Notice of Reassessment issued without prior approval is illegal: Bombay HC

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Notice of Reassessment issued without prior approval is illegal: Bombay HC
 
The citation of the case is as under:
 
 
BOMBAY HIGH COURT
RIVER VALLEY MEADOWS AND TOWNSHIP (P) LIMITED
VERSUS
DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE 1 (3) (2) ,
MUMBAI & ANR.-
WRIT PETITION NO.2216 OF 2021
Dated.- November 16, 2021
Short Overview of the case:
– The issue was with regard to the validity of the Reopening of assessment u/s 147
– In this case, the notice was issued without approval of competent authority
Bombay High Court ob served as under:
  1. There was non-application of mind while granting the approval. \
  2. Moreover, in the order dated 21/09/2021 passed by Respondent dealing with the objections filed by Petitioner, the stand of the AO is not what Mr. Suresh Kumar stated in Court.
  3. In the objection dated 17/09/2021, Petitioner has brought to the notice of the AO that notice issued u/s 148 dated 25/06/2019 was illegal and was issued without approval of competent authority and approval dated 26/06/2019 was an afterthought to cover up the action of the learned Deputy CIT.
  4. In the order dated 21/09/2021 rejecting this objection, the AO does not deny that the approval was dated 26/06/2019 whereas the notice was dated 25/06/2019 but simply states that the reason of escapement of income was sent for approval to Additional CIT on 14/06/2019 much before the notice under Section 148 was issued.
  5. Petitioner’s submission that the notice dated 25/06/2019 issued u/s 148 of the Act was illegal since there was no prior approval as required under Section 151(2) of the Act has to be accepted.
  6. Notice itself has to be quashed and set aside. In such a case, the consequential orders also have to be set aside. Therefore, prayers (a) and (a1) which read as under, are granted.
    “(a) a writ in the nature of mandamus, prohibition, certiorari, or any other appropriate writ, direction or order quashing the notice dated 25.06.2019 issued by the Respondent No.1 under section 148 and consequent proceedings initiated pursuant thereto under section 147 of the Act;
    (a1) issue a writ of Certiorari or any other appropriate writ, direction, or order thereby quashing and setting aside the impugned order dated 21.09.2021 (Exhibit G) and impugned assessment order dated 28.09.2021 (Exhibit N) passed by the Respondents.”
  1. When the Petition was filed, Petitioner had sought quashing of a notice dated 25/06/2019 issued by Respondent No.1 under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and consequent proceedings initiated pursuant thereto under Section 147 of the Act. During the pendency of this Petition, an interim order dated 21/09/2021 came to be passed followed by a final Assessment Order dated 28/09/2021. With the leave of the Court, Petition was amended and both these orders dated 21/09/2021 and 28/09/2021 were also sought to be quashed.
  2. There are various grounds raised in the Petition, the first of which is that the notice dated 25/06/2019 itself was issued without having prior mandatory approval of the Additional CIT which was required in law under Section 151(2) of the Act. We are satisfied that no such mandatory approval was in place before the issuance of this notice and for the sake of brevity, we do not wish to go into the other grounds.
  3. The notice under Section 148 of the Act dated 25/06/2019 states, ‘This notice is being issued after obtaining the necessary satisfaction of the RANGE 1(3), MUMBAI’. Copy of approval at Exh.E to the Petition in which the Additional CIT, Range 1(3), Mumbai has, by hand noted, “Yes, I am satisfied that it is fit case for the issue of notice u/s 147 of the Act – Sd/- 26/06/2019″. 
  4. Mr. Kamat submitted that if this necessary satisfaction / approval was granted only on 26/06/2019, how did Respondent No.1 issue notice under Section 148 on 25/06/2019, i.e., a day prior thereto.
  5. Mr. Suresh Kumar requested for some more time to file reply. Since we were satisfied with the submissions of Mr. Kamat, we found no purpose would be served by adjourning the matter to file a reply and in any event Respondents had sufficient time and they could have filed the reply earlier.
  6. Mr. Suresh Kumar submitted that his instructions are that in one copy it is erroneously written ‘26/06/2019’ whereas in the other copy in the file of Respondent, it is ‘25/06/2019’. In our view, that also shows that there was non-application of mind while granting the approval. Moreover, in the order dated 21/09/2021 passed by Respondent dealing with the objections filed by Petitioner, the stand of the Assessing Officer is not what Mr. Suresh Kumar stated in Court today. In the objection dated 17/09/2021, Petitioner has brought to the notice of the Assessing Officer that notice issued under Section 148 dated 25/06/2019 was illegal and was issued without approval of competent authority and approval dated 26/06/2019 was an afterthought to cover up the action of the learned Deputy CIT. In the order dated 21/09/2021 rejecting this objection, the Assessing Officer does not deny that the approval was dated 26/06/2019 whereas the notice was dated 25/06/2019 but simply states that the reason of escapement of income was sent for approval to learned Additional CIT on 14/06/2019 much before the notice under Section 148 was issued. 
  7. In our view, therefore, the Petitioner’s submission that the notice dated 25/06/2019 issued under Section 148 of the Act was illegal since there was no prior approval as required under Section 151(2) of the Act has to be accepted.
  8. In the circumstances, that notice itself has to be quashed and set aside. In such a case, the consequential orders also have to be set aside. Therefore, prayers (a) and (a1) which read as under, are granted. 
“(a) a writ in the nature of mandamus, prohibition, certiorari, or any other appropriate writ, direction or order quashing the notice dated 25.06.2019 issued by the Respondent No.1 under section 148 and consequent proceedings initiated pursuant thereto under section 147 of the Act; (a1) issue a writ of Certiorari or any other appropriate writ, direction, or order thereby quashing and setting aside the impugned order dated 21.09.2021 (Exhibit G) and impugned assessment order dated 28.09.2021 (Exhibit N) passed by the Respondents.” 
  1. It is open to Respondents to take such steps as advised in law and it is open to Petitioner to raise such objections as and when they receive a fresh notice. 
  2. Petition disposed.
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