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Ajai Verma v. Commissioner Of Income-Tax And Another
Factual and Procedural Background
The petitioner was earlier assessed by an assessment order dated January 29, 2004 (wrongly mentioned as January 29, 2003) by respondent No. 2 under section 144 of the Income-tax Act, 1961, for the assessment year 2001-02 (annexure III to the writ petition). The petitioner challenged a notice issued under section 148 of the Act dated January 10, 2007 (annexure VI). The principal contention was that the section 148 notice was issued after the expiry of four years from the end of the relevant assessment year and, therefore, could not have been issued by the Income-tax Officer (an officer below the rank of Joint Commissioner) but should have been issued by an Assessing Officer not below the rank of Joint Commissioner.
Legal Issues Presented
- Whether a notice under section 148 of the Income-tax Act, 1961, issued after the expiry of four years from the end of the relevant assessment year could validly be issued by an Income-tax Officer (below the rank of Joint Commissioner) where sanction for issuance had been accorded by the Commissioner of Income-tax.
- Whether the sanction required by section 151 (specifically the contentions about the role of Joint Commissioner versus Commissioner) must be given by a Joint Commissioner or whether the Commissioner may accord the required sanction.
- Whether the fact that an assessment under section 144 was annulled in appeal and a further appeal is pending means that the assessment is "pending" and hence a notice under section 148 cannot be issued.
Arguments of the Parties
Petitioner's Arguments
- The notice under section 148 dated January 10, 2007 was issued after the expiry of four years from the end of the relevant assessment year and therefore could not have been issued by the Income-tax Officer; such a notice could only be issued by an Assessing Officer not below the rank of Joint Commissioner.
- Reliance on the Division Bench decision in Dr. Shashi Kant Garg v. CIT, [2006] 285 ITR 158 to support the contention regarding requisite authority for issuing a section 148 notice after four years.
- The Commissioner could not have given the sanction required for issuing the notice; only the Joint Commissioner could give such sanction.
- The assessment order under section 144 was annulled in appeal and the Department had filed a further appeal, so the assessment should be treated as pending; when an assessment proceeding is pending, a notice under section 148 cannot be issued.
The opinion does not contain a detailed account of the Income-tax Department's separate or specific legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Dr. Shashi Kant Garg v. CIT, [2006] 285 ITR 158 | Propositions interpreting section 151 of the Income-tax Act regarding who may issue notices under section 148 and the levels of satisfaction/sanction required depending on whether four years have expired and whether an assessment under section 143(3) or section 147 has been made. | The court treated the underlined observation in that decision as an obiter remark (not binding for the point in issue), relied on the portions addressing section 151, and clarified the meaning of section 151(2). The court applied the interpretation to hold that the Income-tax Officer was empowered to issue the section 148 notice in this case because the Commissioner had accorded sanction for issuance. |
Court's Reasoning and Analysis
The court reviewed the statutory sanction regime under section 151 of the Income-tax Act and the Division Bench's exposition in Dr. Shashi Kant Garg v. CIT. It observed that a portion of that Division Bench decision constituted an obiter observation made while attempting to interpret the complex drafting of section 151(2).
The court interpreted section 151(2) to mean that where an assessment has not been made under section 143(3) or section 147, a notice under section 148 can be issued either (1) by an Assessing Officer of the rank of Joint Commissioner or above, or (2) by an officer below that rank provided the Joint Commissioner is satisfied that it is a fit case for issuance of the notice. This interpretation was presented as the court's clarification of the provision, avoiding any need to refer the matter to a larger bench since the inconsistent portion in the earlier decision was obiter.
Applying these principles to the facts, the court found that the Income-tax Officer (below the rank of Joint Commissioner) had been empowered to issue the section 148 notice because the Commissioner of Income-tax had accorded sanction for such issuance. The court rejected the petitioner's submission that only a Joint Commissioner could give such sanction, emphasizing that the statutory sanction mechanism aims to secure supervision by a superior officer of the Department.
On the contention that the assessment under section 144 had been annulled in appeal and that a further appeal rendered the assessment "pending" (and thus precluded issuing a section 148 notice), the court held that merely filing a second appeal does not mean the assessment is pending for the purposes of section 151. The court noted the possible outcomes of the second appeal and observed that in either event there would be no assessment of the petitioner under section 143(3) or section 147, which is a pre-condition for applicability of section 151(2). Therefore, the pendency of the second appeal was not relevant to invalidating the issuance of the section 148 notice in this case.
Holding and Implications
Holding: The writ petition is dismissed; the court found no merit in the petitioner's challenge to the section 148 notice.
Implications:
- The court confirmed that, in the present facts, an Income-tax Officer below the rank of Joint Commissioner could validly issue a notice under section 148 where the Commissioner had accorded sanction for such issuance.
- The court treated the conflicting portion of the earlier Division Bench decision as obiter and clarified the correct interpretation of section 151(2); it expressly found no need to refer the matter to a larger Bench.
- Direct effect: the petitioner's challenge to the section 148 notice fails and the notice stands. The opinion does not state that it establishes any new binding precedent beyond its clarification of the interpretation and its application to the facts; it dismissed the petition without creating a new legal rule beyond the court's stated interpretation.
1. We have heard Sri S.K Garg, for the petitioner, and Sri R.K Upadhaya for the Income-tax Department. The petitioner was assessed by an assessment order dated January 29, 2004 (wrongly mentioned as January 29, 2003), by respondent No. 2 under section 144 of the Income-tax Act, 1961 (hereinafter referred to as “the Act” in short), for the assessment year 2001-02, a copy of the assessment order has been enclosed as annexure III to this writ petition.
2. The petitioner is challenging a notice issued to him under section 148 of the Act, a copy of which has been enclosed as annexure VI to this writ petition.
3. The main ground of challenge is that the notice under section 148 dated January 10, 2007, and has been issued by the Income-tax Officer. According to the petitioner, this notice has been issued after the expiry of four years from the end of the relevant assessment year and, therefore, the said notice could not have been issued by the Income-tax Officer. It could have been issued by an Assessing Officer not below the rank of the Joint Commissioner.
4. In support of the above proposition, reliance has been placed upon a decision of a Division Bench of this court in the case of Dr. Shashi Kant Garg v. CIT, [2006] 285 ITR 158. The relevant portion of the said decision is extracted below, with the crucial portion underlined1 by us in the extract (page 172):
“From a perusal of section 151 of the Act the following propositions emerge:
(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 has to be issued by the Assessing Officer who is not below the rank of the Assistant Commissioner or Joint 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 Additional Commissioner or the Joint 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 has 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 not 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 April 1, 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 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.”
5. For ready reference, we are quoting below the provisions of section 151 of the Income-tax Act, 1961.
“151. Sanction for issue of notice.—(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.”
(emphasis ours)
6. It is obvious that sub-section (2) of section 151, which was actually not in issue in the said decision before the Division, Bench inasmuch as the Division Bench was examining a case clearly covered by section 151(1), the obiter observation in the underlined portion of the judgment extracted above was made apparently because of the confusion created by the complex language in which section 151(2) has been drafted.
7. We have no doubt that the said provision simply means that where an assessment has not been made under section 143(2) or 147 of the Act, notice under section 148 can be issued:
1. either by an Assessing Officer of the rank of Joint Commissioner or above, or;
2. an officer below that rank provided the Joint Commissioner is satisfied that it is a fit case for the issue of such notice.
8. Because, as stated above, the observation in the underlined portion of the Division Bench is only an obiter observation, therefore, there is no need to refer the matter to a larger Bench.
9. In the case before us, the Income-tax Officer, who is below the rank of the Joint Commissioner and who is an Assessing Officer according to the definition given in the Income-tax Act, 1961, was empowered to issue the notice under section 148 of the Act in the light of the sanction accorded for such issuance of notice by the Commissioner of Income-tax.
10. Learned counsel for the petitioner has argued that the Commissioner could not have given the sanction and only the Joint Commissioner could have given the sanction.
11. We are unable to accept the submission, considering the basic purpose for which such sanction has been provided for. The obvious purpose is to exercise proper supervision by a superior officer of the Department.
12. The other submission from the side of the petitioner is that the assessment order under section 144 of the Act was annulled in appeal and the Department has gone up in further appeal and, thus, the assessment should be deemed to be pending. The submission proceeds to say that when an assessment proceeding is pending, there is no question of issue of notice under section 148 of the Act. Merely going in second appeal does not mean that the assessment is pending. Moreover, if the second appeal is dismissed, the assessment under section 144 of the Act will stand annulled. On the other hand, if the second appeal is allowed, the assessment under section 144 of the Act will stand. In either of the two cases, there would be no assessment of the petitioner either under section 143(3) or under section 147 of the Act, which is the pre-condition for applicability of section 151(2) of the Act. Therefore, filing of the second appeal is not relevant for the purposes of this case.
13. In the circumstances, we do not find any merit in this writ petition, which is accordingly dismissed.
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