Wp/602/2014 Of Pavan Morarka v. The Assistant Commissioner Of Income-Tax 2(3) And Anr

Digitallysigned byGAURIGAURI AMITGAEKWADAMITDate:GAEKWAD2022.02.2315:10:48+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL APPELLATE JURISDICTION WITH WRIT PETITION NO.2145 OF 2014Rachna Morarka)having my office at 4[th] Floor, Brady House, )12-14, V.N. Road, Fort, Mumbai – 400 001)….Petitioner V/s.1. Income Tax Officer – 16(2)(1), Mumbai,)Room No.221, 2[nd] Floor, Matru Mandir,)Tardeo Road, Mumbai – 400 007)2. The Union of India)Through the Secretary, Department of)Revenue, Ministry of Finance, North Block,)New Delhi – 100 001)….Respondents ---- Mr. P.J. Pardiwalla, Senior Advocate a/w. Mr. Niraj Sheth i/b. Mr. Atul K.Jasani for petitioner in both petitions.Mr. Suresh Kumar for respondents in both petitions. ---- CORAM : K.R. SHRIRAM &N.J. JAMADAR, JJ. DATED : 17[th] FEBRUARY 2022 ORAL JUDGMENT : (PER K.R. SHRIRAM, J.) 1Since identical issues are involved in both petitions, facts fromWrit Petition No.602 of 2014 in the case of Mr. Pavan Murarka (petitioner)are referred to hereunder : Petitioner held 50% of the equity share capital of ShivumHoldings Pvt. Ltd. (Shivum) and 25% of the equity share capital of P & AEstate Pvt. Ltd. (P&A). Petitioner’s wife, Rachana Murarka (RM), petitionerin Writ Petition No.2145 of 2014, held 50% of the equity share capital ofShivum and 25% of the equity share capital of P&A. Balance 50% of theequity share capital of P&A was held by Mr. Akshat Prasad. Shivum held85% interest in a partnership firm named Laxmi Trading Company (LTC)and petitioner held the balance 15% interest in LTC. During the previousyear relevant to the assessment year 2006-2007, LTC gave an advance ofRs.1,25,00,000/- to P&A on behalf of Shivum. The accumulated profits ofShivum as on 31[st] March 2006 were Rs.3,38,53,410/-. 2On 29[th] July 2006 petitioner filed return of income forAssessment Year 2006-2007. An assessment order dated 25[th] November2008 came to be passed under Section 143(3) of the Income Tax Act, 1961(the said Act). In the meanwhile, an assessment order dated 20[th] June 2008under Section 143(3) of the said Act came to be passed in the case of P&Aholding that the amount advanced by LTC on behalf of Shivum to P&Aconstituted dividend in the hands of P&A under Section 2(22)(e) of the said Act. 3On 17[th] February 2009 Commissioner of Income Tax (Appeals)[CIT(A)] decided P&A’s appeal against the Revenue holding that additionunder Section 2(22)(e) cannot be made in the hands of P&A since P&A wasnot a shareholder of Shivum. The other contentions of P&A challenging thecorrectness of the treatment of the amounts advanced as dividend were notadjudicated. The view of CIT(A) was not accepted by the Department andan appeal was filed by them before the Income Tax Appellate Tribunal(ITAT) contending that an addition under Section 2(22)(e) was required tobe made in the hands of P&A. The ITAT dismissed Revenue’s appeal andheld that the addition under Section 2(22)(e) can only be made in thehands of the shareholder and since P&A was not the shareholder, addition inits hands could not be sustained, thus deciding the issue against Revenue. 4Unhappy with the view of the ITAT, an appeal was filed byRevenue before the Hon’ble High Court at Delhi maintaining theircontention that the addition was required to be made in the hands of P&A.The High Court was pleased to dismiss Revenue’s appeal by an order andjudgment pronounced on 11[th] May 2011 holding that the loan or advancecannot be treated as deemed dividend in the hands of the concern which isnot a shareholder. Thereafter, in paragraph 30 of the judgment, the HighCourt observed as under : “Before we part with, some comments are to be necessarily 4Unhappy with the view of the ITAT, an appeal was filed byRevenue before the Hon’ble High Court at Delhi maintaining theircontention that the addition was required to be made in the hands of P&A.The High Court was pleased to dismiss Revenue’s appeal by an order andjudgment pronounced on 11[th] May 2011 holding that the loan or advancecannot be treated as deemed dividend in the hands of the concern which isnot a shareholder. Thereafter, in paragraph 30 of the judgment, the HighCourt observed as under : “Before we part with, some comments are to be necessarily made by us. As pointed out above, it is not in dispute thatthe conditions stipulated in section 2(22)(e) of the Acttreating the loan and advance as deemed dividend areestablished in these cases. Therefore, it would always beopen to the Revenue to take corrective measure by treatingthis dividend income at the hands of the shareholders and taxthem accordingly. As otherwise, it would amount toescapement of income at the hands of those shareholders.” 5Displeased with the decision of the High Court at Delhi,Revenue preferred an SLP before the Hon’ble Supreme Court contendingthat the dividend was taxable in the hands of P&A. That appeal is stillpending. 6Relying on the observations of the Delhi High Court, theAssessing Officer at New Delhi issued a notice dated 22[nd] March 2013 underSection 148 of the said Act to petitioner despite agitating correctness of theconclusion of the Delhi High Court before the Apex Court. By a letter dated28[th] March 2013, petitioner objected to the reassessment proceedings on theground that the Assessing Officer at New Delhi did not have jurisdictionover petitioner as petitioner was assessed to tax at Mumbai. Petitioner’scontention was that notice, if any, under Section 148 of the said Act, couldbe issued only by an officer at Mumbai. Initially, the Assessing Officer atNew Delhi did not accept the objections of petitioner but later, on or about13[th] December 2013, transferred the case records of petitioner to respondentno.1 in Mumbai, who is the Jurisdictional Assessing Officer (JAO) ofpetitioner. 7Respondent no.1, thereafter, issued a notice dated 10[th] January2014 under Section 148 of the said Act to petitioner stating that he hasreasons to believe that income chargeable to tax for Assessment year 2006-2007 has escaped assessment within the meaning of Section 147 read withSection 150 of the said Act. In the said notice, it is also stated that the noticeis issued under Section 148 read with Section 150 in view of the decision ofthe Hon’ble High Court, New Delhi in ITA No.1436 of 2010 dated 11[th] May2011. Respondent no.1 subsequently also provided petitioner with thereasons for reopening the assessment recorded on 9[th] January 2014. Thereasons were provided alongwith notice dated 27[th] January 2014 underSection 143(2) of the said Act. By a communication dated 4[th] February 2014through his Chartered Accountants, petitioner objected to the validity of thenotice. By an order dated 7[th] February 2014, the objections were rejected byrespondent no.1. 8Mr. Pardiwalla on behalf of petitioner submitted as under : (a) the notice dated 10[th] January 2014 impugned in the petitionis barred by limitation since it is issued beyond a period of six years fromthe end of the relevant assessment year, which is the time limit within whichthe impugned notice was required to be issued as per Section 149(1)(b) ofthe said Act. Therefore, the impugned notice is invalid and deserves to bequashed; (b) the impugned notice dated 10[th] January 2014 seeks toderive validity in view of Section 150 of the said Act as is apparent from theface of the notice and Section 150 of the said Act has no application in thematter; (c) for Section 150 of the said Act to apply, the notice must beissued in consequence of or to give effect to any finding or direction and the 8Mr. Pardiwalla on behalf of petitioner submitted as under : (a) the notice dated 10[th] January 2014 impugned in the petitionis barred by limitation since it is issued beyond a period of six years fromthe end of the relevant assessment year, which is the time limit within whichthe impugned notice was required to be issued as per Section 149(1)(b) ofthe said Act. Therefore, the impugned notice is invalid and deserves to bequashed; (b) the impugned notice dated 10[th] January 2014 seeks toderive validity in view of Section 150 of the said Act as is apparent from theface of the notice and Section 150 of the said Act has no application in thematter; (c) for Section 150 of the said Act to apply, the notice must beissued in consequence of or to give effect to any finding or direction and the order in question must be passed by any authority in any proceeding underthis Act or by a Court in any proceeding under any other law. Since none ofthese statutory requirements are fulfilled in the present case, Section 150has no application and does not save the impugned notice from beingbarred by limitation; (d) the observations of the Hon’ble Delhi High Court inparagraph 30 of its order (reproduced above) cannot be considered as“finding” or “direction”; (e) the judgment of the Hon’ble Delhi High Court cannot beregarded as an order covered by Section 150 of the said Act; (f) respondents’ contention that the Assessing Officer at NewDelhi had issued a notice under Section 148 of the said Act to petitioner on22[nd] March 2013 before the limitation period expired and, therefore, theimpugned notice issued by the Assessing Officer at Mumbai in continuationof the said proceedings must also be treated as being valid and within timeis misconceived. This was because the notice issued by the Assessing Officer at New Delhi was invalid and of no effect since it was issued by an officerwho did not have jurisdiction over petitioner; (g) no records can be transferred when the proceedings wereinvalid ab initio and such transfer can not validate any proceedings taken incontinuation thereof. The notice issued by a non Jurisdictional AssessingOfficer is invalid as held in Commissioner of Income Tax V/s. M.I. Builders(P.) Ltd.[1]; (h) in any event, on the date on which the records weretransferred by the Assessing Officer at New Delhi to the Assessing Officer atMumbai, the time limit of six years, as per Section 149 of the said Act, hadalready elapsed because of which respondent no.1 recorded fresh reasonsand issued a fresh notice under Section 148 of the said Act dated14[th] January 2014 well beyond six years. Therefore, the notice issued by theAssessing Officer at Mumbai was independent of the notice issued by theAssessing Officer at New Delhi and, therefore, the validity thereof has to bedecided independently. In such circumstances, the notice must be held to bebarred by limitation; (i) no sanction has been accorded before issuance of notice bythe Assessing Officer at Mumbai under Section 151 of the said Act and,therefore, the impugned notice is invalid; 1. 349 ITR 271 (Allahabad) (i) no sanction has been accorded before issuance of notice bythe Assessing Officer at Mumbai under Section 151 of the said Act and,therefore, the impugned notice is invalid; 1. 349 ITR 271 (Allahabad) (j) even the sanction issued to the Assessing Officer at NewDelhi was invalid because the approval has been obtained from AdditionalCommissioner of Income Tax whereas, the approval ought to have beenaccorded by the Commissioner of Income Tax since the notice dated22[nd] March 2013 was issued after a period of four years from the end of therelevant assessment year. As held in the case of Miranda Tools (P.) Ltd. V/s.Income Tax Officer[2], the sanction accorded by the Additional Commissionerof Income Tax rendered the notice issued by the Assessing Officer at NewDelhi bad-in-law and without jurisdiction;(k) stand of respondents that notice under Section 148 readwith Section 150 of the said Act has been issued, the approval under Section151 of the said Act is not required to be obtained is not correct. First of all,Section 150 of the said Act has no application and secondly, Section 150only lifts the bar of limitation for issuance of notice under Section 149 andthe other conditions that are required to be complied with beforejurisdiction to reassess can be validly assumed must be fulfilled. Reliancewas placed on the decision of the Apex Court in the case of Income TaxOfficer V/s. Murlidhar Bhagwan Das[3]. In the alternative, since the notice isissued after four years and assessment under Section 143(3) of the said Acthas been completed, the proviso to Section 147 has to be complied with andrespondent has to show there was failure on part of petitioner to fully and 2. (2020) 114 taxmann.com 584 (Bombay) 3. (1964) 52 ITR 335 (SC) truly disclose all material facts as a result of which income chargeable to tax hasescaped assessment. No such failure has been established. 9Mr. Suresh Kumar justified the stand of respondents. Mr. SureshKumar submitted as under : (a) reassessment proceedings were initiated in March 2013 (withinsix years) by the Income Tax Officer, New Delhi believing himself to havejurisdiction over petitioner but when petitioner objected to the reassessmentproceedings and when petitioner submitted proof that he is assessed in Bombay,the case records were transferred to the office of respondent no.1; (b) fresh notice was issued under Section 148 read with Section150(1) of the said Act because petitioner objected to notice dated22[nd] March 2013 on the ground that it was issued by an officer who did not havejurisdiction and reassessment proceedings are in view of the directions of theDelhi High Court;(c) reassessment proceedings can be initiated without beingaffected by the limitation period stated in Section 149 because Section 150(1) ofthe said Act clearly mentions that notice under Section 148 may be issued at anytime to give effect to any “finding” or “direction” contained in an order passed byany authority in any proceedings under the Act by way of appeal, reference orrevision or by a Court in any proceeding under any other law. Hence,reassessment proceedings can be initiated by respondent no.1 even after March2013; (d) since the reopening proceedings were initiated in view of directions of the Delhi High Court, there is no need to comply with theprovisions of Section 151. 10Having considered the rival submissions, we are satisfied thatthe notice dated 10[th] January 2014 impugned in this petition is barred bylimitation since it is issued beyond a period of six years from the end of therelevant assessment year, the time limit prescribed under Section 149(1)(b) of the said Act. 11 Respondent is seeking to derive validity in view of Section 150 of the said Act. Section 150(1) reads as under : 150. Provision for cases where assessment is in pursuance ofan order on appeal, etc. (d) since the reopening proceedings were initiated in view of directions of the Delhi High Court, there is no need to comply with theprovisions of Section 151. 10Having considered the rival submissions, we are satisfied thatthe notice dated 10[th] January 2014 impugned in this petition is barred bylimitation since it is issued beyond a period of six years from the end of therelevant assessment year, the time limit prescribed under Section 149(1)(b) of the said Act. 11 Respondent is seeking to derive validity in view of Section 150 of the said Act. Section 150(1) reads as under : 150. Provision for cases where assessment is in pursuance ofan order on appeal, etc. (1) Notwithstanding anything contained in section 149, thenotice under section 148 may be issued at any time for thepurpose of making an assessment or reassessment orrecomputation in consequence of or to give effect to anyfinding or direction contained in an order passed by anyauthority in any proceeding under this Act by way of appeal,reference or revisionor by a Court in any proceeding underany other law. ……………... 12 Therefore, for Section 150 of the Act to apply, the notice must be issued in consequence of or to give effect to any “finding” or “direction” contained in an order passed by any authority in any proceeding under thisAct or by a Court in any proceeding under any other law. In our view, none of these statutory requirements are fulfilled and therefore, Section 150 hasno application and does not save the impugned notice from being barred by limitation. 13Reliance by respondents on the observations of the Hon’bleDelhi High Court in paragraph 30 of its order and judgment dated 11[th] May2011 is misplaced. The observations of the Hon’ble Delhi High Court cannotbe considered as “finding” or “direction” as contemplated by Section 150 ofthe said Act. A “finding” can be only that which is necessary for the disposalof an appeal in respect of an assessment of a particular year. Similarly, a“direction” can be issued only by an authority under the powers conferredon it. Moreover, a direction by a statutory authority is in the nature of anorder requiring positive compliance. When it is left to the option anddiscretion of the Income Tax Officer whether or not to take action, it cannotbe described as a “direction”. The Apex Court in Income Tax Officer V/s.Murlidhar Bhagwan Das (Supra) held that “a "finding", therefore, can beonly that which is necessary for the disposal of an appeal in respect of anassessment of a particular year. The Appellate Assistant Commissioner mayhold, on the evidence, that the income shown by the assessee is not theincome for the relevant year and thereby exclude that income from theassessment of the year under appeal. The finding in that context is that thatincome does not belong to the relevant year. He may incidentally find thatthe income belongs to another year, but that is not a finding necessary forthe disposal of an appeal in respect of the year of assessment in question.The expression "direction" cannot be construed in vacuum, but must beGauri Gaekwad collated to the directions which the Appellate Assistant Commissioner cangive under s. 31. Under that section he can give directions, inter alia, unders. 31(3)(b), (c) or (e) or s. 31(4). The expression "directions" in the provisocould only refer to the directions which the Appellate AssistantCommissioner or other tribunals can issue under the powers conferred onhim or them under the respective sections. Therefore, the expression"finding" as well as the expression "direction" can be given full meaning,namely, that the finding is a finding necessary for giving relief in respect ofthe assessment of the year in question and the direction is a direction whichthe appellate or revisional authority, as the case may be, is, empowered togive under the sections mentioned therein. The words "in consequence of orto give effect to" do not create any difficulty, for they have to be collatedwith, and cannot enlarge, the scope of the finding or direction under theproviso. If the scope is limited as aforesaid, the said words also must berelated to the scope of the findings and directions”. 14In Rajinder Nath V/s. Commissioner of Income Tax[4], the Apex Court held as under : The expressions "finding" and "direction" are limited inmeaning. A finding given in an appeal, revision or referencearising out of an assessment must be a finding necessary forthe disposal of the particular case, that is to say, in respect ofthe particular assessee and in relation to the particularassessment year. To be a necessary finding, it must be directlyinvolved in the disposal of the case. …………… As regards the expression "direction" in Section 153(3)(ii) of the Act, it is now well settled that it must be an expressdirection necessary for the disposal of the case before theauthority or court. It must also be a direction which theauthority or court is empowered to give while deciding thecase before it. 15Even if we, for a moment, regard the observations of the Delhi High Court as “finding” or “direction”, the same are not contained in anorder passed by any authority in any proceeding under the Act by way of appeal, reference or revision or by a Court in any proceeding under anyother law. Section 116 of the said Act sets out who the authorities are.Section 116 of the said Act reads as under : 116. Income-tax authorities. There shall be the following classes of income- tax authoritiesfor the purposes of this Act, namely :- (a) the Central Board of Direct Taxes constituted under theCentral Boards of Revenue Act, 1963 (54 of 1963), (aa) Principal Directors General of Income-tax or PrincipalChief Commissioners of Income-tax, (b) Directors- General of Income-tax or Chief Commissionersof Income-tax, (ba) Principal Directors of Income-tax or PrincipalCommissioners of Income-tax, (c) Directors of Income-tax or Commissioners of Income-taxor Commissioners of Income-tax (Appeals), (cc) Additional Directors of Income-tax or AdditionalCommissioners of Income-tax or Additional Commissioners ofIncome-tax (Appeals), (cca) Joint Directors of Income-tax or Joint Commissioners ofIncome-tax , (d) Deputy Directors of Income-tax or Deputy Commissionersof Income-tax or Deputy Commissioners of Income-tax (Appeals),(e) Assistant Directors of Income-tax or AssistantCommissioners of Income-tax, (f) Income-tax Officers, (g) Tax Recovery Officers, (h) Inspectors of Income-tax Certainly, the Hon’ble Delhi High Court is not among the classesof Income Tax Authorities for the purpose of this Act. (c) Directors of Income-tax or Commissioners of Income-taxor Commissioners of Income-tax (Appeals), (cc) Additional Directors of Income-tax or AdditionalCommissioners of Income-tax or Additional Commissioners ofIncome-tax (Appeals), (cca) Joint Directors of Income-tax or Joint Commissioners ofIncome-tax , (d) Deputy Directors of Income-tax or Deputy Commissionersof Income-tax or Deputy Commissioners of Income-tax (Appeals),(e) Assistant Directors of Income-tax or AssistantCommissioners of Income-tax, (f) Income-tax Officers, (g) Tax Recovery Officers, (h) Inspectors of Income-tax Certainly, the Hon’ble Delhi High Court is not among the classesof Income Tax Authorities for the purpose of this Act. Moreover, the order of the Hon’ble Delhi High Court is not anorder in any provision under any other law. It is an order under theproceedings under the Act. In any case, petitioner was not a party before theDelhi High Court and, therefore, there cannot be any finding or direction inrespect of petitioner. Therefore, none of the requirements of Section 150 arefulfilled. Therefore, Section 150 not being applicable to the matter at hand,it does not save the impugned notice from being barred by limitation. 16 Respondent’s stand that the Assessing Officer at New Delhi hadissued a notice under Section 148 of the said Act on petitioner on22[nd] March 2013 before the limitation period expired and, therefore, theimpugned notice issued by the Assessing Officer at Mumbai in continuationof the said proceedings must also be treated as valid and within time ismisconceived. This is because we notice that the notice issued by theAssessing Officer at New Delhi itself was invalid and of no effect since it wasissued by an officer who did not have jurisdiction over petitioner. We gathersupport from the case of Commissioner of Income Tax V/s. M.I. Builders (P.)Ltd. (Supra), the assessee had raised the objection with regard tocontinuation of the proceedings by Income Tax Officer – 1(I), Lucknow on the ground that the said proceedings are illegal as the notice under Section148 of the said Act issued itself was devoid of proper jurisdiction and abinitiovoid. The Income Tax Officer – 1(I), Lucknow, however, withoutconsidering the objection continued to proceed in the matter and passed theassessment order and also directed to initiate penalty proceedings. TheCIT(A) dismissed the appeal of the assessee but the ITAT in the appeal filedby the assessee allowed the appeal of the assessee on the ground that noticeissued under Section 148(1) of the said Act was without jurisdiction and,therefore, the subsequent proceedings are invalid. Feeling aggrieved, theRevenue preferred an appeal before the High Court. While dismissing theappeal of the Revenue, the Court held that when the notice under Section148 (1) of the said Act was issued, ACIT, Range-IV, Lucknow had nojurisdiction over the assessee as the jurisdiction over the assessee wastransferred to the Additional CIT, Range-I, Lucknow. It was held that therecannot be situation where two Assessing Officer would have simultaneousjurisdiction over the assessee. Accordingly, it was held that the Tribunal hadrightly held that the issuance of notice under Section 148 (1) of the said Actby the non-jurisdictional Assessing Officer was without jurisdiction. 17We shall also note that on the date when the records weretransferred by the Assessing Officer at New Delhi to the Assessing Officerat Mumbai, the time limit of six years as per Section 149 of the said Act had 17We shall also note that on the date when the records weretransferred by the Assessing Officer at New Delhi to the Assessing Officerat Mumbai, the time limit of six years as per Section 149 of the said Act had already elapsed. Respondent no.1, thereafter, recorded fresh reasons andissued a fresh notice dated 14[th] January 2014 under Section 148, that isimpugned, well beyond six years. The notice issued by the Assessing Officerat Mumbai was independent of the notice issued by the Assessing Officer atNew Delhi and, therefore, the validity thereof has to be decidedindependently. The very fact that the Assessing Officer at Mumbai recordedhis own reasons and issued a fresh notice and did not seek to derive hisjurisdiction basis the notice dated 22[nd] March 2013 itself indicates that theRevenue’s stand has no basis. 18 In our view, the stand of Revenue that no fresh sanction underSection 151 of the said Act was required is also misconceived. Admittedly,no sanction has been accorded before issuance of notice by the AssessingOfficer at Mumbai. The Revenue cannot seek to sustain the validity of thenotice by relying on the sanction accorded to the issuance of the noticedated 22[nd] March 2013 by the Assessing Officer at New Delhi. The noticeissued by the Assessing Officer at New Delhi was after obtaining approval ofAdditional Commissioner of Income Tax, Range-14, New Delhi. Even thatnotice is invalid because the notice dated 22[nd] March 2013 was issued aftera period of four years from the end of the relevant assessment year and,therefore, sanction ought to have been accorded by the Commissioner ofIncome Tax. The sanction accorded by the Additional Commissioner ofIncome Tax, therefore, would render the notice issued by the AssessingGauri Gaekwad Officer at New Delhi itself bad in law and without jurisdiction. A DivisionBench of this Court in Miranda Tools (P.) Ltd. V/s. Income Tax Officer (Supra) in paragraph 9 has held as under : 9. The next question arises is whether the sanction granted bythe Chief Commissioner of Income Tax would fulfill therequirement of section 151. It is long been settled that whenthe statute mandates the satisfaction of a particular authorityfor the exercise of power then it has to be done in thatmanner only. Adopting this principle, the Division Benches ofthis Court in the case of Ghanshyam K. Khabrani v. Asst. CIT1and CIT v. Aquatic Remedies P. Ltd. have held that sanction forissuance of reopening notice has to be obtainedfrom the Authority mentioned in Section 151 and not fromany other officer including a superior officer. In the presentcase the Chief Commissioner of Income tax is not the officerspecified in section 151 of the Act. There is thus a breach ofrequirement of section 151(2) of the Act regarding sanctionfor issuance of notice under section 148 of the Act.Consequently, the impugned notice and the impugned ordercannot be sustained in law. The Petitioner, therefore, isentitled to succeed. 19 The other ground taken by respondent to oppose the petition isthat since the notice has been issued under Section 148 read with Section150 of the said Act, the approval under Section 151 of the said Act is notrequired to be obtained is also misconceived. As stated earlier, first of allSection 150 of the said Act has no application in the present case. In anyevent, Section 150, as held in Income Tax Officer V/s. Murlidhar BhagwanDas (Supra), only lifts the bar of limitation for issuance of notice underSection 149 of the said Act and the other conditions that are required to becomplied with before jurisdiction to reassess can be validly assumed must befulfilled. The Apex Court while construing the second proviso to Section 34(3) of the Income Tax Act, 1921 held as under : 19 The other ground taken by respondent to oppose the petition isthat since the notice has been issued under Section 148 read with Section150 of the said Act, the approval under Section 151 of the said Act is notrequired to be obtained is also misconceived. As stated earlier, first of allSection 150 of the said Act has no application in the present case. In anyevent, Section 150, as held in Income Tax Officer V/s. Murlidhar BhagwanDas (Supra), only lifts the bar of limitation for issuance of notice underSection 149 of the said Act and the other conditions that are required to becomplied with before jurisdiction to reassess can be validly assumed must befulfilled. The Apex Court while construing the second proviso to Section 34(3) of the Income Tax Act, 1921 held as under : The first part of the proviso released the operation of theproviso from the restriction imposed by section 34 only in-respect of the time limit within which any action may be-taken or any order of assessment or reassessment may bymade. It means that the proviso continues to be subject to theother restrictions imposed under the section and it cannotoverride the said provisions in that regard. Under the proviso,the period of limitation will not apply to a re-assessmentmade under section 27 or to an assessment or re-assessmentmade on the assessee or any person in consequence of or togive effect to any finding or direction contained in an orderunder section 31, section 33, section 33B, section 66 orsection 66A of the Act. It was not contended, nor was itpossible to contend, that by reason of the reference to thesaid provisions the powers and jurisdiction conferred on therespective. authorities, tribunals or courts referred to thereinwere enlarged or modified by a' reference in the proviso orthat the proviso could be read or construed as amendingthose sections conferring on those bodies wider or differentpowers or jurisdiction. Learned counsel for the departmentexpressly disclaimed any such submission. Therefore, thescope of the proviso cannot ordinarily exceed the scope of thejurisdiction conferred on an authority under the saidprovisions. (emphasis supplied) 20 Therefore, for a moment, even if accept Revenue’s contentionthat the present proceedings are continuation of the proceedings initiated bythe Assessing Officer at New Delhi vide notice dated 22[nd] March 2013, theproceedings would be invalid since the notice issued by the Assessing Officerat New Delhi itself was invalid inasmuch as sanction of the appropriateauthority as per Section 151 was not obtained before issuing the notice. 21On the submissions of Mr. Pardiwalla that respondent hadissued impugned notice under Section 148 relying on the Delhi High Courtorder and judgment despite agitating the conclusion of the Delhi High Court before the Apex Court, Mr. Suresh Kumar submitted that an SLP has beenfiled against the decision of the Delhi High Court to cover the contingencyof an adverse outcome in the SLP. It is Revenue’s contention before the ApexCourt that the deemed dividend under Section 2(22)(e) is assessable in thehands of P&A. This is certainly not permissible because the jurisdictionalrequirement is that respondents must entertain a belief that incomechargeable to tax has escaped assessment in the hands of petitioner. It is notpossible for respondents to entertain such belief if they are agitating thematter against P&A. On this ground also, the impugned notice should beheld as invalid. The Division Bench of this Court in DHFL Venture CapitalFund V/s. Income Tax Officer[5] held that where the Assessing Officer soughtto make protective assessment by reopening an assessment on the groundthat a contingency may arise in future resulting in escapement of incomethat would be wholly impermissible and would amount to rewriting of thestatutory provision. Paragraph 18 of the said judgment reads as under : 18. A protective assessment as the learned author indicatesis regarded as being protective because it is an assessmentwhich is made ex abundanti cautela where the departmenthas a "doubt as to the person who is or will be deemed to bein receipt of the income". A departmental practice, which hasgained judicial recognition, has emerged where it appears tothe Assessing Officer that income has been received duringthe relevant Assessment Year, but where it is not clear orunambiguous as to who has received the income. Such aprotective assessment is carried out in order to ensure thatincome may not escape taxation altogether particularly incases where the Revenue has to be protected against the barof limitation. But equally while a protective assessment ispermissible a protective recovery is not allowed. However,such an exercise which is permissible in the case of a regular assessment must necessarily yield to the discipline of thestatute where recourse is sought to be taken to the provisionsof section 148. Protective assessments have emerged as amatter of departmental practice which has found judicialrecognition. Any practice has to necessarily yield to therigour of a statutory provision. Hence, when recourse issought to be taken to the provisions of section 148, there hasnecessarily to be the fulfillment of the jurisdictionalrequirement that the Assessing Officer must have reason tobelieve that income has escaped assessment. To accept thecontention of the Revenue in the present case would be toallow a reopening of an assessment under Section 148 on theground that the Assessing Officer is of the opinion that acontingency may arise in future resulting an escapement ofincome. That would, in our view, be wholly impermissibleand would amount to a rewriting of the statutory provision.Moreover, the reliance which is sought to be placed on theprovisions of Explanation 2(a) to Section 147 ismisconceived. Explanation 2 provides a deeming definition ofcases where income chargeable to tax has escapedassessment and clause (a) includes a case where no return ofincome has been furnished by the assessee although hisincome or the income of any other person in respect of whichhe is assessable exceeds the maximum amount which is notchargeable to tax. As the reasons which have been disclosedto the assessee would indicate, this is not a case where anassessee has not filed a return of income simplicitor. Thewhole basis of the reopening is on the hypothesis that if theprovisions of Sections 61 to 63 are attracted as has beenclaimed by the assessee, and the income of Rs.32.83 Croreswhich has been claimed by the assessee to be exempt istreated as exempt, in that event an alternate basis for taxingthe income in the hands of the AOP of the contributories issought to be set up. For the reasons already indicated, theentire exercise is only contingent on a future event and aconsequence that may enure upon the decision of theTribunal, that again if the Tribunal were to hold against theRevenue. A reopening of an assessment under Section 148cannot be justified on such a basis. There has to be a reasonto believe that income has escaped assessment. 'Has escapedassessment' indicates an event which has taken place. Taxlegislation cannot be rewritten by the Revenue or the Courtby substituting the words 'may escape assessment' in future.Writing legislation is a constitutional function entrusted tothe legislature. (emphasis supplied) 22In the circumstances, the notice dated 10[th] January 2014 issuedby respondent no.1 under Section 148 of the said Act to petitioner andnotice dated 14[th] February 2014 issued by respondent no.1 to RachnaMorarka for Assessment Year 2006-2007 are quashed and set aside.Consequently, the orders rejecting petitioner’s objections are also quashedand set aside. 23Both petitions disposed accordingly. (N.J. JAMADAR, J.) (K.R. SHRIRAM, J.)