SHANTILAL NAROTTAMDAS PANCHAL,MALAD EAST vs. ITO-41(3)(4), MUMBAI, BANDRA KURLA COMPLEX

4. On facts and circumstances of the case and in law, the Ld. NFAC/CIT(A) has erred in reopening the assessment merely on the basis of information received without considering the fact that there was no tangible material on the basis of which the assessment could be reopened, further, the AO failed to apply his independent mind to such material before reopening the assessment, therefore the reopening is bad in law. III. Addition of Rs.16,16,116/- u/s. 56(2)(vii)(b) of the act:

2 Assessment Year 2017-2018

5. On facts and circumstances of the case and in law, the Ld. NFAC/CIT(A) has erred in set-aside the reassessment order by making an addition u/s.56(2)(vii)(b) of the act of Rs.16,16,116/- as the difference between stamp duty value and purchase value of the property without appreciating that under the redevelopment Agreement the assessee and his wife jointly received new property area 495.3 sft against their old property alongwith this they purchased an extra area of 144 sft from the builder for Rs.18,30,100/-. Accordingly, the total area of the property received is 640 sft and the stamp duty value on this is Rs.34,46,216/-. However, the A.O. incorrectly made the addition by taking the difference between the stamp duty value on this is Rs.34,46,216/-. However, the A.O. incorrectly made the addition by taking the difference between the stamp duty value of the total area of the property of Rs.34,46,216/- and the extra area of the property purchased of Rs.18,30,100/-. Therefore, addition is bad in law and ought to be deleted.” 3. When the appeal was taken up for hearing the Learned Authorized Representative for the Assessee, at the outset, challenged the validity of reassessment proceedings contending that the approval/sanction obtained under Section 151 of the Act was not valid. In this regard, primary contention advanced on behalf of the Assessee is that in the present case for Assessment Year 2017-2018, the notice under Section 148 and order under Section 148A(d) have been issued on 21/07/2022, which is beyond the period of three years from the end of the relevant Assessment Year. The case of the Assessee falls within the ambit of provisions of Section 151(ii) of the Act whereby the specified authority for grant of approval has been specified as Principal Chief Commissioner of Principal Director General or Chief Commissioner of Director General. Contrary to the aforesaid requirement, the approval in the present case has been obtained from the Principal Commissioner of Income Tax-2, Mumbai [vide Reference No.Pr.CIT-2/Approval/u/s148A(d)/2022-23, dated 19/07/2022]. Accordingly, since proper sanction by the specified authority has not been obtained for issue of notice under Section 148 of the Act, such notice is invalid and bad in law. In this regard, reliance was placed by 3 Assessment Year 2017-2018 the Learned Authorized Representative for the Assessee on the judgment passed by the Hon’ble Bombay High Court in the case of Ramesh Bachulal Mehta Vs. Income Tax Officer in Writ Petition No.271 of 2023, dated August 11, 2025 [2025] 177 taxmann.com 606 (Bombay) and in the case of Prakash Pandurang Patil Vs. Income Tax Officer in Writ Petition No.10749 of 2024, dated August 12, 2024 [ 2025] 177 taxmann.com 552 (Bombay).

“4. In this respect, the attention of Hon'ble Bench is invited to the judgment of Hon'ble Supreme Court in case of Union of India & Ors. Vs. Rajeev Bansal in Civil Appeal 8629 of 2024. In this case, the first notice under section 148 of the Act was issued on 3-05-2021 and subsequently following the directions contained in the judgment of Hon'ble Supreme Court in case of Union of India vs Ashish Agarwal (2023) 1 SCC 617, the said notice was deemed to be a show-cause notice under section 148A(b) of the new regime as amended by Finance Act of 2021. Subsequently, following the due procedure as clarified by Hon'ble Supreme Court in Ashish Agarwal case (supra) a notice under section 148 was issued on 21-07-2022, after passing an order u/s 148A(d) of the Ac, following the due procedure as laid down in the Act and clarified by Hon'ble Supreme Court.

5. In this respect it is humbly submitted before Hon'ble Bench, that in light of the 3rd proviso to section 149 and in light of the judgment of Hon'ble Supreme Court in Rajeev Bansal Case (supra), the notice under section 148 in this case has been issued within the time limit of three years only, as calculated after excluding the period that should be excluded as per proviso 3 to section 149 and as has been brought out by Hon'ble Supreme Court in Rajeev Bansal case. Other than above additional arguments were made on behalf of the assessee during the hearing that TOLA will not be applicable in this case, that Rajeev Bansal is not applicable in respect of the sanction by specified Authority, Ashish Agarwal judgment was 4 Assessment Year 2017-2018 only applicable to the cases wherein the notices wee challenged. A rebuttal of all the arguments made on behalf of the assessee and calculation of the limitation period in light of the judgment of Hon'ble Supreme Court in Rajeev Bansal case is as below 6. In Rajeev Bansal case, Hon'ble Supreme Court discussed the interaction of new provisions of the Income Tax Act in respect of the re-opening under section 147 of the Act, as effected by Finance Act of 2021, w.e.f. 01-04-2021 with Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020 (henceforth TOLA) in Union of India vs. Ashish Agarwal (henceforth Ashish Agarwal case) in (2023) 1 SCC 617. Further in Union of India vs. Rajeev Bansal in Civil Appeal Number 8629 of 2024, Hon'ble Court further elaborated on the interaction and clarified the calculations already laid down in Ashish Agarwal case. The arguments of department in light of the judgment and against the arguments made on behalf of the assessee are as below- 6.1. TOLA is applicable to new provisions as amended by Finance Act 2021-In respect of the applicability of TOLA on above provisions, Hon'ble Court observed as follows in para 63. “63. TOLA extended the time limits for completion or compliance of certain actions under the specified Act, which fell for completion during the COVID-19 outbreak. The use of the expression "any" in Section 3(1) indicates that the relaxation applies to "all" or "every" action whose time limit falls for completion from 20 March 2020 to 31 March 2021. Section 3(1) is only concerned with the performance of actions contemplated under the provisions of the specified Acts. Consequently, the amendment or substitution of a provision under the specified Acts will not affect the application of TOLA, so long as the action contemplated under the provision falls for completion during the period specified by TOLA, that is, 20 March 2020 to 31 March 2021. 6.1.1. In respect of applicability of TOLA on new provisions, Hon'ble Court observed the following in para 67- "Section 2(1)(b)(ii) of TOLA defines 'specified Act' to include the Income Tax Act. After 1 April 2021, Section 2(1)(b)(ii) must be read to mean the Income Tax Act as amended by the Finance Act 2021. The substitution of Sections147 to 151 will not affect the purpose of TOLA, which is, to provide relaxation of the time limit for completion or compliance of any actions falling for 5 Assessment Year 2017-2018 completion between 20 March 2020 and 31 March 2021. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021." 6.1.2. In para 68 Hon'ble Court observed that the Revenue cannot extend the operation of the old law under TOLA, but it can certainly benefit from the extended time limit for completion of actions falling for completion between 20 March 2020 and 31 March 2021. In para 69 Hon'ble Court again noted that the new provision time limit of 31 March stood extended to 30th June and the same is reproduced below- "For instance, Section 149(1)(a) of the new regime specified the time limit of three years from the end of the relevant assessment year for reopening of the assessment. For assessment year 2017-2018, the three year period expired on 31 March 2021. The expiry of time fell within the time period contemplated by Section 3 of TOLA read with its notifications. Resultantly, the Revenue had time until 30 June 2021 to issue a reassessment notice for assessment year 2017-2018 under Section 149(1)(a). This harmonious reading gives effect to the legislative intention of both the Income Tax Act and TOLA. Moreover, Sections 147 to 151 are machinery provisions. Therefore, they must be given an interpretation that is consistent with the object and purpose of the Income Tax Act" 6.1.3. In para 71 Hon'ble Court noted that the full benefit of the relaxation should be provided to both the assesses and the Revenue to tide over the difficulties caused by the COVID-19 pandemic. In para 72 Hon'ble Court again pointed out that the non-obstante clause in section 3(1) of TOLA will override the provisions of the Income Tax Act in case of any direct conflict or inconsistency Hon'ble Court further observed in the same para that Section 3(1) overrides Section 149 only to the extent of relaxing the time limit for issuance of reassessment notice under Section 148 Again in the same para it was held that the time limit for issuance of a reassessment notices, which fall for completion between 20 March 2020 and 31 March 2021, has been extended till 30 June 2021 6.1.4. Thus, it is apparent that as long as the original notice under section 148 was issued before 30-06-2021, it will be valid and was later held to be a show-cause under section 148A(b) of the Act. In this case the original 148 notice was issued on 3-5- 6 Assessment Year 2017-2018 2021,

8 Assessment Year 2017-2018 6.4. Calculation of limitation date as per new provisions of the Income Tax Act read with TOLA read with direction contained in Ashish Agarwal case- In respect of the calculation of the dates on which the time limits provided under new regime would expire Hon'ble Court referred to 3 time periods in para 94- I. The period up to 30 June 2021 this period is covered by the provisions of the Income Tax Act read with TOLA; II. The period from 1 July 2021 to 3 May 2022 the period before the decision of this Court in Ashish Agarwal (supra); and III. The period after 4 May 2022 the period after the decision of this Court in Ashish Agarwal (supra). This period is covered by the directions issued by this Court in Ashish Agarwal (supra) and the provisions of the Income Tax Act read with TOLA 6.4.1. Hon'ble Court referred to the third proviso to section 149 and held as below in para 95 and 96 of the order "The third proviso excludes the following periods to calculate the period of limitation: (i) the time allowed to the assessee under Section 148A(b); and (ii)the period during which the proceedings under Section 148A are "stayed by an order or injunction of any court." 6.4.2. In para 99 Hon'ble Court noted that in Ashish Agarwal case Hon'ble court created a legal fiction and accordingly, all there assessment notices issued under the old regime were deemed to always have been show cause notices issued under Section 148A(b) of the new regime. Hon'ble court held in the same para that the fiction replaced Section 148 notices with Section 148A(b) notices with effect from the date when the notices under Section 148 of the old regime were issued between 1 April 2021 and 30 June 2021, as the case may be 6.4.3. In para 105 Hon'ble Court made the important observation in respect of the calculation of the limitation date- "A direction issued by this Court in the exercise of its jurisdiction under Article142 is an order of a court. The third proviso to Section 149 of the new regimeprovides that the period during which the proceedings under Section 148A are stayed by an order or injunction of any 9 Assessment Year 2017-2018 court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under Section 148A(b) and the date of the decision of this Court in Ashish Agarwal (supra), the assessing officers. were deemed to have been prohibited from passing a reassessment order. Resultantly, the show cause notices were deemed to have been stayed by order of this Court from the date of their issuance (somewhere from 1 April 2021 till 30 June 2021) till the date of decision in Ashish Agarwal (supra), that is, 4 May 2022." 6.4.4. In last part of para 106- "To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices." 6.4.5. In para 107, Hon'ble Court referred to 3d proviso and pointed out that the same also excludes the time allowed to the assessee to respond. Hon'ble Court noted that the assessee was provided two weeks to respond in Ashish Agarwal judgment and the same is to be excluded from the period of limitation. Accordingly in last part of para 107 Hon'ble Court brought out the total period that is to be excluded while deciding the date of limitation- "Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices." 6.4.6. In para 108 Hon'ble Court held that the time surviving under the Income Tax Act read with TOLA will be available to revenue to complete the remaining formalities in last part of the para, Hon'ble Court stated the following- "Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving 10 Assessment Year 2017-2018 under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021." 6.4.7. Further in para 110- "The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime (which is also the date of issuance of the deemed notices). As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in AshishAgarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149." 6.4.8. Hence, it is obvious from a perusal of the above excerpts that the time from date of issuance of notice under section 148 under old regime till the submission of response by the assessee in response to AO providing information as per directions contained in Ashish Agarwal judgment is to be excluded from calculation of the limitation period. Hon'ble Court clearly brought out that the clock will start ticking again for revenue only after the reply to deemed show-cause has been received or time allowed of two weeks has expired From this the count for surviving time will start and from this date the notice under section 148 is to be passed within the surviving time.

6.4.9 In para 114 Hon'ble Court summarized the judgment clearly pointing out that it is applicable to both 149 (issuance of notice) and 151 (sanction) off Specified Authority. Thus it is apparent that the time limit for both issuance of notice and sanction of specified Authority is to be calculated after excluding the time period under 3 proviso to section 149 as pointed out by Hon'ble Apex Court

7. Calculation of period of limitation in the present case- In para 112 Hon'ble Court explained the judgment with an 11 Assessment Year 2017-2018 example and using the same the period of limitation has been calculated in this case- Description Date Calculation of the surviving period The notice u/s 148 of old regime issued (1) 03/05/2021 Date of limitation as per New Regime read with TOLA (2) 30/06/2021 Surviving period being the number of days between 1 and 59 days 2 above Calculation of the excluded period The date of judgment of Ashish Agarwal 04/05/2022 Date on which information was supplied by AO to the 28/05/2022 assessee following Ashish Agarwal judgment The time limit of two weeks as provided in notice expired 12/06/2022 on Calculation of the limitation date The date from which the count for consuming the surviving 12/06/2022 period will start or the last date of excluded period Surviving period 59 days Date on which the limitation period will end (add surviving 10/08/2022 period on last date of exclusion period) Date of sanction by Pr. CIT 19/07/2022 Date of issuance of notice under section 148 21/07/2022 7.1. Thus, AO was supposed to take sanction under section 152(i) (i.e. that of Pr. CIT) and issue a notice under section 148 on or before 10-08-2022. In this case these both the formalities were completed on 21-07-2022 i.e. within the extended beneficial time limit provided under new provisions of Income Tax Act read with TOLA read with directions of Hon'ble Supreme Court in Ashish Agarwal case Accordingly, the claims of the assessee that the notice was issued beyond the period of three years is completely incurred and may be rejected.”

“74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

(a) Under new regime introduced by the Finance Act, 2021 15 Assessment Year 2017-2018 Assessing Officer was required to obtain prior approval or sanction of the ‘Specified Authority’ at four stages – at first stage under Section 148A(a), at second stage under Section 148A(b), at third stage under Section 148A(d), and at fourth stage under Section 148. In the case of Ashish Agarwal (supra) the Hon’ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the ‘Specified Authority’ according to Section 151 of the new regime before passing an order under Section 148A(d) or issuing a notice under Section 148. (b) Under new regime if income escaping assessment is more than Rupees 50 lakhs a reassessment notice could be issued after expiry of three years from the end of the relevant previous year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

(c) The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20th March 2020 and 31st March 2021, then the ‘Specified Authority’ under Section 151(i) has an extended time till 30th June 2021 to grant approval.

(d) Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148. 16 Assessment Year 2017-2018

(e) Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.

9. In the present case the period of 3 years from the end of the Assessment Year 2017-2018 fell for completion on 31/03/2021. The expiry date fell with the period of 20th March 2020 to 31st March 2021 contemplated under Section 3(1) of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [for short ‘TOLA’]. Resultantly, the authority specified under Section 151(i) of the new regime could have granted sanction till 30th June 2021. It is admitted position that in the present case order under Section 148A(d) and the notice under Section 148 of the Act were issued after 30th June 2021. However, the necessary approval/sanction has been taken from the Principal Commissioner of Income Tax. As per the judgment of Hon’ble Supreme Court in the case of Rajeev Bansal (supra) the necessary approval/sanction should have the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner).

10. We note that in the judgment passed by the Hon’ble Bombay High Court in the case of Ramesh Bachulal Mehta Vs. Income Tax Officer in Writ Petition No.271 of 2023, dated August 11, 2025 [2025] 177 taxmann.com 606 (Bombay), after taking into consideration the above judgment of the Hon’ble Supreme Court, the jurisdictional Bombay High Court has quashed the reassessment proceedings under Section 148 of the Act for the Assessment Year 2016-2017 (initiated after the expiry of 3 years from the end of relevant previous year). The Hon’ble Bombay High Court held that that as per Section 151(ii) of the Act sanction/approval was mandatorily required from higher authority i.e. Principal Chief Commissioner of Income Tax /Chief Commissioner of Income Tax, and 17 Assessment Year 2017-2018 therefore, the approval/sanction granted by the Principal Commission of Income Tax was held to be invalid. The relevant extract for Jurisdictional High Court is set out herein below:

“8. On bare reading of the above extract of the judgment of Hon'ble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon'ble Supreme Court had clarified as under.

8.1 Under the substituted provisions of re-assessment as introduced by the Finance Act, 2021, the Assessing Officer is required to obtain prior approval or sanction of the 'Specified Authority' at four stages: (i) at first stage under Section 148A(a); (ii) at second stage under Section 148A(b); (iii) at third stage under Section 148A(d); and (iv) at fourth stage under Section 148. In the case of Ashish Agarwal (supro) the Hon'ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(d) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the Specified Authority' according to Section 151 of the new regime before passing an order under Section 148A(d) or for issuing a notice under Section 148. 8.2 Under new regime, if income escaping assessment is more than Rupees 50 lakhs, a reassessment notice could be issued after the expiry of three years from the end of the relevant assessment year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

8.3 Section 151(ii) of the substituted provisions prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance with the provisions of section 151 vitiates the jurisdiction of the Assessing Officer to issue a notice under section 148. 8.4 Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice.

13. We, accordingly, set aside the impugned order dated 13.07.2022 passed under section 148A(d), the Notice issued under Section 148 and all other proceedings/orders emanating there from and allow the writ Petition in terms of Prayer Clause (a) of the petition. 19 Assessment Year 2017-2018

14. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. No order as to costs.