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Facts
The assessee filed a return for AY 2016-17 declaring NIL income. A regular assessment was finalized accepting the loss. Later, the department found information about high-value transactions and initiated reassessment proceedings by issuing a notice u/s 148, which was dispatched after the amended provisions of law came into effect. The CIT(A) deleted additions made by the AO.
Held
The Tribunal held that the notice u/s 148 (old provision) issued on 31/03/2021 but dispatched on 20/04/2021 was in violation of mandatory provisions of Sections 148, 148A, and 149 of the Act, as amended by the Finance Act, 2021. Consequently, the assessment order based on this defective notice was set aside.
Key Issues
Whether the notice issued under Section 148 of the Income Tax Act, 1961, dispatched after the amended provisions became effective, is valid for initiating reassessment proceedings?
Sections Cited
143(3), 147, 148, 68, 148A, 149, 282A, 143(1), 35-E (3), 119
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI
ORDER
PER YOGESH KUMAR, U.S. JM:
The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-3 Noida (‘Ld. CIT(A)’ for short), New Delhi dated 17/10/2024 for the Assessment Year 2016- 17.
Brief facts of the case are that, the assessee filed its return of income for A.Y. 2016-17 declaring loss at NIL. Regular assessment u/s 143(3) of the Income Tax Act, 1961 ('Act' for short) was finalized vide order dated 27/12/2018 accepting the loss declared by the Assessee. Thereafter, it is found from the information in possession with the department that, the assessee RBA Buildtech Pvt. Ltd. entered into LLP in the name and style of M/s AR Landcraft LLP and there were various high value transactions. Accordingly, after recording the reason for reopening a notice u/s 148 of the Act has been issued on 31.03.2021. Thereafter, vide letter dated 26.10.2021, the assessee was requested to make compliance in response to the notice issued u/s 148 of the Act. The assessee vide reply dated nil received on 25.11.2021, requested the A.O. to treat the original return of income filed as return filed in response to the notice issued u/s 148 of the Act. Assessment order came to be passed on 26/03/2022 u/s 147 of the Act by making total addition of Rs. 48,30,86,469/- u/s 68 of the Act on account of unsecured loan received from M/s Apace Builders & Contractors Pvt. Ltd. (Rs. 29,12,86,469/-), Evergreen Sunfab Pvt. Ltd. (Rs. 12,56,00,000/-) M/s JSS Buildcon Pvt. Ltd. (Rs.
15,00,000/-) and Shubhkamna Buildtech Pvt. Ltd. (Rs.
6,47,00,000/).
Aggrieved by the Assessment Order dated 26/03/2022, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT (A) vide order dated 17/10/2024, deleted the additions made u/s 68 of the Act. Aggrieved by the deletion of the said addition, the Department of Revenue preferred the present Appeal.
4. The Ld. Counsel for the Assessee filed an application under Rule 27 of Income Tax (Appellate Tribunals) Rules 1963 andsubmitted that the assessment framed u/s 147 of the Act is bad in law as the same has been framed on the basis of notice issued u/s 148 (Old) of the Act dated 31/03/2021 and the said notice has been dispatched on 20/04/2021, on which date the amendment introduced vide Finance Act 2020-21 w.e.f 01/04/2021 was in-force. Further submitted that the A.O. should have followed the procedure incorporated as per the said amendment in compliance with new Sections 148, 148A and 149 of the Act, which came into effect from 01/04/2024. Thus, submitted that the assessment order passed based on the said defective notice itself is void-ab-initio. The Ld. Counsel has also relied on plethora of Judgment in support of his contentions.
Per contra, the Ld. Department's Representative filed written submission reads as under:-
“3. The first legal ground which is raised by respondent is related with procedure of section 148A not being followed. The said ground has already been adjudicated in appellate order and the second ground regarding jurisdiction on account of non issuance of valid notice u/s 143(2) of the Act by AO, was dismissed by CIT(A) in appellate order and is also not legally sustainable as no valid return of income could be furnished by respondent within compliance period in response to statutory notice u/s 148 of the Act at the time of assessment proceedings, as apparent from record.
Further, raising these grounds by respondent again at this stage are not permissible under Rule 27 of ITAT rules, as it requires fresh investigations of facts of assessment proceedings. The Supreme Court in Hukamchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC) clarified the scope of the Tribunal's appellate powers. In the context of supporting the impugned order on grounds decided against a respondent, it held that the Tribunal is not authorized to permit any ground that would require fresh investigation of facts, unless it remands the matter or calls for a report from the lower appellate authority. This restriction underpins Rule 27 as well, and is accepted as a general limitation by the Income Tax Appellate Tribunals.”
We have heard both the parties and perused the material available on record. In the present case, the Ld. A.O. issued notice u/s 148 of the Act (un-amended) dated 31/03/2021, however, the same has been dispatchedto the Assessee on 20/04/2021. The said fact has not been disputed by the Ld. Department's Representative in the written submission. However, objected for taking the said plea before the Tribunal under Rule 27 of Income Tax (Appellate Tribunal)
Rules, 1963.
We have gone through the records and found that the Assessee has raised the said ground of issuance of defective notice and non- compliance of the Section (New) 148, 148A and 149 of the Actbefore the Ld. CIT(A). However, the Ld. CIT(A) has deleted the addition on the merits and not decided the Ground No. 1a of the Assessee raised before him. Considering the above facts and circumstances, we deem it fit to allow the Assessee to raise the said Grounds of Appeal under Rule 27 of Income Tax (Appellate Tribunal) Rules, 1963. Accordingly, the said ground is dealt as under:-
8. The Old provision of Section 148 of the Act has been amended and new provision of Section 148, 148A and 149 of the Act have been introduced vide Finance Act, 2021 w.e.f 01/04/2021. Any notice of reopening shall follow the prescribed procedure as per the above amended provisions. In the present case, though the date of the notice issued u/s 148 of the Act (un-amended) mentioned as 31/03/2021 (pre-amendment period), however, the said notice has been issued/served on the Assessee only on 20/04/2021 and as on the said date, the old Rule introduced vide Finance Act 2021 was enforce. Therefore, the notice dated 31/03/2021 u/s 148 of the Act (Old), served on 20/04/2021 is in violation of mandatory provisions of Section 148, 148A and 149 of the Act introduced vide Finance Act 2021.
The Jurisdictional High Court in the case of SumanJeet Agarwal Vs. Income-tax Officer reported in [2022] 143 taxman.com 11 (Delhi) in which it was held as under:-
“25.12.The review of the aforesaid judgments of the Supreme Court and the several High Courts shows that all Courts have consistently held that the expression ‘issue’ in its common parlance and its legal interpretation means that the issuer of the notice must after drawing up the notice and signing the notice, make an overt act to ensure due despatch of the notice to the addressee. It is only upon due despatch, that the notice can be said to have been ‘issued’.
25.13. Further, a perusal of the Compliance Affidavit reveals that while the function of generation of Notice on ITBA portal and digital signing of the Notice is executed by the JAO, the function of drafting of the e-mail to which the Notice is attached and triggering the e-mail to the assessee is performed by the ITBA e-mail software system.
Thus, mere generation of Notice on the ITBA Screen cannot in fact or in law constitute issue of notice, whether the notice is issued in paper form or electronic form. In case of paper form, the notice must be despatched by post on or before 31st March 2021 and for communication in electronic form the e-mail should have been despatched on or before 31st March 2021.
In the present writ petitions, the despatch by post and e-mail was carried out on or after 01st April 2021 and therefore, we hold that, the impugned Notices were not issued on 31st March 2021.
25.14. The Department has not disputed the correctness of the law settled by the Supreme Court in the case of R.K. Upadhyaya (Supra) in which the Court was concerned with issuance of the Section 148 notice in paper form and concluded that, since the date of despatch was within prescribed period of limitation, the notice was validly issued for the purpose of Section 149 of the Act of 1961, and held that the date of service of notice was not relevant. In fact, the Department has relied upon the said judgment. The said judgment squarely applies to Notice classified as category ‘E’. The amendments to the Act of 1961 including Section 282A was to enable the income tax authority to issue notice either in paper form or electronic form and were made W.P.(C) No. 10/2022 and connected matters Page 114 of 152 to provide an adequate legal framework for paperless assessment. Similarly, setting up of the digital platform of ITBA portal and the Efiling portal is for facilitating assessment proceedings electronically. The said amendments or the use of ITBA portal by Department for issuing notice in no manner mitigates against or dispense with the legal requirement of the Department to ensure due despatch of the Section 148 notice to satisfy the test of Section 149 of the Act of 1961. The contention of the Department that upon generation of the Notice on the ITBA Screen simpliciter (even before its despatch) is to be held to be issued does not persuade the Court and is contrary to the judgment relied upon by the said party.
25.15. This Court in the case of Court On its Own Motion v. Commissioner of Income Tax, (2013) 352 ITR 273, while dealing with Section 143(1) of the Act of 1961, has held that the law requires that, the intimation under Section 143(1) should be communicated to the assessee. The uncommunicated orders or intimations cannot be enforced and are not valid. The relevant extract of the aforesaid decision is reproduced hereinunder: “… 33. The second grievance of the assessee is with regard to the uncommunicated intimiations under Section 143(1) which remained on paper/file or the computer of the Assessing Officer. This is serious challenge and a matter of grave concern. The law requires intimation under Section 143(1) should be communicated to the assessee, if there is an adjustment made in the return resulting either in demand or reduction in refund. The uncommunicated orders/intimations cannot be enforced and are not valid.
152 …But when there is failure to despatch or send communication/intimation to the assessee consequences must follow. Such intimation/order prior to 31 March, 2010, will be treated as non est or invalid for want of communication/service within a reasonable time. This exercise, it is desirable should be undertaken expeditiously by the Assessing Officers.
25.16. The Department sought to contend that the Madras High Court in Malavika Enterprises (Supra) has struck a discordant chord with the judgment in the DaujeeAbhusanBhandar (Supra). However, on a perusal of the judgment in Malavika Enterprises (Supra), we find that in the said case the notice had been despatched on 31st March, 2021, at 6.42 pm by the ITBA server, though served on the assessee on 01st April, 2021, at 2.00 am and therefore, the Madras High Court concluded that the notice has been validly issued on 31st March, 2021. The relevant portion of paragraph 8 of this judgment reads as follows: “
…
Coming to the facts of the case, it is stated that notice under section 148 of the Act of 1961 is said to have been issued on 31- 3-2021 for the assessment year 2013-2014, followed by consequential notices. It is the case of the petitioner that the notice is said to have been issued vide email at 6.42 pm, but was served on 1-4-2021 at 2 am and, therefore, the unamended provision of section 148 of the Act of 1961 would not be applicable to the case.
… …We do not find that this judgment takes the case of the Department any further as the Section 148 notice in the case was duly despatched on 31st March, 2021.
25.17. The Department has not cited any judgment which would support its contention that mere drawing up of Notice and signing it (pending despatch) amounts to issuance. The counsel for the respondent placed heavy reliance on the judgment of the Supreme Court in M.M. Rubber & Co. (Supra). In the said case as well, the apex Court was concerned with the issue of limitation while determining if the impugned order therein had been passed within time. However, the provision under consideration was Section 35-E (3) of the Central Excise and Salt Act, 1944 (“Act of 1944”), which reads as under: “…
Sub-Section (3) of Section 35E of the Act which deals with the limitation for exercise of the powers under sub- sections (1) and (2) of the Act and which is the relevant provision for consideration in this appeal reads as follows:
"No order shall be made under sub-section (1) or subsection (2) after the expiry of one year from the date of the decision or order of the adjudicating authority.
…" The Court in the aforesaid judgment deliberated with reference to the phrase “No order shall be made” in Section 35-E(3) of the Act of 1944 and concluded that the date on which the order was made by the adjudicatory authority by signing it is a relevant date for W.P.(C) No. 10/2022 and connected matters Page 117 of 152 determining if it was passed within limitation. As is evident, the expression used in Section 35-E (3) of the Act of 1944, is “no order shall be made” which is distinct from the expression used in the Section 149 of the Act of 1961 which reads as “No notice under Section 148 shall be issued”. The two statutory provisions are materially different and the ratio of the said judgment can have no bearing in interpreting Section 149 of the Act of 1961.
25.18.Additionally, the contention of the counsel for the Department that generation of Section 148 Notice on ITBA screen amounts to “issued” within the meaning of Section 149 of the Act of 1961 is not borne out from the instructions issued by the Directorate of Income Tax (Systems). On the contrary, the said circulars duly recognize that after generation of notice the concerned income tax authority is required to take overt steps for issuing the said notice to the assessee. The circulars use the words “generation” and “issuance” distinctively. In this regard reference may be made illustratively to the following Instructions: a. The ITBA Assessment Instruction No. 2 [F.No. System/ITBA/Instruction/Assessment/16-17/177 dated 01.08.2016] issued by the Directorate of Income Tax (System)mentions that:
“the AO Staff/ AO Inspector will not be able to generate the notice but will be able to view the notices already generated by the AO for taking a printout of the same, for issue to the assessee.” b. The ITBA Assessment Instruction No. 3 [F No. System/ITBA/Instruction/Assessment/177/16-17/] dated 03.02.2017, also illustrates the same distinction: “Details of the Authority/party from whom information is requisitioned can be entered alongwith date for compliance and the Notice can then be generated and issued.”
25.19. The counsel for the Department have also sought to argue that generation of a Notice with DIN on ITBA Screen conclusively indicates that the Notice has been irrevocably issued. The submission of the respondent is not borne out from the applicable circular regarding DIN issued by CBDT and is therefore a mere ipse dixit of the counsel.
25.20. As per Circular No. 19/2019 (F. No. 225/95/2019-ITA.II) dated 14th August, 2019 issued by the CBDT, the DIN was introduced to maintain a proper audit of trail of communications issued by income tax authority. The said circular does not state that the generation of DIN would automatically constitute issuance of the notice. Relevant extract from the aforementioned circular is reproduced as under: “…
…However, it has been brought to the notice of Central Board of Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as “communication”) were found to have been issued manually, without maintaining a proper audit trail of such communication.
In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has decided that no communication shall be issued by any income tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the 1st day of October, 2019 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of' such communication.” (Emphasis Supplied).
In fact, in several cases, we take judicial notice that even as on date the JAOs issue notices which do not have DIN and in those cases the Department contends that the absence of the DIN does not make those notices invalid.
25.21. The contention of the counsel for the Department that since the date of the issuance of the Notices is a disputed issue of fact the same should not be entertained in the writ petitions is also without merit. There is no dispute in the present cases and it has been conceded during rejoinder arguments that the Notices have been despatched on or after 1st April, 2021, unlike in the case of Rajesh SunderdasVaswani (Supra) where the date of despatch was seriously disputed. This Court has only been called upon to determine the legal effect of the despatch of 1st April 2021 and thereafter, on the validity of the notices dated 31st March, 2021.
25.22. In this regard, it would be useful to note that, the impugned Notice in W.P. (C) 5316 of 2022 was classified in category ‘C’. However, during the pendency of the proceedings, the JAO on 30th July 2022 determined that the said Notice though generated and signed on 31st March 2021 was issued through e-mail by the ITBA servers on 6th April, 2021. It has been brought to this Court’s attention that the JAO has now self-determined that the same shall be governed by the judgment of the Supreme Court in Ashish Agarwal (Supra) and JAO has accordingly proceeded to treat the Notice dated 31st March 2021 as notice under Section 148A(b). The aforesaid acts of the JAO belie the submissions of the counsel for the Department that the generation of the Notice on the ITBA screen constitutes issuance. It further substantiates the contention of the petitioners that the date and time of issue of the emails by the ITBA servers are readily available with the Department and therefore there is no disputed issue of facts.
25.23. We therefore answer question no. (I) in negative against the Department and hold that the impugned Notices dated 31st March, 2021, which were despatched on 1st April, 2021, or thereafter, would not meet the test of ‘issued’ under Section 149 of the Act of 1961 and would be time barred, unless saved by the judgment of the Supreme Court in Ashish Aggarwal (Supra).
25.24. With respect to impugned Notices falling in category ‘A’, there is an additional factor which evidences that the said Notices were admittedly not issued on 31st March, 2021. The said Notices were digitally signed on 01st April, 2021, or thereafter. The note appearing at the foot of each Notice clearly declares that the date of the affixation of digital signature shall be treated as the date of the Notice. The note reads “if digitally signed, the date of signature may be taken as date of document”. In these Notices therefore, the date of the Notice itself is determined by the date of affixation of digital signature and not the date of generation. The contention of the Department that, the said note appearing at the footer of the Notice has no basis in law and should be ignored by this Court, cannot be accepted. The Department cannot deny the contents of its own Notice and it is bound by the said contents.
25.25. In this regard it will also be useful to refer to Para 2.10.6 of the ITBA, User Assessment Manual, Version 1.9, August 2020, as referred to by the Department in its Counter Affidavit in W.P. (C) No. 13814 of 2021. The said instruction draws the attention of the income tax officer to the consequence of the date of digital signature and date of generation of document being different, if the digital signatures are affixed subsequently. Para 2.10.6 reads as under: “ … ii. Generate and Digitally sign later (Applicable for single as well as bulk generation): ♣Click Generate and Digitally sign later. In this case, document will be generated successfully immediately.
DCIT Vs. RBA Buildtech Pvt. Ld. ♣To sign the document later, go to “View/Edit Despatch Register” Screen. Select the status as ‘Pending for signing’ and Search. ♣Select the document and click Sign Documents. Ensure DSC is attached to the system. ♣Select the DSC of the user. ♣ Click Sign. Document will be signed succesfully. However, this option is required to be very carefully exercised in the case of orders as the date of generation of document and date of digital sign may be different as these will be actual date of generation and digital signing. …”
Finding for Notices falling under category ‘A’
We therefore hold that the impugned Notices falling under category ‘A’ shall be held to be dated as on the date DSC was affixed. Since the date of affixation of DSC on the impugned Notices is 1st April 2021 and thereafter they were sent and delivered through the ITBA portal on or after 1st of April 2021, the impugned Notices falling under category ‘A’ can only be said to have been issued on or after 1st of April 2021.
Illustratively, in W.P. (C) 1759/2022 the Notice even though dated 31st March 2021 was digitally signed on 1st April 2021 and thereafter was sent and delivered through ITBA portal on 15th April 2021, in this case, the date of the impugned Notice is 1st April 2021 (i.e., the date on which it was digitally signed) and it was issued through e-mail on the 15th of April 2021.
Finding for Notices falling under category ‘E’
25.26. With respect to the impugned Notices which have been classified as category ‘E’, the date of despatch through speed post is determined as the date of issuance following the judgment of the Supreme Court in the case of R.K. Upadhyaya (Supra). Illustratively, in was booked for despatch through speed post on 10th June 2021, in this case, the Notice can be said to have been issued only on 10th June 2021 i.e. when it was booked for despatch through speed post.
25.27. With respect to the impugned Notices sent by e-mail and forming subject matter of category ‘C’ the Department has raised an additional defence that though the e-mails were admittedly despatched on 01stApril, 2021 or thereafter, the same was due to the time taken by ITBA e-mail software system to trigger the e-mails, this delay in despatch should not be attributed to the JAO for despatch and the Notices should be ‘deemed’ to have been issued on 31st March, 2021.
This contention of the Department is specifically dealt with in answer to question no. (III).
Question No. (II):Whether “despatch” as per Section 13 of the Act of 2000 is sine qua non for issuance of Notice through electronic mail for the purpose of Section 149 of the Act of 1961?- The Court has answered this is in the affirmative, in favour of the assessee. AND Question No. (III): Whether the time taken by the ITBA’s e-mail software system on 31st March, 2021, in despatching the e-mails to the assessee is not attributable to the JAOs and the notices will be deemed W.P.(C) No. 10/2022 and connected matters Page 124 of 152 to have been issued on 31st March, 2021? -The Court has answered this in the negative against the Department.”
In view of the above, as the notice issued u/s 148 of the Act (old Provision) dated 31/03/2021 being served/dispatched on 20/04/2021 to the Assessee, is in violation of mandatory provision of Section 148, 148A and 149 of the Act substituted by Finance Act, 2021 w.e.f 01/04/2021. Accordingly, the subsequent assessment order framed based on the said notice is contrary to the provision of law, therefore, the subject assessment order is hereby set aside.
Since we have set aside the impugned assessment order by allowing the Grounds canvassed under Rule 27 of Income Tax (Appellate Tribunal) Rules, 1963 by the Assessee, the grounds of Appeal of the Revenue have become in-fructuous and the same are not adjudicated, which are kept open.
In the result, the Appeal of the Revenue is dismissed.