jt. CIT, which has been mentioned in the assessment order itself.

Learned Counsel for the appellant submits that after the approval by the Jt. CIT, notice is not necessary to be issued by the Jt. CIT, but it can very well be issued by the AO. He submits that in the present case notice was issued by the AO after obtaining approval by the Jt. CIT and there was no error in the notice issued to the petitioner under s. 148 of the Act, and the Tribunal while taking erroneous view of the matter held that the entire proceedings were without jurisdiction.

Shri S.D. Singh, Learned Counsel for the respondent submitted that the respondent is not disputing that approval was obtained from the Jt. CIT. He has also referred to the judgment of the Division Bench of this Court in Ajai verma Vs. Commissioner of Income Tax and Another, in which case this Court after referring to the judgment of Dr. Shashi Kant Garg (supra) has laid down that the AO was empowered to issue notice under s. 148 of the Act, 1961 when there is approval by the Jt. CIT. Following was laid down in paras 10, 11, 12 and 13 :

In the case before us, the ITO, who is below the rank of the Jt. CIT and who is an AO according to the definition given in the IT Act, 1961, was empowered to issue the notice under s. 148 of the Act in the light of the sanction accorded for such issuance of notice by the CIT.

Learned Counsel for the petitioner has argued that the CIT could not have given the sanction and only the Jt. CIT could have given the sanction.

We are unable to accept the submission, considering the basic purpose for which such sanction has been provided for. The obvious purpose is to exercise proper supervision by a superior officer of the Department.

The other submission from the side of the petitioner is that the assessment order under s. 144 of the Act was annulled in appeal and the Department has gone up in further appeal ''and, thus, the assessment should be deemed to be pending. The submission proceeds to say that when an assessment proceeding is pending, there is no question of issue of notice under s. 148 of the Act.

Sec. 151 of the Act, 1961 provides for sanction for issue of notice. In the said section an Explanation has been added by Finance Act, 2008 w.e.f. 1st Oct., 1998 clarifying that if the Jt. CIT, CIT or the Chief CIT is satisfied on the reasons recorded by the AO about the fitness of a case for the issue of notice under s. 148 he need not issue such notice himself. Sec. 151 of the Act, 1961 along with the Explanation is quoted below :

Sanction for issue of notice.--(1) In case where an assessment under sub-s. (3) of s. 143 or s. 147 has been made for the relevant assessment year, no notice shall be issued under s. 148 by an AO, who is below the rank of Asstt. CIT or Dy. CIT, unless the Jt. CIT is satisfied on the reasons recorded by such AO that it is a fit case for the issue of such notice :

Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice.

(2) In a case other than a case falling under sub-s. (1), no notice shall be issued under s. 148 by an AO, who is below the rank of (Jt. CIT), after the expiry of four years from the end of the relevant assessment year, unless the (Jt. CIT) is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice.

Explanation; For the removal of doubts, it is hereby declared that the Jt. CIT, the CIT or the Chief CIT, as the case may be, being satisfied on the reasons recorded by the AO about fitness of a case for the issue of notice under s. 148, need not issue such notice himself.

The Explanation which has been added by the Finance Act, 2008 clarifies the whole situation and makes it clear that it is not necessary that the Jt. CIT himself may issue notice.

Shri S.D. Singh, Learned Counsel for the respondent submitted that the Explanation which was added was not available when the Tribunal decided the matter. The submission is correct. However, the Explanation being clarificatory and having been made with retrospective effect shall cover the above issue. In view of the above, we answer both the questions In favour of the Revenue. The appeal is allowed. The judgment and order of the Tribunal dt. 21st Sept., 2007 is hereby set aside. In view of the fact that the Tribunal has not considered the appeal and cross-objections on merits, we remit the matter to the Tribunal for fresh consideration. The appeal as well as the cross-objection are restored before the Tribunal which may be expeditiously disposed of. The parties shall bear their own cost.