I-T - Revenue officers authorised u/s 151 to supervise AO's error, must not simply concur with his reasons for reopening, when original return is not scrutinized u/s 143(3): Delhi HC
By TIOL News Service
NEW DELHI, SEPT 06, 2017: THE ISSUE BEFORE THE COURT IS - Whether Revenue officers authorised u/s 151 to oversee the decision of AO, can concur with the reasons for reopening assessment, without applying their minds to the fact that the return originally filed was only processed u/s 143(1) and not scrutinized u/s 143(3). NO is the verdict.
Facts of the case:
The assessee-company's original return was taken in scrutiny and then processed u/s 143(1). Subsequently, after expiry of four years from the end of the relevant AY, the AO sent notice to the assessee for reopening of assessment. Hence, the present petition had been preferred seeking quashing of the notice issued by Dy DIT u/s 148 as well as consequential rejection of the objection filed by Assessee to the reopening of assessment.
High Court held,
++ the purpose of Section 151 of the Act is to introduce a supervisory check over the work of the AO, particularly, in the context of reopening of assessment. The law expects the AO to exercise the power u/s 147 to reopen an assessment only after due application of mind. If for some reason, there is an error that creeps into this exercise by the AO, then the law expects the superior officer to be able to correct that error. This explains why Section 151(1) requires an officer of the rank of the Joint Commissioner to oversee the decision of the AO where the return originally filed was assessed u/s 143(3) of the Act. Further, where the reopening of an assessment is sought to be made after the expiry of four years from the end of the relevant AY, a further check by the further superior officer is contemplated;
++ in the present case, having started off on a wrong note that the original assessment was scrutinized and an order was passed u/s 143(3), the AO proceeded to put up the note to the DIT as is evident from the title of the note but, through the Additional DIT. Both the Additional DIT and the DIT appear to have concurred with the reasons for reopening the assessment but without applying their minds to the fact that the return originally filed was only processed u/s 143(1) and not u/s 143(3) of the Act. Had the Additional DIT realised this mistake, he would not have put up the file further for the approval of the DIT. Clearly, therefore, at the level of Additional DIT there was non-application of mind. Had the DIT realized the mistake, he would have declined to make a noting and would have returned the file to the Additional DIT drawing his attention to Section 151(2) which did not require any further approval by the DIT where the return originally filed is only processed u/s 143(1) of the Act. On the contrary, the DIT again recorded his concurrence with the views of the AO and the Additional DIT. Therefore, at the second level also plainly there was non-application of mind;
++ it is not understood how from the records available for AY 2006-07, it was not clear whether a scrutiny assessment was made. The records obviously would have contained the order of the AO u/s 143(3) of the Act. If, as is the case, there was no such order then clearly the only conclusion to be drawn was that the return was processed u/s 143(1). Since it is not the case of the Department that the file for AY 2006-07 went missing, as was the case for AY 2005-06, the above statement in the counter affidavit filed on 9th September 2014, more than a year after the reopening, is inexplicable.
(See 2017-TIOL-1750-HC-DEL-IT)
