Aquatic Remedies P.Ltd, Mumbai vs Department Of Income Tax

सर्वश्री नरेन्द्र कुमार बिल्लैय्या, लेखा सदस्य एवं अमित शुक्ला, न्यायिक सदस्य के समक्ष

BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER &

SHRI AMIT SHUKLA, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No. 250/Mum/2014 (निर्धारण वर्ष / Assessment Year : 2004-05

Aquatic Remedies Pvt. Ltd., 218/219, Kailash Plaza, Vallabaug Lane, Ghatkopar (E), Mumbai 400 075 बनाम/ Vs. DCIT Cent. Cir.45, 6th Floor, Aaykar Bhavan, M.K.Road, Mumbai 400020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AABCA3876G (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) आयकर अपील सं./I.T.A. No. 1760/Mum/2014 (निर्धारण वर्ष / Assessment Year : 2004-05

DCIT Cent. Cir.45, 6th Floor, Aaykar Bhavan, M.K.Road, Mumbai 400020 बनाम/ Vs. Aquatic Remedies Pvt. Ltd., 218/219, Kailash Plaza, Vallabaug Lane, Ghatkopar (E), Mumbai 400 075 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AABCA3876G (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent)

Assessee by Shri Rajiv Khandelwal Revenue by Shri Sacchidanand & Shri Kishan Vyas

सुनवाई की तारीख / Date of Hearing :13/03/2015 घोषणा की तारीख /Date of Pronouncement:25/03/2015

आदेश / O R D E R

PER N.K.BILLAIYA, JM:

These are cross appeals by the assessee and the Revenue against the very same order of the Ld. CIT(A)-38, Mumbai dated 20/12/2013 pertaining to assessment year 2004-05. Both these appeals were heard together and they are disposed of by this common order for the sake of convenience.

ITA NO.250/MUM/2014:

2. The assessee has raised three substantive grounds of appeal. With ground No.1 the assessee has challenged jurisdiction of the Officer for re-opening the assessment under section 143(3) r.w.s 147 of the Income Tax Act, 1961 (the Act). Ld. Counsel for the assessee argued at length stating that while re-opening the assessment the Officer has not followed the due process of law and the settled judicial position. Referring to the relevant provisions of the Act, the Ld. Counsel stated that the Officer has not followed the procedure. The approval given by the authority for re-opening the assessment is not as per the provisions of law.

3. Rebutting to these submissions Ld. DR stated that due process of law has been followed and the Officer has taken sanction from the appropriate authorities as per provisions of the law and, therefore, no infirmity in the issue of notice under section 148 of the Act.

4. We have heard the rival submissions. We have carefully perused the orders of the authorities below and the documentary evidences brought on record and referred to during the course of hearing.

4.1 The assessee is a company engaged in the business of trading in pharmaceutical products. A search operation under section 132 of the Act was conducted on 09/09/2010 at residential/business premises of the Aquatic Group. The assessee is part of Aquatic Group and was thus, covered in the search operation. Notice under section 148 of the Act was issued on 25/03/2011 asking the assessee to file return of income. In response to the notice issued, the assessee filed a letter stating that the original return filed may be treated as return of income filed in response to notice issued under section 148 of the Act. The assessee has challenged the issuance and validity of this notice under section 148 of the Act claiming that it has been issued in violation of the relevant provisions of the Act without proper approval from the appropriate authority.

4.2 Section 151 of the Act is relevant provision for the sanction for issue of notice under section 148 of the Act. Section 151 read as under:

"151. (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 22[by an Assessing Officer, who is below the rank of Assistant Commissioner 23[or Deputy Commissioner], unless the 24[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 24a[Principal Chief Commissioner or] Chief Commissioner or 24a[Principal 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 24[Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the 24[Joint] Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.]

25[Explanation.--For the removal of doubts, it is hereby declared that the Joint Commissioner, the 25a[Principal Commissioner or] Commissioner or the 25a[Principal Chief Commissioner or] 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.]"

Clause. -2 is relevant clause for the case in hand. It is clearly mentioned that the sanctioning authority shall be Joint Commissioner. In the case in hand, as per the copy of the approval placed at page 115 of the paper book, which is a letter by the Dy.CIT (HQ) to the Addl.CIT (Central), Range 10. With this letter it has been stated that the CIT (Central)-IV, Mumbai had accorded his approval under section 151(1) of the Act for issue of notice under section 148 of the Act in the case of Aquatic Remedies P. Ltd. for assessment year 2004-05. Copy of CIT's approval was also enclosed. Thus, it can be seen that the approval has not been granted by Joint Commissioner as per the mandate of clause -2 of section 151. On the contrary, the approval has been granted by Commissioner under section 151(1) of the Act which is not at all applicable for the case in hand.

4.3 Ld. DR has referred to a letter dated 24/3/2011, which is placed at page 114 of the paper book stating that the Addl. Commissioner has agreed with the views of the AO for re-opening of assessment. It is the say of the Ld. DR that proper sanction has been taken from the Addl. Commissioner/Joint Commissioner as per the provisions of the law.

4.4 We do not find any substance in this submission of Ld. DR. The notice was issued not in pursuant to this letter of the Addl. Commissioner but the notice was issued pursuant to the approval given by the Commissioner. An identical issue was considered by the Hon'ble High Court of Bombay in Writ Petition No.1246 of 2012 in the case of Ghanshyam K. Khabrani. The observations of the Hon'ble High Court are worth mentioning here.

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 A.Y. 2004-05. 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(1) 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 Commissioner of Income Tax Vs. SPL'S Siddhartha Ltd. (ITA No.836 of 2011 decided on 14 September 2011) 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."

4.5 Hon'ble Delhi High Court has also decided identical issue in favour of the assessee and against the Revenue in the case of S.P.L.Siddhartha Ltd. in ITA No.836 of 2011. This decision has also been considered by the Hon'ble Bombay High Court (supra). Following observations of the Hon'ble Delhi High Court are worth mentioning.

"7. Section 116 of the Act also defines the Income Tax Authorities as different and distinct Authorities. Such different and distinct authorities have to exercise their powers in accordance with law as per the powers given to them in specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted .by the satisfaction of the other authority. It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not expect its being done in some other manner. It was so held in the following decisions:

(i) CIT Vs. Naveen Khanna (dated 18.11.2009 in ITA No.21/2009 (DHC).

(ii) State of Bihar Vs. J.AC. Saldanna & Ors. AIR (1980) SC 326.

(iii) State of Gujarat Vs. Shantilal Mangaldas, AIR (1969) SCN 634.

Thus, if authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It Es also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be "independent" and not "borrowed" or "dictated" satisfaction. Law in this regard is now sell-settled. In Sheo Narain Jaiswal & Ors. Vs. ITO, 176 ITR 35 (Pat.), it was held:

"Where the Assessing Officer does not himself exercise his jurisdiction under Section 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non- satisfaction of the condition precedent."

5. The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja Vs. State of Gujarat, (1995) 5 SCC 302 has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether.

6. We are, therefore, of the opinion that the Tribunal has rightly decided the legal aspect, keeping in view well- established principles of law laid down in catena of judgments including that of the Supreme Court.

7. No question of law arises. This appeal is accordingly dismissed.

4.6 Considering the factual matrix of the case in hand, in the light of the judicial decisions discussed herein above, in our considered opinion the sanction for issue of notice is not as per the provisions of the law. Keeping in view the well established principle of law laid down in catena of judgments, including that of the Hon'ble Supreme Court, we hold that the order made under section 143(3) of the Act r.w.s. 147 is without jurisdiction and accordingly quashed. Ground No.1 is allowed.

4.7 Since we have quashed the assessment order we do not find it necessary to go into the merits of the case.

5. In the result, appeal filed by the assessee is allowed.

ITA No.1760/MUM/2014: 6. For similar reasons the cross appeal of the Revenue is dismissed.

Order pronounced in the open court at the time of hearing on 25th day of Mar . 2015.

Sd/- Sd/- (AMIT SHUKLA ) (N.K. BILLAIYA) न्यायिक सदस्य/JUDICIAL MEMBER लेखा सदस्य / ACCOUNTANT MEMBER मुंबई Mumbai; दिनांक Dated 25/03/2015 व.नि.स./ VM , Sr. PS

आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. विभागीय प्रतिनिधि, आयकर अपीलीय अधिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, सत्यापित प्रति //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अधिकरण, मुंबई / ITAT, Mumbai

Date Initials

1. Draft dictated on: 18/03/2015

Sr. PS/PS 2. Draft placed before author: 20/03/2015

Sr. PS/PS 3. Draft proposed & placed before the second member:

JM/AM 4. Draft discussed/approved by Second Member:

JM/AM 5. Approved Draft comes to the Sr. PS/PS:

Sr. PS/PS 6. Order pronounced on:

Sr. PS/PS 7. File sent to the Bench Clerk:

8. Date on which file goes to the Head Clerk:

Sr. PS/PS 9. Date on which file goes to AR

10. Date of dispatch of Order:

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