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Facts
The assessee's appeal arises from an order by the NFAC, Delhi, for assessment year 2017-18. The case involves information received from search and seizure operations on related entities, leading to a notice under Section 148 for alleged siphoning of funds through bogus contracts.
Held
The Tribunal held that the notice issued under Section 148 was beyond the period of limitation and that the approval for the reassessment notice was obtained from an incorrect authority as per the new regime. Consequently, the notice was deemed void ab initio.
Key Issues
Whether the reassessment notice issued under Section 148 was within the prescribed time limits, considering the interplay of the Income Tax Act and the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA), and whether the proper authority granted approval as per the new regime.
Sections Cited
147, 148, 143(3), 69A, 132, 148A, 149, 151
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 13/06/2025 passed by NFAC, Delhi for assessment year 2017-18 on following grounds of appeal :
“ 1. Reopening of Assessment Invalid 2 ITA 4918/Mum/2025; A.Y. 2017-18 M/s R S Construction The learned Assessing Officer erred in law and on facts in reopening the assessment u/s 147 of the Income Tax Act, 1961 without satisfying the mandatory jurisdictional conditions and without bringing on record any fresh tangible material directly pertaining to the appellant.
Invalid Reliance on Third-Party Search The reassessment proceedings are based solely on alleged information gathered during search actions on third parties, without furnishing the underlying material to the appellant or providing any opportunity to cross-examine concerned persons, which is in gross violation of the principles of natural justice.
3. Erroneous Addition u/s 69A The AO erred in treating 10,71,28,000/- as unexplained under section 69A, despite the fact that the appellant had received only 49,50,000/- from M/s Lakshin Infradev Pvt. Ltd., which was a loan/advance for a proposed joint business venture that did not materialize.
Lack of Proper Appreciation of Facts The authorities below failed to consider that the amount received from M/s Lakshin Infradev Pvt. Ltd. was not income but a commercial transaction that was eventually reversed, and no unaccounted income arose therefrom.
NFAC Failed to Provide Proper Opportunity to Appellant The National Faceless Appeal Centre (NFAC) failed to provide the appellant with a fair and effective opportunity to present its case during the appellate proceedings.
Failure to Consider Appellant's Submissions The lower authorities failed to consider the appellant's submissions and the bank statements provided, and have passed a mechanical and unreasoned order.
Violation of Principles of Natural Justice Both the AO and NFAC proceeded to pass adverse orders without supplying copies of the material relied upon or giving adequate time for rebuttal, thereby breaching the principles of natural justice.
3 ITA 4918/Mum/2025; A.Y. 2017-18 M/s R S Construction 8. Assessment Without Proper Evidence The impugned addition is based on conjecture and suspicion rather than cogent evidence. No material has been brought on record to demonstrate that the amount represents unaccounted income of the appellant.
Mechanical and Non-Speaking Orders The orders of both the AO and the CIT(A) are non-speaking and lack independent reasoning. The CIT(A) merely affirmed the findings of the AO without application of mind or appreciation of facts and evidence.
General Relief The appellant craves leave to add, amend, modify, or withdraw any of the above grounds at or before the time of hearing.” Brief facts of the case leading to the legal issues are as under: 2. An information has received from A search and seizure operation u/s 132 of Income tax Act, 1961 was conducted on 06.02.2020 in the case of Prathima Group and R K Group Hyderabad and Pune based entities. During the search operation, premises M/s Meher Power India Pvt Ltd and M/s Nyles Sales Agencies Pvt Ltd were also covered. Directors of both entities are Ramsingh Raiji and his wife Krishna Raiji. During the course of search and post search investigation, it has been gathered that both the above mentioned entities are prima-facie involved in siphoning of funds through bogus Contract/Invoice rising without doing actual work. M/s.R.K. Construction is one of the beneficiaries in this transaction of bogus contract/invoice raising without doing work and received Rs. 10,71,28,000/-. Based on the information received by the Ld.AO, notice under amended section 148 of the Act was issued on 30/06/2022 for AY 2017-18 calling upon the assessee to file its return of income.
4 ITA 4918/Mum/2025; A.Y. 2017-18 M/s R S Construction 2.1 It is submitted that, pursuant to the decision of Hon’ble Supreme Court in case of UOI V/s Ashish Agarwal reported in (2022) 138 taxmann.com 64, notice dated 30/06/2022 u/s.148 of the old regime; was deemed to the notice issued u/s.148 under the new regime. Subsequently, order u/s. 148A(d) was passed on 29/07/2022, and after taking approval from the Pr.Commissioner of Income Tax – 1 Mumbai and notice u/s.148 was issued on 29/07/2022 and the assessment was completed by passing assessment order u/s.143(3) r.w. 147 of the Act. 2.2 The Ld.AR at the outset submitted that, the notice issued u/s.148 dated 29/07/22 of the new regime is issued beyond the period of limitation for the year under consideration. He placed reliance on following observation of the decision of Hon’ble Supreme Court in case of UOI vs. Rajeev Bansal reported in (2024) 167 taxmann.com 70, in support of the contention: “19. Mr. N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID- 19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income-tax Act; b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re assessment for previous assessment years; c. The relaxations provided under section 3(1) of TOLA apply "notwithstanding anything contained in the specified Act." Section 3(1), therefore, overrides the time limits for issuing a notice under section 148 read with Section 149 of the Income-tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re- assessment with a new regime. The first proviso to Section 149 does 5 ITA 4918/Mum/2025; A.Y. 2017-18 M/s R S Construction not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income-tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015- 2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: Assessment Within 3 Expiry of Within six Expiry of Year years Limitation Years Limitation read with read with TOLA for (2) TOLA for (4) (1) (2) (3) (4) (5) 2013-2014 31-3-2017 TOLA not 31-3-2020 30-6-2021 applicable 2014-2015 31-3-2018 TOLA not 31-3-2021 30-6-2021 applicable 2015-2016 31-3-2019 TOLA not 31-3-2022 TOLA not applicable applicable 2016-2017 31-3-2020 30-6-2021 31-3-2023 TOLA not applicable 2017-2018 31-3-2021 30-6-2021 31-3-2024 TOLA not applicable f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; g. Section 2 of TOLA defines "specified Act" to mean and include the Income-tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income-tax Act. Therefore, TOLA continues to apply to the Income T a x Act even after 1 April 2021; and h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income-tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra).”
2.3 Ld.AR submitted that, for A.Y. 2017-18, TOLA being not applicable, the notice u/s. 148 under new provisions should have been issued on or before 30/06/2021 being the surviving period granted by Hon’ble Supreme Court by virtue of decision laid down 6 ITA 4918/Mum/2025; A.Y. 2017-18 M/s R S Construction in the case of UOI vs. Ashish Agarwal (supra). He also referred to following paragraphs of the said decision : “68. After 1 April 2021, the Income-tax Act has to be read along with the substituted provisions. The substituted provisions apply retrospectively for past assessment years as well. On 1 April 2021, TOLA was still in existence, and the Revenue could not have ignored the application of TOLA and its notifications. Therefore, for issuing a reassessment notice under section 148 after 1 April 2021, the Revenue would still have to look at: (i) the time limit specified under section. 149 of the new regime; and (ii) the time limit for issuance of notice as extended by TOLA and. its notifications. 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.
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.” 2.4 The Ld.AR also placed reliance on the decision of Co- ordinate Bench of this Tribunal in case of ACIT vs. Ramchand Thakurdas Jhamatani reported in (2025) 173 taxmann.com 182 wherein identical plea was considered in favour of assessee. On the contrary, the Ld.DR relied on the orders passed by authorities below. 2.5 He also placed on record the decision of Hon’ble Gujarat High Court in case of Dhanraj Govindram Lulla vs. ITO in special civil Application Nos. 6381, 5680, 22260 & 996 of 2022/2023 vide order dated 08/07/2025.
7 ITA 4918/Mum/2025; A.Y. 2017-18 M/s R S Construction We have perused the submissions advance by both sides in the light of record placed before us.
Admittedly, the impugned notices were deemed to be the notice issued within period of 3 years as per direction of Hon’ble Supreme Court in case of Ashish Agarwal (Supra). In the present case the period of 3 years from the end of the Assessment Year 2017-2018 fell for completion on 31st March 2021. The expiry date fell during the time period of 20th March 2020 and 31st March 2021, contemplated under Section 3(1) of TOLA. Resultantly, the authority specified under Section 151(i) of the new regime could have granted sanction till 30th June 2021. On perusal of the order, dated 30/07/2022, passed under Section 148A(d) of the Act we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax. Since the aforesaid order was passed after the expiry of 3 years from the end of the Assessment Year 20172018, as per the new regime, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Even the notice, dated 30/07/2022, under Section 148 of the Act of the new regime was issued after obtaining the prior approval of the Principal Commissioner of Income Tax. Accordingly, we conclude that in the present case the approval was obtained by an authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime. 3.1 Further, notice under old provision of the Section 148 was issued to the assessee on 30/06/2022. As per the table in the decision Hon’ble Supreme Court in case of UOI vs. Ashish Agarwal 8 ITA 4918/Mum/2025; A.Y. 2017-18 M/s R S Construction reproduced here in above, 3 years expired on (supra) 31/03/2021. By virtue of ratio laid down by Hon’ble Supreme Court in case of UOI vs. Ashish Agarwal, notices issued between 01/04/2021 and 30/06/2021 was deemed to be issued as on 31/03/2021 and thus extended period to complete the procedure as per the new provisions of Section 148A was available only till 30/06/2021 for A.Y.2017-18. Thus in the present facts of the case, the revenue did not have any time complete the entire procedure u/s.149(1) of the new regime and to issue notice u/s.148 in the new regime. In support reliance is placed on the decision of Hon’ble Bombay High Court for Assessment year under consideration in case of Alag Property Construction Pvt. Ltd. Vs. ACIT 15(1)(1) in WP no. 3938 of 2022 vide order dated 08/09/2025. The Ld.DR heavily relied on the decision of Hon’ble Gujrat High Court (Supra), however, ultimately it is noticed that Hon’ble Court allowed assessee’s plea regarding the issue of notice u/s.148 A of the new regime being issued beyond the surviving period. Similar in the situation in the case of present assessee as observed in para 4.1 hereinabove. 3.2 On both the above count, and respectfully following the ratio laid down by Hon’ble Bombay High Court (Supra) we are of the opinion that the notice dated 30/07/2022 is void ab initio and deserves to be quashed. As a consequence, the assessment proceedings also becomes bad in law and deserves to be quashed. Accordingly additional Ground No.1 raised by the assessee stands allowed. In the result the appeal filed by the assessee stands allowed.