The Delhi High Court recently announced that the re-assessment passed under sections 147/ 148 of the Income Tax Act after 4 years without the approval of Chief Commissioner or Commissioner of Income Tax is bad in law.
A two-judge bench of the High Court was hearing an appeal filed by the Revenue against the order of the ITAT quashing re-assessment against /s Gee Kay Finance & Leasing co. Ltd.
In instant case, the Assessee-Company filed a return declaring a loss which was processed under Section 143(1), later on scrutiny, there found a loss. Subsequently, a notice issued under Section 148 of the Income Tax Act, 1961 leading to re-assessment.
The AO initiated re-assessment and added back the substantial amounts under Section 68 of the Act and completed the assessment. The CIT (A) confirmed the order of assessing officer.
Thereafter, Assessee appealed before ITAT and contended that the issuance of notice under Section 148 of the Act was without jurisdiction as the concerned Assessing Officer proceeded to re-open the assessment without the sanction of the Commissioner of Income Tax, as required by Section 151(1).
The same contention was accepted by the tribunal and allowed the appeal of Assessee. Being aggrieved Revenue raised the appeal before High Court and relies upon various amendments effected to Section 151 of the Act.
The bench comprising Justice S. Ravindra Bhat and Justice Vinod Goel heard the contention of Raghvendra Singh advocate for Revenue that section 151 of the Act after 4 years of such expiry, the Chief Commissioner or Commissioner had to be satisfied that the reasons of the AO, were justified.
The same counsel further submitted that after the amendment of 1998 Act with effect from 01.10.1998 wherever completed assessments were made by officers below the rank of Assistant Commissioner or Deputy Commissioner then approval of the Joint Commissioner was necessary.
Dr. Rakesh Gupta, learned counsel behalf of the assessee pressed the relevance of section 2(7A) and the changes occurred in the definition of Assessing Officer and inclusion of Joint Commissioner as one of the assessing authorities only with effect from 1998.
The Court, while perusing the changes in the amendments which came into force with effect from 01.04.1989 observed that “After the expiry of 4 years from the end of the relevant assessment year, a scrutiny assessment can be reopened only with the approval of the Chief Commissioner or Commissioner”.
Accordingly, the bench, while endorsing the judgment of Calcutta High Court observed that “even scrutiny assessment at par with such assessments and ensures that there is no disconnect and a minimum safeguard, by way of an opinion by the higher official expressing satisfaction is on the record before a notice is issued under Section 148, in respect of a period beyond 4 years from the end of the relevant assessment”.
By following the aforementioned judgment, the Court dismissed the appeal of Revenue.
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