- Bookmark
- Share
- CaseIQ
Cit, Jabalpur v. M/S. S. Goyanka Lime And Chemicals Ltd.
Factual and Procedural Background
A search was conducted at the residential and business premises of the assessee on 12.12.2002. Subsequently, a notice for block assessment under section 158-BC was issued for the block period from 1.4.1998 to 12.12.2002, and returns for each assessment year were filed and processed under section 143(1). Later, a notice under section 148 was issued by the Assessing Officer on 31.12.2004 based on certain recorded reasons. The assessee objected to this notice, but the objection was rejected, and assessment was completed under section 143(3) read with section 147 of the Income Tax Act, 1961. Appeals were filed before the Commissioner of Income Tax (Appeals), who quashed the notice under section 148 on the grounds that the sanction by the Joint Commissioner was given mechanically without application of mind, following the precedent set in Arjun Singh v. Assistant Director of Income Tax (MP). This quashing was upheld by the Income Tax Appellate Tribunal, Jabalpur, leading to the filing of these appeals under section 260-A of the Act.
Legal Issues Presented
- Whether the sanction accorded by the Joint Commissioner of Income Tax for issuance of notice under section 148 was valid, given it was recorded mechanically as "I am satisfied" without application of mind?
- Whether the explanation added to section 151 by the Finance Act, 2008, retrospectively effective from 1.10.1998, affects the requirement for the Joint Commissioner to personally issue notice or apply mind to the reasons recorded?
- Whether reopening of block assessment by issuance of notice under section 148 is permissible or whether such procedure is unsustainable?
Arguments of the Parties
Appellant's Arguments
- Reliance on the Explanation added to section 151 by the Finance Act, 2008, and a Departmental Circular dated 7.3.2009, contending that the Joint Commissioner is only required to be satisfied with the reasons recorded by the Assessing Officer and is not required to issue the notice himself or apply further mind.
- Relied on Gujarat High Court judgment in Lalita Ashwin Jain v. Income Tax Officer and Supreme Court decision in Commissioner of Income Tax (Central) - I, New Delhi v. Vatika Township (P) Limited to support their position and seek interference in the matter.
Respondent's Arguments
- Relied on Gujarat High Court judgment in Cargo Clearing Agency (Gujarat) v. Joint Commissioner Of Income-Tax to argue that reopening of block assessment by issuance of notice under section 148 is not within jurisdiction and that the entire procedure for issuing such notice is unsustainable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Arjun Singh v. Assistant Director of Income Tax (MP) [2000] 246 ITR 363 | Sanction for issuance of notice under section 148 must be given with application of mind and objective satisfaction, not mechanically. | The court relied on this precedent to hold that the Joint Commissioner’s mechanical recording of satisfaction was unsustainable, justifying quashing of the notice under section 148. |
| Lalita Ashwin Jain v. Income Tax Officer (2014) 88 CCH 273 [Guj HC] | Interpretation of the Explanation to section 151 regarding the role of the Joint Commissioner in sanctioning notices. | Appellants cited this case to argue that the Joint Commissioner need only be satisfied with reasons recorded and not issue notice personally; the court considered but did not find it sufficient to overturn the quashing. |
| Commissioner of Income Tax (Central) - I, New Delhi v. Vatika Township (P) Limited (SC) 2014 ITL 833 | Procedural requirements for issuance of notices under the Income Tax Act. | Appellants relied on this Supreme Court decision for interference; the court noted the reliance but found no error in the concurrent findings of the appellate authorities. |
| Cargo Clearing Agency (Gujarat) v. Joint Commissioner Of Income-Tax (2008) 307 ITR 1 (Guj) | Jurisdictional limitation on reopening block assessments via notice under section 148. | Respondents relied on this to argue that the procedure for issuing the notice under section 148 was unsustainable; the court considered this contention in evaluating the legality of the notice. |
Court's Reasoning and Analysis
The court examined the manner in which the Joint Commissioner recorded his satisfaction for sanctioning the issuance of the notice under section 148. It found that the Joint Commissioner merely wrote "Yes, I am satisfied" in a mechanical fashion, apparently as a formality, without applying his mind to the reasons recorded by the Assessing Officer. This was consistent with the principles established in Arjun Singh (supra), which require that such satisfaction must be objective and based on material. The court held that this mechanical sanction was unsustainable. The court further noted that the Explanation to section 151 introduced by the Finance Act, 2008, pertains only to the issuance of the notice and does not alter the requirement that the satisfaction must be properly recorded with application of mind. Considering the concurrent findings of the Commissioner (Appeals) and the Appellate Tribunal, the court found no error warranting interference or reconsideration.
Holding and Implications
The appeals are dismissed.
The court upheld the quashing of the notice under section 148 on the ground that the sanction by the Joint Commissioner was given mechanically without application of mind. This decision affirms the necessity for objective satisfaction based on material before sanctioning issuance of notices under section 148. The ruling directly affects the parties by confirming the invalidity of the notice issued in this case. No new precedent was set beyond affirming the application of established legal principles.
JUDGMENT
As common questions of law and fact are involved in all these appeals filed under section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), all the appeals are being decided by this common order.
2-Challenge in all these appeals are made to concurrent orders passed by the Commissioner (Appeals) and the Income Tax Appellate Tribunal, Jabalpur in the matter of quashing notices issued under section 148 of the Act.
3-A search was conducted at the residential and business premises of the assessee on 12.12.2002 Thereafter, notice for block assessment under section 158-BC was issued for the block period 1.4.1998 to 12.12.2002 and for each of the assessment years, returns were filed which were processed under section 143(1). However, notice under section 148 was issued by the Assessing Officer on 31.12.2004, on the basis of certain reasons recorded. The assessee objected to the same before the Assessing Officer, this was rejected by the Assessing Officer and he completed the assessment under section 143(3) read with section 147, of the Act. Appeals were filed before the Commissioner of Income Tax (Appeals) and the Appellate Authority found that the reason recorded by the Joint Commissioner of Income Tax, for according sanction, it only stated that ‘I am Satisfied’. As this action for sanction was without application of mind and as this was done in a mechanical manner, following the law laid down in the case of Arjun Singh v. Assistant Director of Income Tax (MP), reported in [2000] 246 ITR 363, the Commissioner quashed the notice under section 148, of the Act, and the same having been upheld by the Appellate Tribunal, these appeals have been filed.
4-Shri Sanjay Lal, learned counsel for the appellants, invited out attention to the Explanation added to section 151, by the Finance Act, 2008 retrospectively with effect from 1.10.1998; and, the Circular issued by the Department in this regard on 7.3.2009, to say that the Joint Commissioner is only required to be satisfied on the reasons recorded by the Assessing Officer and there is no further requirement for him to issue notice himself.
5-Placing reliance on the aforesaid and certain judgment of the Gujarat High Court, in the case of Lalita Ashwin Jain v. Income Tax Officer, (2014) 88 CCH 273 [Guj HC]; and, the Supreme Court in the case of Commissioner of Income Tax (Central) - I, New Delhi v. Vatika Township (P) Limited, (SC) 2014 ITL 833, Shri Sanjay Lal - learned counsel for the appellants, prays for interference into the matter.
6-However, Shri L.L Sharma - learned counsel for the respondents, placed reliance on another judgment of the Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) v. Joint Commissioner Of Income-Tax, (2008) 307 ITR 1 (Guj), to say that for block assessment and re-assessment, there is no jurisdiction to reopen the block assessment by issuing notice under section 148 and, therefore, on the basis of this judgment learned counsel states that the entire procedure initiated for issuing notice under section 148 is unsustainable.
7-We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so “Yes, I am satisfied”. In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:-
“The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format “Yes, I am satisfied” which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.”
8-If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration.
9-As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue.
10-In view of the concurrent findings recorded by the learned appellate authorities and the law laid down in the case of Arjun Singh (supra), we see no question of law involved in the matter, warranting reconsideration.
11-The appeals are, therefore, dismissed.
Alert