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VIJAY KUMAR AGARWAL versus THE INCOME TAX OFFICER/ASSESSING OFFICER WARD I, HATHRAS

High Court of Judicature at Allahabad

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Vijay Kumar Agarwal v. The Income Tax Officer/Assessing Officer Ward I, Hathras - WRIT TAX No. 555 of 2000 [2007] RD-AH 11425 (6 July 2007)

 

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HIGH COURT OF JUDICATURE OF ALLAHABAD

    RESERVED

Civil Misc. Writ Petition No.555 of 2000 (Tax)

Vijai  Kumar Agrawal  .........                                         Petitioner

Versus

The Income Tax Officer/ Assessing Officer,

Ward I, Hathras          ..........                                     Respondent

....

Hon'ble R.K. Agrawal, J.

Hon'ble Vikram Nath, J.

(Delivered by Vikram Nath, J)

By means of the present writ petition the petitioner has prayed for a writ of certiorari quashing the notice dated 08.03.1999 issued by the respondent under Section 148 of the Income Tax Act, 1961 (in short referred to as the Act) pertaining to the assessment year 1996-97.  Further prayer is to issue a writ of mandamus commanding the respondents not to proceed further in pursuance of the notice dated 08.03.1999.

The petitioner is a proprietor firm carrying on business of sale and purchase of Bardana. It also carries on business of Commission Agent. During the crop season of Potato and Tobacco the petitioner makes delivery of the materials in which it is dealing from its cash and sale Depot at Farrukhabad.  However, dealing for such delivery was made from Hathras for the assessment year 1996-97. The Income Tax Officer Hathras vide order dated 31.03.1997 assessed the petitioner in his individual capacity as proprietor of M/s Sri Ram Vijai Kumar, under Section 143(3) of the Act. Subsequently it appears that the petitioner had purchased three bank drafts against cash payment drawn on the State Bank of India, Rail Road, Farrukhabad. The Deputy Director of Income Tax (Investigation) passed on the said information to the Assessing Officer  revealing therein that the said three bank drafts, two for Rs. 1,35,000/- (being draft nos. 131050, 131047) and one draft for Rs. 3,00,000/- (being draft No. 131440) were got prepared by M/s Dharam Chandra Suresh Kumar, which were encashed by the assessee. Upon receipt of the said information the Income Tax Officer issued notice dated 25.07.1997 requiring the petitioner to explain the purchase of the drafts, source of investment and the genuineness of the respective parties. The petitioner submitted a detailed reply and explained that all the three drafts were  purchased out of cash balance of the sale proceeds and the transactions were recorded in the books of account. No further correspondence took place with regard to the said notice dated 25.07.1997.

After about two years the petitioner received a notice dated 08.03.1999 under section 148 of the Act calling upon the petitioner to file returns in response to the notice for the assessment year 1996-97. The notice was signed by Sri A.D. Misra, Income Tax Officer, Hathras and it bears the seal of the Office of the Income Tax Officer, Hathras. The petitioner in response, vide letter dated 11.11.1999 required the reasons for reopening the assessment and at the same time stated that the return filed under section 139(1) of the Act  may be treated as return in response to the notice under section 148 of the Act and further specifically mentioned that the letter was being written without prejudice to the validity of the proceedings. Reasons were supplied by the Income tax Officer which indicated that the basis for reopening the assessment was the same as mentioned in the notice dated 25.07.1997 i.e. the purchase of three bank drafts amounting to Rs.5,70,000/-. The proceedings under section 148 of the Act were still pending and in the meantime the present writ petition has been filed challenging the notice dated 08.03.1999 issued under section 148 of the Act.

We have heard Sri R.S. Agrawal, learned counsel for the petitioner and Sri Ashok Kumar, learned Standing Counsel representing the Income Tax Department and have also perused the record.

The ground of attack to the notice is that in view of the provisions contained in section 151 of the Act the Income Tax Officer/Assessing Officer, Ward-I Hathras being an officer of the rank below the rank of Assistant Commissioner, as such no notice could be issued by him without obtaining prior sanction from the Joint Commissioner of Income Tax. In the absence of any sanction of the Joint Commissioner the notice under section 148 of the Act was illegal and liable to be quashed as without authority of law. The necessary averments in this regard have been made in paragraph no. 24 of the writ petition.

The submission of Sri Agrawal is that the assessment for the year 1996-97 in the case of the petitioner was made under section 143(3) of the Act by order dated 31.03.1997 by the Income Tax Officer, Hathras. According to him once an assessment has been made under section 143(3) of the Act, the sanction for issuing notice as required under section 151 of the Act was necessary. In the present case there being no sanction as envisaged under section 151 of the Act and the notice having been issued by an Officer below the rank of Assistant Commissioner, the notice and the proceedings pursuant thereto are liable to be quashed being without authority of law. In support of his contention Sri Agrawal  has relied upon a decision of this Court in the case of Dr. Shashi Kant Garg Versus Commissioner of Income Tax & Others reported in (2006) 285  ITR 158 (All).

On the other hand Sri Ashok Kumar, learned counsel for the Revenue has submitted firstly that as the proceedings under section 148 of the Act were

initiated upon a report made by the Deputy Director of Income Tax (Investigation), Agra who is an Officer higher in rank than the Joint Commissioner, therefore, it was not necessary for the Income Tax Officer to obtain sanction of the Joint Commissioner before issuing the notice under section 148 of the Act. The second submission on behalf of the revenue is that taking into consideration the provisions of section 292-B of the Act the notice under section 148 of the Act could not be held to be invalid merely for the reason of any mistake, defect or omission. He further submitted that as the Assessing Officer had issued notice dated 25.7.1997 with regard to the purchase of three bank drafts which is also the basis for issuing notice dated 08.03.1999 under section 148 of the Act, there was continuity in the assessment proceedings and, therefore, the question of prior sanction does not arise. It was next submitted that upon receipt of the notice dated 08.03.1999 under section 148 of the Act, the petitioner submitted his reply dated 11.11.1999 and required the Income Tax Officer to supply copy of the reasons for reopening the assessment, and the Income tax Officer supplied the reasons vide letter dated 26.04.2000 and thereafter issued the notice dated 05.07.2000 fixing 20.07.2000 to produce the material and it is thereafter that the petitioner filed writ petition in the month of July,2000. On these facts it was contended  that the writ petition was highly belated and suffers from laches of more than one year.

Having considered the rival submissions made at the Bar we first proceed to refer to the relevant provisions of law on which reliance has been placed by the  counsel for the parties.

Section 151 of the Act reads as follows:-

"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 (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.)

Section 292-B of the Act  reads as follows:-

"292-B. No return of income, assessment, notice  summons or other proceeding, or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act."

Sub-section (1) of section 151 of the Act in very specific words provides that where assessment has been made under sub-section (3) of section 143 or section 147 of the Act the notice will not be issued under section 148 by the Assessing Officer who is below the rank of Assistant Commissioner or the Deputy Commissioner without the satisfaction of the Joint Commissioner that it was a fit case for issuing of such notice on the reasons recorded by such Assessing Officer.

We find from the said provision that the ingredients for invoking said provisions are not existing in the present case. In the case of the petitioner even though the assessment order has been made under sub section (3) of section 143 of the Act, but the Assessing Officer who has issued the notice is below the rank of the Assistant Commissioner as it is apparent from the notice itself, as it has been signed by the Income Tax Officer, Ward-1, Hathras and further there was no sanction of the Joint Commissioner as averred in paragraph no. 24 of the writ petition, which has not been denied in paragraph no.11 of the counter affidavit. Therefore, we find that the sanction or satisfaction of the Joint Commissioner of Income Tax as required under section 151(1) of the Act was lacking in the present case, thereby making the impugned notice without authority of law.

A Division Bench of this Court of which one of us (R.K. Agrawal, J.) was a member dealt with the interpretation of section 151 of the Act in the case of Dr. Shashi Kant Garg Versus Commissioner of Income Tax reported in  (2006) 285 ITR (All). Similar view was expressed in the said judgment that where the officer issuing the notice under section 147/148 of the Act is below the rank of Assistant Commissioner (or Deputy Commissioner) then the satisfaction of the Joint Commissioner on the grounds for issuing such notice is a must. The Division Bench in its judgment explained the proposition as contained in section 151 of the Act in the following words:-

"From a perusal of Section 151 of the Act the following proposition emerges:-

(i)   If an assessment has been made under sub- section (3) of Section 143 or Section 147 of the Act and four years have not expired from the end of the relevant assessment year, a notice under Section 148 of the Act can be issued by the Assessing Officer who is  below the rank of the Assistant Commissioner or the Deputy Commissioner but before issuing any such notice, the Joint Commissioner is to be satisfied on the reasons recorded by such Assessing Officer that it is a fit case for issue of such notice. Here "Joint Commissioner", would also include an Additional Commissioner, in view of the definition of the phrase "Joint Commissioner" as contained in section 2(28C) of the Act. The satisfaction has to be necessarily recorded by the Additional Commissioner or the Joint Commissioner, as the case may be.  However, if the Assessing Officer is the Assistant Commissioner or the Deputy Commissioner, then in that case, prior approval of any higher officer is not required in case he has recorded the reasons for issuing notice in view of the provisions of sub-sections (4) and (5) of section 120 of the Act;

(ii) If, however, the period of four years have expired and the assessment  order has been made under sub-section (3) of section 143 or Section 147 of the Act, the notice is to be issued only after the satisfaction has been recorded by either the Chief Commissioner or the Commissioner on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. Thus, the Assessing Officer  below the rank of the Assistant Commissioner can issue a notice but before issuing the notice, the satisfaction of the Commissioner or the Chief Commissioner of Income Tax is necessarily to be obtained. This would be the position after 1.4.1988 in view of the omission of the words "Additional Commissioner" in Section 2(16) of the Act by the Direct Tax Laws (Amendment) Act, 1987; and

(iii)    Where an assessment has not been made under sub-section (3) of Section 143 or Section 147 of the Act and the period of four years from the end of the relevant assessment year had expired, notice under Section 148 of the Act can be issued only by an Officer of the rank of the Joint Commissioner after being satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. Here, the term "Joint Commissioner" is inter-changeable with the words "Additional Commissioner" in view of the definition of the term "Joint Commissioner", as given in section 2(28C) of the Act."

The Division Bench in the case of Dr. Shashi Kant Garg (supra) further explained the law with regard to exercise of powers as follows:-

"Having analysed the various provisions of the Act defining jurisdiction of the various authorities and the powers, procedure to be adopted and the limitations imposed upon such authorities for making assessment or reassessment, we are of the further opinion that if under the provisions of the act an authority is required to exercise powers or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner."

In view of the aforesaid discussion we hold that the notice issued under section 148 of the Act was without jurisdiction as it was hit by section 151(1) of the Act.

Now coming to the submission of the counsel for the respondents that the notice under section 148 of the Act were in continuation of the earlier notice dated 27.05.1997, we find that after the assessment was made under section 143(3) of the Act on 31.03.1997, the notice dated 27.05.1997 was without authority of law and the only provision under which the assessment could be reopened was under section 147/148 of the Act. Undisputedly the notice dated 08.03.1999 under section 148  of the Act impugned in the present writ petition was governed by section 151 of the Act and if it was issued in violation of the said provisions, the notice could not be sustained as it would be bad in law. The earlier notice dated 27.05.1997 was not a jurisdictional notice under section 148 of the Act and, therefore, cannot be of any help to the respondents in validating the notice dated 08.03.1999 under section 148 of the Act. Therefore, this argument of the respondent cannot be sustained and is accordingly rejected.

Secondly, with regard to the contention of the respondent that the notice was challenged after the delay of more than one year, it may be mentioned that technical objection of delay can not be sustained. The reasons were supplied by the Assessing Officer on 28.04.2000 and the writ petition was filed within 90 days of the said communication. It was always open to the petitioner to challenge the reasons also for issuing notice. The petitioner could have challenged the notice on two grounds. Firstly on the ground of lack of jurisdiction and secondly on the ground that the reasons of belief were not relevant. In the present case the petitioner after receiving the reasons, as stated above challenged the notice on the ground of jurisdiction / lack of jurisdiction and, therefore, this contention of the Standing Counsel for the Revenue also cannot be accepted.

The last contention of the respondent is with regard to the applicability of section 292-B of the Act for seeking validity of the notice. We find that section 292-B of the Act only refers to the notice being not invalid on account of some mistake, defect or omission. In the present case there was neither any mistake or defect or omission but it lacked a positive application of mind by a superior officer i.e. of the level of Joint Commissioner as required under law, which was not obtained. It cannot be said that non application of mind by a superior officer was a defect or mistake or an omission. The Assessing Officer would not have had the jurisdiction to issue notice under section 148 of the Act without the reasons having been recorded by such Officer were found to be satisfactory by the superior Officer of the rank of the Joint Commissioner.  There was non-compliance of the provisions contained in section 151 (1) of the Act. Such non-compliance of statutory requirement can not be said to be protected by the provisions of section 292-B of the Act. The scope of the section 292-B of the Act is very limited. Such lack of jurisdiction could not have been rectified by invoking the provisions of section 292-B of the Act. A Division Bench of this Court in the case of Sri Nath Suresh Chand Ram Naresh versus Commissioner of Income Tax  reported in (2006) 280 ITR 396 (All) while dealing with the validity of notice under section 148 of the Act where it had been sent in the name of wrong person held that such defect could not be cured by aid of section 292-B of the Act and as such the notice was invalid.

In view of the aforesaid discussion we are of the considered opinion that the notice issued under section 148 of the Act was without jurisdiction and cannot be sustained and further the proceedings pursuant to such notice was also not maintainable.

In view of the discussions made above the writ petition succeeds and is allowed. The impugned notice dated 08.03.1999 (Annexure-6 to the writ petition) and the proceedings consequent thereto are hereby quashed. However, in the facts and circumstances of the case there shall be no order as to costs.

Dated: 6th July, 2007

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