Wp/9297/2022 Of Raj Kumar Jain v. Principal Commissioner Of Income Tax I

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPURBEFORE HON’BLE SHRI JUSTICE SHEEL NAGU & HON’BLE SHRI JUSTICE MANINDER S. BHATTI ON THE 5[th] OF MAY, 2022 WRIT PETITION No. 9297 of 2022 Between:-RAJ KUMAR JAIN S/O SHRI MANIK CHAND JAIN , AGED ABOUT67 YEARS, OCCUPATION: PROPRIETOR OF M/S POOJAENTERPRISES BUSSINESS R/O MAHAVIR BHAWAN SATNA (M.P.)(MADHYA PRADESH) .....PETITIONER (BY SHRI SAPAN USRETHE, ADVOCATE) AND PRINCIPAL COMMISSIONER OF INCOME TAX I THROUGHCENTRAL REVENUE BUILDING NAPIER TOWN, JABALPUR(M.P.)1.(MADHYA PRADESH) JOINT COMMISSIONER OF INCOME TAX RANGE I CENTRAL2.REVENUE BUILDING NAPIER TOWN, JABALPUR (MADHYAPRADESH) PRADESH) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE KATNI3.INCOME TAX OFFICE, JABALPUR ROAD, KATNI (MADHYAPRADESH) PRADESH) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRE CIRCLE,4.JABALPUR 291, RAMNATH BUILDING, NAPIER TOWN,JABALPUR (MADHYA PRADESH)JABALPUR (MADHYA PRADESH) .....RESPONDENTS (BY SHRI SANJAY LAL, ADVOCATE) This petition coming on for admission and interim relief this day, Hon’ble Shri Justice Maninder S. Bhatti passed the following: ORDER Matter heard finally with the consent of the parties. 2.The petitioner while filing this petition has prayed for followingreliefs:- (i) To quash the invalid and illegal impugnedassessment order passed under section 147 read withsection 144 alongwith demand note under section 156 ofthe Act dated 31/03/2021 (Annexure P-8 and P-9); (ii) To quash the invalid and illegal notice issuedunder section 148 dated 31/03/2021 (Annexure P-2) as itwas issued without proper sanction; (iii) To direct the appropriate authority to stay thedemand recovery proceedings till the disposal of the caseand/or (iv) To issue any other writ, order or direction asthis Hon’ble Court deems just and fair in the facts andcircumstances of the case to give relief to the petitioner. 3.The facts narrated in the petition reveal that a survey was conducted in the business premises of petitioner on 29/10/2014, as a result of which thepetitioner surrendered an amount of Rs. 51,75,000/-. Thereafter, the petitioner filed its income tax return on 25/01/2016 declaring total income tobe Rs. 32,69,300/-. However, the petitioner received a notice under section148 of the Income Tax Act (hereinafter shall be referred as ‘the Act’) dated31/03/2021. The petitioner was once again served with the notice dated23/06/2021 whereby the petitioner was called upon to submit income taxreturn and response to notice under section 148 of the Act, the petitioner filedits response to the notice under section 148 of the Act on 1/11/2021 asaccording to petitioner there was delay in filing response on account ofoutbreak of Covid. The petitioner also requested for supply of reasonsrecorded for re-opening of the assessment. Thereafter, the respondentseventually passed an order dated 31/03/2022 which is contained in AnnexureP-8 by which the assessment was carried out with additions which reflectsfrom paragraph 4 of the impugned order. The order dated 31/03/2022 wasfollowed by a notice of demand which is contained in Annexure P-9 dated31/03/2022 and the petitioner was called upon to pay sum of Rs. 22,50,155/-.The petitioner was then supplied with the reasons alongwith the notice dated25/03/2022 which are contained in Annexure P-1 thus, challenging theimpugned orders/notices as detailed above, the present petition has beenfiled. 4.Counsel for the petitioner submits that in the present case there isviolation of statutory provisions contained in section 151 of the Act 4.Counsel for the petitioner submits that in the present case there isviolation of statutory provisions contained in section 151 of the Act inasmuch as in the present case the assessment year was of 2015-16 andsince the respondents resorted to a notice under section 148 of the Act, theyshould have obtained sanction of Principal Chief Commissioner or ChiefCommissioner or Principal Commissioner or Commissioner for issuance ofsuch notice. Thus, the counsel submits that in the present case instead ofsanction from the competent authority as provided in section 151 (1) of theAct, the respondents obtained sanction of the authority which is lower inrank i.e. Joint Commissioner, who is only empowered to grant sanctionunder section 151 (2) of the Income Tax Act and not under section 151 (1) ofthe Income Tax Act. Thus while placing reliance on the judgment of HighCourt of Mumbai in the case of J.M. Financial and InvestmentConsultancy Services Private Limited Vs. Assistant Commissioner ofIncome Tax Circle 3 (2)(1) and ors. passed in W.P. No. 1050/2022submitted that the issue in question has been already decided by the HighCourt of Mumbai therefore, in terms of the aforesaid order this petition alsodeserves to be allowed. 5.Per contra, counsel for the respondents submits that section 151 (1) ofthe Act only comes into play when there is assessment prior to 4 years fromthe date of notice under section 148 of the Act. In the present case sincethere was no assessment thus submits that in the present case section 151 (1)was not applicable and sanction under section 151 (2) of the Act has been rightly accorded and thus, while placing reliance on AssistantCommissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers (P) Ltd.of the judgment of Apex Court passed in Civil Appeal No. 2830/20007submits that there has to be a conjoint reading of sections 147 to 152 andtherefore, submits that the assessment officer is empowered to initiatereassessment when intimation is given under section 143 (1) to the assessesand thus, supports the impugned orders/notices and prays for dismissal of thepetition. 6.We have considered the submissions advanced by the rival parties. 7.To deal with the issue raised in the present case it is first necessary torefer to section 147 which provides that if the assessing officer has reason tobelieve that an income chargeable to tax has escaped assessment canassess/re-assess such income. The relevant extract of section 147 of the Actis reproduced hereinbelow:- “147. Income escaping assessment:- If theAssessing Officer [has reason to believe] that anyincome chargeable to tax has escaped assessment forany assessment year, he may, subject to theprovisions of sections 148 to 153, assess or reassesssuch income and also any other income chargeableto tax which has escaped assessment and whichcomes to his notice subsequently in the course of theproceedings under this section, or recompute the lossor the depreciation allowance or any otherallowance, as the case may be, for the assessmentyear concerned (hereafter in this section and in sections 148 to 153 referred to as the relevantassessment year) -------;” 7.1Section 148 provides as under:- “148. Issue of notice where income has escapedassessment :- (1) Before making the assessment,reassessment or recomputation under section 147,the Assessing Officer shall serve on the assessee anotice requiring him to furnish within such period, asmay be specified in the notice, a return of his incomeor the income of any other person in respect ofwhich he is assessable under this Act during theprevious year corresponding to the relevantassessment year, in the prescribed form and verifiedin the prescribed manner and setting forth such otherparticulars as may be prescribed, and the provisionsof this Act shall, so far as may be, apply accordinglyas if such return were a return required to befurnished under section 139. ----------” 7.1Section 148 provides as under:- “148. Issue of notice where income has escapedassessment :- (1) Before making the assessment,reassessment or recomputation under section 147,the Assessing Officer shall serve on the assessee anotice requiring him to furnish within such period, asmay be specified in the notice, a return of his incomeor the income of any other person in respect ofwhich he is assessable under this Act during theprevious year corresponding to the relevantassessment year, in the prescribed form and verifiedin the prescribed manner and setting forth such otherparticulars as may be prescribed, and the provisionsof this Act shall, so far as may be, apply accordinglyas if such return were a return required to befurnished under section 139. ----------” 7.2Lastly section 151 provides as under:- “151. Sanction for issue of notice (1) No notice shall be issued under section 148 byan Assessing Officer, after the expiry of a period offour years from the end of the relevant assessmentyear, unless the Principal Chief Commissioner orChief Commissioner or Principal Commissioner orCommissioner is satisfied, on the reasons recordedby the Assessing Officer, that it is a fit case for theissue of such notice. (2) In a case other than a case failing under sub-section (1), no notice shall be issued under section148 by an Assessing Officer, who is below the rankof Joint Commissioner, unless the JointCommissioner is satisfied, on the reasons recordedby such Assessing Officer, that it is a fit case for theissue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner orChief Commissioner or the Principal Commissioneror the Commissioner or the Joint Commissioner, asthe case may be, being satisfied on the reasonsrecorded by the Assessing Officer about fitness of acase for the issue of notice under section 148, neednot issue such notice himself. 8.A perusal of the aforesaid reveals that a notice under section 148 after expiry of a period of 4 years from the end of relevant assessment year cannotbe issued unless the Principal Chief Commissioner or Chief Commissioneror Principal Commissioner or Commissioner accords sanction. Section 151(2) provides that in a case other than a case falling under section 151 (1) thesanction is required to be obtained from the Joint Commissioner. Now if theimpugned orders as well as the reasons for reopening contained in AnnexureP-10 are examined carefully, the same show that the sanction in the presentcase has been accorded by the Joint Commissioner of Income Tax undersection 151 (2) of the Act. It is undisputed that the case pertains toassessment year 2015-16. It is also not in dispute that by the stage ofissuance of notice under section 148 more than 4 years had already lapsed,thus, in our considered opinion, the sanction of the authorities mentioned insection 151 (1) of the Income Tax Act ought to have been obtained as a pre-requisite of the issuance of impugned notice. 9.The High Court of Mumbai in the case of J.M. Financial and Investment Consultancy Services Private Limited (supra) held inparagraph 7 as under:- “7. In our view, since four years had expired fromthe end of the relevant assessment year, as providedunder Section 151 (1) of the Act, it is only thePrincipal Chief Commissioner or ChiefCommissioner or Principal Commissioner ofCommissioner who could have accorded theapproval and not the Additional Commissioner ofIncome Tax. On this ground alone, we will have toset aside the notice dated 31[st] March 2021 issuedunder Section 148 of the Act, which is impugned inthis petition. In view thereof, the consequent ordersand notices will also have to go.” 10.Therefore, in view of aforesaid analysis it is apparent that without Investment Consultancy Services Private Limited (supra) held inparagraph 7 as under:- “7. In our view, since four years had expired fromthe end of the relevant assessment year, as providedunder Section 151 (1) of the Act, it is only thePrincipal Chief Commissioner or ChiefCommissioner or Principal Commissioner ofCommissioner who could have accorded theapproval and not the Additional Commissioner ofIncome Tax. On this ground alone, we will have toset aside the notice dated 31[st] March 2021 issuedunder Section 148 of the Act, which is impugned inthis petition. In view thereof, the consequent ordersand notices will also have to go.” 10.Therefore, in view of aforesaid analysis it is apparent that without there being sanction of the competent authority, the impugned notice undersection 148 of the Act has been issued and therefore, there is jurisdictionalerror in doing so. Since the sanction under section 151 (1) of the Act is thebasic foundation on which a notice under section 148 is issued and since thesanction under section 151 is by an incompetent authority, all ensuingexercise like notice under section 148/assessment order automatically renderotios. 11.The reliance on the decision of Rajesh Jhaveri (supra) by the counselfor the respondents has no applicability as far as the case in hand isconcerned. In said case the issue pertaining to grant of sanction under section 151 was not a debatable issue however, the attempt of the counsel forthe revenue to submit that if there is no assessment even in an assessmentyear prior to 4 years from the date of notice under section 148 of the Act,sanction is not required, does not impress this court. In our consideredopinion this stand of the revenue is misconceived and also goes contrary toits own stand of obtaining sanction (Though by subordinate authority).Thus, the decision of the Apex Court in the Rajesh Jhaveri (supra) has noapplicability as far as the present case is concerned. 12.Thus from the aforesaid analysis, it is crystal clear that the sanction inthe present case was accorded by an incompetent authority (JointCommissioner I.T). The competent authority to accord sanction is undersection 151(1) of the Act i.e. Principal Chief Commissioner or ChiefCommissioner or Principal Commissioner or Commissioner and not the JointCommissioner who is only empowered under section 151 (2) of the Act(which provision is inapplicable to the fact situation herein). 13.Thus, in view of the aforesaid analysis the assessment order containedin Annexure P-8 dated 31/03/2022, demand notice (Annexure P-9) dated31/03/2022 and also the notice under section 148 of the Income Tax Actdated 31/03/2021 (Annexure P-2) are quashed. 14.However, the respondents are at liberty to proceed afresh after obtaining sanction of the competent authority if they are so advised. 15.Thus, writ petition stands allowed. ( SHEEL NAGU) (MANINDER S. BHATTI ) JUDGE JUDGE nn Digitally signed by NAVEEN NAGDEVE Date: 2022.06.21 14:57:26 +05'30'