Commissioner of Income Tax vs Smt. Attri Devi

G.S. Singhvi, J.—On an application filed by the Commissioner of Income Tax, Haryana, u/s 256(1) of the Income Tax Act, 1961 (for short, "the Act"), the Income Tax Appellate Tribunal, Delhi Bench "D" Delhi (for short, "the Tribunal"), has referred the following question of law for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in cancelling the reassessment proceedings on the ground that the Board has not given a valid sanction and there was no basis for forming satisfaction for issue of notice u/s 148 of the Income Tax Act, 1961 ?"

A perusal of the record shows that after more than eight years of the completion of assessment proceedings in relation to the assessment year 1961-62, the Assessing Officer, on receipt of some complaint in the case of the assessee''s husband--Shri Mishri Lal, addressed a letter dated December 15, 1971, to her captioned as notice u/s 143(3) of the Act proposing to reopen the assessment. On February 4, 1972, the Assessing Officer sent a communication to the Central Board of Direct Taxes (for short, "the Board"), for obtaining its sanction for issuance of notice u/s 148 read with Section 147(a) to the assessee. On receipt of sanction from the Board, the Assessing Officer issued notice to the assessee and reassessed her income. On appeal, the Appellate Assistant Commissioner upheld the reopening of assessment but deleted the addition vide his order dated April 28, 1977. The Tribunal dismissed the appeal filed by the Revenue and confirmed the deletion made by the Appellate Assistant Commissioner, though on a different ground. It held that the notice issued by the Assessing Officer u/s 148 read with Section 147(a) of the Act was a nullity because the Board had granted sanction without application of mind to the relevant factors. Paragraphs 8 and 9 of the order dated September 13, 1979, which contain the reasons assigned by the Tribunal for dismissing the appeal of the Revenue, read as under :

"8. The basic ingredient for recording satisfaction u/s 151 of the Act is not as to what is on the Income Tax Officer''s file but what is in focus of the Commissioner or the Board, as the case may be, before recording satisfaction and giving sanction. If we are to accept the Revenue''s proposition, we must accept and presume that recording of satisfaction, from which sanction flows for issue of notice u/s 148 of the Act, is a mere formality, which would be factually and legally incorrect. The following two Supreme Court judgments are the authorities for the proposition that it is not only the formation of the required belief by the Income Tax Officer to take recourse to assessment or reassessment but he is further statutorily required to record his reasons and must necessarily obtain sanction of the Commissioner or the Board, as the case may be :--

Chhugamal Rajpal Vs. S.P. Chaliha and Others, ; and Johri Lal (H.U.F.), Agra Vs. The Commissioner of Income Tax, .

Though the latter authority is under the Indian Income Tax Act, 1922, but the principle enunciated is unexceptional because of the parallel provisions held the two Income Tax Acts reframing or framing of earlier years'' assessments is concerned.

In this case, whatever may have been on file of the Income Tax Officer but on the reasons recorded by him and which were forwarded to the Board, there simply could be no question of any valid sanction because there was no basis for forming any satisfaction in the first place. Therefore, we strike down the initiation of proceedings as also the consequent assessment order u/s 143(3) read with Section 147(a) as illegal and void ab initio."

We have heard Shri Rajesh Bindal, who very candidly stated that after seeking adjournment on August 31, 2004, he had telephonically enquired from Shri A. L. Monga, Income Tax Officer, posted in the office of Chief Commissioner of Income Tax, Panchkula, about the file in which the Board had recorded reasons for grant of sanction u/s 151 of the Act but the same has not been made available to him. Shri Bindal further stated that as per the officers of the Department, the file containing the order of the Board is not available.

In our opinion, without going through the relevant record, it is not possible to upset the finding recorded by the Tribunal that the Board had mechanically sanctioned initiation of the reassessment proceedings and on that ground, the order of reassessment was liable to be treated as nullity.

In view of the above, the question referred by the Tribunal is answered in favour of the assessee and against the Revenue.

The reference is decided in the manner indicated above.