Income Tax Appellate Tribunal - Mumbai
Srichand Changlani, Ulhasnagar vs Ito Wd 2(4), Mumbai on 16 November, 2018
1 ITA No.1843/Mum/2016 Srichand D. Changlani आयकर अपीलीय अिधकरण "ई"" यायपीठ मुब ं ई म ।
Assessment Year-2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI माननीय ी जोिग दर सह, उपा य एवं माननीय ी मनोज कु मार अ वाल, लेखा सद य के सम ।
BEFORE HON'BLE SHRI JOGINDER SINGH, VP AND
HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकरअपीलसं ./I.T.A. No.1843/Mum/2016
(िनधा रणवष / Assessment Year: 2008-09)
Srichand D. Changlani Income tax Officer
(Through Legal heir Sameer Changlani)
बनाम/ Ward 2(4), 2nd Floor
11-A, Industrial Area Rani Mansion, Murbad Road
Section IV Vs.
Kalyan-421 301
Ulhasnagar-421 004
थायीले खासं . /जीआइआरसं . /PAN/GIR No. AEBPC- 7249-A (अपीलाथ /Appellant) : ( थ / Respondent) Assessee by : Shri Madhav Nandgaonkar-Ld.AR Revenue by : Shri D.G. Pansari- Ld.DR सुनवाई की तारीख/ : 01/11/2018 Date of Hearing घोषणा की तारीख / : 16/11/2018 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. Aforesaid appeal by assessee for Assessment Year [AY] 2008-09 contest the order of Ld. Commissioner of Income Tax (Appeals)-3, Thane, [CIT(A)], Appeal No.59-THN/13-14 dated 21/12/2015 on various Grounds of appeal. The assessee has raised additional Grounds on 10/04/2018 which are legal issues and do not require appreciation of 2 ITA No.1843/Mum/2016 Srichand D. Changlani Assessment Year-2008-09 new facts and therefore, taken on record as Ground Number-3. Finally, the effective grounds of appeal reads as under:-
(1) On the fact, in the circumstances of the case & in law the learned Assessing Officer erred in reopening the assessment completed u/s. 143(3) by issue of notice u/s. 148 r.w.s 147 and the approval by CIT-3 Thane u/s. 151 were bad in law.
(2) On the fact, in the circumstances of the case & in law the learned Assessing Officer has erred in not treating and the CIT-3, Thane in holding that Rs.4,64,061/- spent and paid by the appellant, to the concerned government authority, as cost of acquisition of the property transferred by the appellant and in treating the same as revenue expenditure.
(3) On the facts, in the circumstances of the case and in law the Assessing Officer has erred in passing order dated 05.3.2013 u/s. 143(3) r.w.s 147 for AY 2008-09 on the basis of satisfaction recorded by CIT-3, Thane and the approval granted u/s. 151 by the said authority, whereas the satisfaction u/s.151 should have been recorded and approval u/s.151 for issue of notice u/s. 148, also should have been granted by the jurisdictional joint commissioner of income tax."
The deceased assessee, being resident individual, was originally assessed u/s. 143(3) on 20/12/2010 wherein returned income of Rs.2.16 Lacs filed by the assessee was accepted. Subsequently, the assessee was subjected to reassessment proceedings u/s 147 vide issuance of notice u/s 148 dated 02/04/2012 on the premise that certain Long Term Capital Gains [LTCG] computed by the assessee were required to be re- worked in view of the fact that cost of acquisition to the extent of Rs.4,64,061/- being arrears of cost, interest etc. as claimed by the assessee could not be allowed as part of cost of acquisition of the asset. Although the assessee defended the same vide submissions dated 21/09/2012 & 27/12/2012, however not convinced, Ld. AO revising the cost of acquisition, re-worked LTCG as Rs.14.04 Lacs as against Rs.9.40 Lacs computed by the assessee and accepted u/s 143(3). Consequently, after providing deduction u/s 54EC for Rs.10 Lacs, the balance amount i.e. Rs.4.04 Lacs was added to the income of the 3 ITA No.1843/Mum/2016 Srichand D. Changlani Assessment Year-2008-09 assessee. The stand of Ld. AO, upon confirmation by first appellate authority, is under appeal before us.
2. The Ld. Auhtorized Representative for Assessee [AR], Shri Madhav Nandgaonkar, drawing our attention to the documents placed in the paper-book raised a jurisdictional issue by submitting that the sanction / approval of appropriate authority i.e. Joint Commissioner as envisaged by law u/s 151 was not obtained to initiate reassessment proceedings against the assessee and therefore, the proceedings stood vitiated in law in terms of decision of Hon'ble Bombay High Court rendered in DSJ Communication Limited Vs. DCIT [222 Taxman 129]. A copy of the same has been placed on record. Per Contra, Ld. DR submitted that there was no infirmity in the reassessment proceedings.
3.1 We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper- book and decision of Hon'ble Bombay High Court as cited before us. It is noted that the assessee was originally assessed u/s 143(3) and the reassessment proceedings have been initiated within a period of 4 years from the end of relevant assessment year. The procedure to obtain sanction for issue of notice has been prescribed u/s 151 which read as follows:-
Sanction for issue of notice.
151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.
4 ITA No.1843/Mum/2016Srichand D. Changlani Assessment Year-2008-09 (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.
The appropriate clause as applicable to the case of the assessee is clause (2), which mandates satisfaction of Joint Commissioner. The Joint Commissioner, as defined u/s 2(28C), includes Additional Commissioner of Income Tax as appointed u/s 117(1).
3.2 Upon perusal of documents as placed on record, it is noted that pursuant to audit objections, the reassessment proceedings were proposed to be initiated by Income Tax Officer, Ward 2(4), Kalyan and accordingly, the permission of the higher authorities was sought for the same. The permission was given to the concerned Income Tax Officer vide letter dated 27/03/2012 the relevant extract of which reads as follows:-
The Income Tax Officer Ward 2(4), Kalyan Sir, Sub: Revenue Audit Objection in the case of Shri Srichand D. Changlani for A.Y.2008-09 -reg-
Ref : Your letter dated 16.02.2012 Kindly refer to the above.
02. I am directed to convey that the CIT-III, Thane has accorded necessary approval for action u/s. 147 of the I.T. Act, 1961, for A.Y. 2008-09 in the above mentioned case. A copy of proposal for initiating proceedings u/s. 147 is enclosed herewith.
03. I am further directed to request you that remedial action may be taken without further loss of time and the assessment be completed on priority.
Yours faithfully, Sd/-
(S.S. AMBULKAR) Income tax Officer (Tech.) Encl: As above with case record in 1 Vol. For Commissioner of Income tax-III, Thane 5 ITA No.1843/Mum/2016 Srichand D. Changlani Assessment Year-2008-09 3.3 From the perusal of the same, it emerges that the permission to initiate action u/s 147 was accorded by CIT-III, Thane and not by concerned Joint Commissioner of Income Tax. Thereafter, the assessee was issued notice u/s 148 dated 02/04/2012. The assessee raised objections against the same which were disposed off by the concerned AO vide speaking order dated 19/11/2012, a copy of which has also been placed on record. Upon perusal of the same, we find that the aforesaid fact i.e. that the permission of CIT-III, Thane as per the provisions of Section 151(1) of the Income Tax Act, 1961 has been obtained, is reiterated. Nothing on record suggest that the satisfaction of Joint Commissioner / Additional Commissioner was ever obtained by the revenue before initiating the reassessment proceedings. The aforesaid fact could also not be controverted by the revenue before us. 3.4 Under the given circumstances, the ratio of cited decision of Hon'ble Bombay High Court becomes squarely applicable to the facts of the case wherein Hon'ble court observed as under:-
7. Mr. Kapoor relied upon section 151, which as under :--
"151. Sanction for issue of notice.--(1) In a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for the relevant assessment year, no notice shall be issued under Section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer 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 Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under Section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.6 ITA No.1843/Mum/2016
Srichand D. Changlani Assessment Year-2008-09 Explanation. -- For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under Section 148, need not issue such notice himself." Mr. Kapoor submitted firstly that the approval as required by section 151 had not been obtained. Secondly, he submitted that in any event, even according to the respondents, the approval of the CIT-2 was obtained. In other words, admittedly, the approval of the Joint Commissioner was not taken. The impugned order is therefore, according to him, liable to be set aside.
8. The endorsement at the foot of the reasons merely directed that the matter be "Put up for approval" for issue of a notice under section 148. There is nothing on record that indicates that the same was actually put up for approval. Nor is there anything to indicate that the approval was in fact granted.
9. Mr. Gupta, the learned counsel appearing on behalf of the respondents submits that it must be presumed from the said endorsement that the approval had been granted. He was however, unable to produce the approval despite our having granted him an opportunity of doing so. The affidavit in reply does not annexe the approval. Despite a further opportunity in Court, the approval was not produced.
Mr. Gupta relied upon paragraph 4 of the petitioner's objections contained in the petitioner's letter dated 3.3.2011, which reads as under :--
"4. The sanction given by the Addl.CIT is also not proper as the reasons recorded merely contains the signature of the Addl.CIT but not his comments. If the Addl.CIT has given any separate comments, kindly furnish us a copy of the same for our rebuttal. In absence of any separate comments, the sanction or approval is not proper and therefore, the reopening against lacks jurisdiction".
The word used in paragraph 4 is "comments" and not "approval". It is difficult to read the paragraph as an admission on the petitioner's part that the Additional Commissioner had in fact granted his approval. In any event, if he had in fact granted approval, it was for the respondents to produce the same. The respondents cannot merely rely upon their interpretation of a submission by the petitioner in this regard. At the cost of repetition, the respondents have failed to produce the approval of the Additional Commissioner or the Joint Commissioner either in the affidavit in reply or even otherwise, although they were granted an opportunity of doing so. Whether the approval was granted or not is an objective fact which can be established only by producing the approval. It is not the respondents' case that the approval was in fact granted, but is misplaced.
10. Indeed the respondents' case is to the contrary. In paragraphs 4(iii) and 8 of the affidavit in reply, it is expressly stated that the impugned notice was issued "with the approval of CIT-2, Mumbai." There is not a whisper about the Additional Commissioner or the Joint Commissioner having granted the approval. The alleged approval therefore, in any event, is contrary to the provisions of section 151, as held in the judgment of a Division Bench of this Court, to which one of us (M.S. Sanklecha, J.) was a party, dated 12.3.2012 in Ghanshyam K. Khabrani v. Asstt. CIT [2012] 346 ITR 443/20 taxman.com 716/210 Taxman 75 (Bom.) (Mag.). The Division Bench held as under:--
'6 The second ground upon which the reopening is sought to be challenged is that the mandatory requirement of Section 151(2) has not been fulfilled. Section 151 requires a sanction to be taken for the issuance of a notice under Section 148 in certain cases. In the present case, an assessment had not been made under Section 143(3) or Section 147 for 7 ITA No.1843/Mum/2016 Srichand D. Changlani Assessment Year-2008-09 A.Y. 200405. Hence, under sub section 2 of Section 151,no notice can be issued under Section 148 by an Assessing officer who is below the rank of Joint Commissioner after the expiry of 4 years from the end of the relevant Assessment Year unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. The expression "Joint Commissioner" is defined in Section 2(28C) to mean a person appointed to be a Joint Commissioner of Income Tax or an Additional Commissioner of Income Tax under Section 117(1). In the present case, the record before the Court indicate that the Assessing Officer submitted a proposal on 28 March 2011 to the CIT(I) Thane through the Additional Commissioner of Income Tax Range (I) Thane. On 28 March 2011, the Additional CIT forwarded the proposal to the CIT and after recording a gist of the communication of the Assessing Officer stated that:
"As requested by the A.O. Necessary approval for issue of notice u/s 148 may kindly be granted in the case, if approved."
On this a communication was issued on 29 March 2011 from the office of the CIT (1) conveying approval to the proposal submitted by the Assessing officer. There is merit in the contention raised on behalf of the Assessee that the requirement of Section 151(2) could have only been fulfilled by the satisfaction of the Joint Commissioner that this is a fit case for the issuance of a notice under Section 148. Section 151(2) mandates that the satisfaction has to be of the Joint Commissioner. That expression has a distinct meaning by virtue of the definition in Section 2(28C). The Commissioner of Income Tax is not a Joint Commissioner within the meaning of Section 2(28C). In the present case, the Additional Commissioner of Income Tax forwarded the proposal submitted by the Assessing Officer to the Commissioner of Income Tax. The approval which has been granted is not by the Additional Commissioner of Income Tax but by the Commissioner of Income Tax. There is no statutory provision here under which a power to be exercised by an officer can be exercised by a superior officer. When the statute mandates the satisfaction of a particular functionary for the exercise of a power, the satisfaction must be of that authority. Where a statute requires something to be done in a particular manner, it has to be done in that manner. In a similar situation the Delhi High Court in CIT v. SPL'S Siddhartha Ltd. [2012] 17 taxmann.com 138 held that powers which are conferred upon a particular authority have to be exercised by that authority and the satisfaction which the statute mandates of a distinct authority cannot be substituted by the satisfaction of another. We are in respectful agreement with the judgment of the Delhi High Court.
7. In view of the finding which we have recorded on submission (i) and (iv), it is not necessary for the Court to consider submission (iii) which has been urged on behalf of the Assessee. Once the Court has come to the conclusion that there was no compliance of the mandatory requirements of Section 147 and 151(2), the notice reopening the assessment cannot be sustained in low.'
11. In view of the above conclusion, we did not permit Mr. Kapoor to advance any other arguments. It is therefore, also not necessary to consider the other prayers.
Similar is the ratio of decision of Hon'ble Delhi High Court rendered in CIT Vs SPL'S Sidhhartha Ltd. [17 Taxmann.com 138]. 3.5 Respectfully following the wisdom of higher judicial authorities, we concur with the submissions of Ld. AR that the proceedings stood 8 ITA No.1843/Mum/2016 Srichand D. Changlani Assessment Year-2008-09 vitiated for want of proper satisfaction of appropriate authority as envisaged by law and therefore, the same had no legs to stand. By quashing the same, we allow ground number 1 & 3 of the appeal and therefore, ground number 2 does not survive.
4. Resultantly, the appeal stands allowed in terms of our above order.
Order pronounced in the open court on 16th November, 2018.
Sd/- Sd/- (Joginder Singh) (Manoj Kumar Aggarwal) उपा / Vice President ले खा सद / Accountant Member मुं बई Mumbai; िदनां क Dated : 16.11.2018 Sr.PS:-Jaisy Varghese
आदे शकी ितिलिपअ े िषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent
3. आयकरआयु$(अपील) / The CIT(A)
4. आयकरआयु$/ CIT- concerned
5. िवभागीय ितिनिध, आयकरअपीलीयअिधकरण, मुं बई/ DR, ITAT, Mumbai
6. गाड फाईल / Guard File आदे शानु सार/ BY ORDER, उप/सहायकपं जीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुं बई / ITAT, Mumbai.