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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & GIRISH AGRAWAL
Per Smt. Beena Billai, JM: Present appeal filed by assessee arises out of order dated 19/08/2025 passed by NFAC, Delhi [hereinafter “the Ld. CIT(A)”] for assessment year 2017-18 on the following grounds:-
1. 1. “1. On the facts and circumstances of the case and in law, the learned Assessing Officer has erred in issuing the order under Section 148A(d) and the notice under Section 148 after obtaining the approval of the approval of PCIT-19, Mumbai which was not the correct 'specified authority' as per Section 151 who should have approved it when three years have already elapsed from the end of the relevant assessment year.
2. On the facts and circumstances of the case and in law, the ITO, Ward 23(2)(6), Mumbai has erred in passing the order u/s. 148A(d) and also issuing the notice u/s. 148 without appreciating that he was not having the jurisdiction for the same in view of Section 151A and the notification issued thereunder notifying e-Assessment of Income Escaping Assessment Scheme, 2022 and, thereby, rendering the said order and the notice as well as the entire assessment proceeding as null and void.
3. On the facts and circumstances of the case and in law, the learned Assessing Officer has erred in issuing notice /s 148 dated 29/07/2022 without complying with the requirements of Circular No. 19 of 2019 dated 14th August, 2019 issued by the CBDT.
4. On the facts and circumstances of the case and in law, the CIT (A) has erred in confirming the addition of the unexplained money of Rs.1,35,28,860 representing the cash deposited by the appellant in his bank account during the demonetization period without appreciating the fact that the appellant was running a petrol pump operated under the authorization of public sector oil marketing company and, thereby, he was permitted to even receive the specified bank notes by virtue of the relevant Notification issued by the RBI in this regard.
5. On the facts and circumstances of the case and in law, the CIT (A) has erred in not admitting the additional evidences which were submitted by the appellant in support of his contentions.
6. On the facts and circumstances of the case and in law, the CIT(A) ought to have excused the non-filing of formal application by the appellant for admitting the additional evidences or he ought to have given the opportunity to the appellant for the same.”
Brief facts of the case are as under:-
Assessee is an individual and filed its return of income on 16/11/2017 declaring total income of Rs.5,69,617/-. Subsequently, assessee revised his return on 26/06/2018 declaring total income of Rs.6,22,270/-. The Ld.AO during assessment proceedings noted that, assessee deposited demonetized cash during the period 09/11/2016 to 31/12/2016. The Ld.AO thus, treated Rs.1,35,28,860/- as unexplained money u/s 69A of the Act.
Aggrieved by the order of the Ld.AO, assessee preferred appeal before Ld.CIT(A).
2.1. Before Ld.CIT(A), assessee submitted that, he is running a petrol pump and his main sales are against cash. It was submitted that, total turnover of Rs.10,75,16,221/- was earned during year under consideration. It was further submitted that, during the period 01/04/2016 to 08/11/2016, assessee declared cash sales of Rs.7,59,18,508/-. The entire cash so collected was deposited in bank account against cash sales and month-wise and corresponding cash deposited was furnished before Ld.CIT(A).
2.2. Before Ld.CIT(A) assessee also raised legal plea that, notice issued u/s 148 was not as per provisions of Section 151 of the Act. The, Ld.CIT(A) did not adjudicate this issue. The Ld.CIT(A) after considering all above details upheld the addition made by Ld.AO.
Aggrieved by the order of Ld.CIT(A) assessee is in appeal before this Tribunal.
Ground No. 1-3 raised by assessee is challenging validity of notice u/s 148 of the Act as the same was not as per provisions of Section 151 of the Act. The Ld.AR submitted that original notice u/s 148 was issued on 25/04/2021 after obtaining necessary approval u/s 151 of the Act of the old law. Subsequently, said notice was treated to be a deemed notice u/s 148A of new provisions as per directions of Hon’ble Supreme Court in case of Union of India vs Ashish Agarwal [2022] reported in138 taxmann.com 64 (SC). The Ld.AR submitted that, relaxation under TOLA is not application to assessee for assessment year 2017-18 as per the categorical submission by Ld.ASG before Hon’ble Supreme Court in case of UOI vs. Rajeev Bansal reported in [2024] 167 taxmann.com 70. The Ld.AR thus submitted that, time limit for issuing notice under new provisions expired on 31/06/2021. He submitted that in present facts, order u/s 148A(d) was passed on 28/07/2022 followed by impugned notice being issued on even date.
3.1. He further submitted that, approval for issuing such notice was taken from Pr. Commissioner-19, Mumbai vide order dated 20/07/2022. The Ld.AR thus submitted that, procedure as enunciated under the new provision of the Act as held by Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal (supra) which has not been followed in the present facts and therefore, the impugned notice so issued is bad in law.
3.2. On the contrary, the Ld.DR relied on the orders passed by authorities below.
We have perused the submissions advanced by both the sides in light of the records placed before us.
The Hon’ble Supreme Court in case of Rajeev Bansal (supra) clearly emphasized regarding competent authority who has to approve such notices under new provisions of the Act as under:-
“73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments Sri krishna (P.) Ltd. v. ITO [1996]
Section 151(2) of Before expiry of four years Joint Commissioner the old regime from the end of the relevant assessment year
Section 151(1) of After expiry of four years Principal Chief Commissioner the old regime from the end of the relevant or Chief Commissioner or assessment year Principal Commissioner or Commissioner Section 151(i) of Three years or less than Principal Commissioner or the new regime three years from the end of Principal Director or the relevant assessment Commissioner or Director year Section 151(ii) of More than three years have Principal Chief Commissioner the new regime elapsed from the end of the or Principal Director General relevant assessment year or Chief Commissioner or Director General
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.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus:
(i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
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. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. 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.
Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. 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 20 March 2020 31 March 2021, then the specified authority under section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.
For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30 June 2021.
Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages:
a. Section 148A(a) - to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022;33 c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and d. Section 148 - to issue a reassessment notice.
In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts "shall be deemed to have been issued under section 148-A of the Income-tax Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b)." Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of U P [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267.
This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned." Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under section 148-A." Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. 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. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.” 4.1. In the present facts of the case, admittedly Ld.AO passed order u/s 148A(d) of the Act with the permission of Pr.CIT-19, Mumbai on 28/07/2022. The Hon’ble Supreme Court in both the decisions being Ashish Agarwal (supra) and Rajeev Bansal (supra), observed that, the appropriate authority for issuing of such notices cannot be altered. The relevant notice filed before this Tribunal reflects that, the authority who granted approval cannot be considered to be the appropriate authority u/s 151 under the new provisions of the Act. Admittedly, the notice was issued beyond period of three years from end of assessment year under consideration and as per the decisions of the Hon’ble Supreme Court, approving authority then should be as per Section 151(ii) i.e., Principal Chief Commissioner Pr.CIT-19, Mumbai. Under these admitted facts, we are of the view that, notice dated 28/07/2022 is issued to be in accordance with the procedures laid down under the Act and deserves to be quashed.
Accordingly, Ground Nos. 1-3 raised by assessee stand allowed.
As we have already quashed the initiation of the proceedings, consequential assessment order passed becomes null and void. Accordingly, assessment order passed u/s 147/144/144B of the Act is liable to be quashed and the addition, challenged by assessee becomes academic at this stage.