PRAFUL ARJUN RANE ,MUMBAI vs. ITO INT TAX WARD-4(1)(1), MUMBAI

Grounds taken by the assessee are reproduced as under: “1. In the facts and the circumstances of the case and in law, the learned ITO Int Tax Ward-4(1)(1), Mumbai erred in reopening the assessment u/s 148Aand In the factsand circumstances of the case and in law, the JAO erred in passing order u/s 148A[d]r w s 148

In the facts and the circumstances of the case and in law, the learned ITO Int Tax Ward-4(1)(1), Mumbai erred in making proposed addition by overlooking the fact that a. Section 69 does not apply because receipts of old payments were produced b. No payment was made during the year to prove addition of Rs1873965/-

In the facts and the circumstances of the case and in law, the learned ITO Int Tax Ward-4(1)(1), Mumbai erred in making proposed addition of Rs18,73,965/-by overlooking the fact that a. By overlooking the fact that no automatic addition can be made only on the basis of stamp duty value b. Wrongly proposing addition u/s 56[2][viib] thereby making addition untenable in law overlooking old agreement and proviso to section 56[2] [viib]

In the present appeal, essentially the issue to be decided is on legal ground, challenging the validity of notice issued u/s.148 on account of being barred by limitation and consequent reassessment order passed u/s. 147 r.w.s. 144C(13) being bad in law. For this, assessee has raised Praful Arjun Rane AY 2015-16

Brief facts of the matter are that assessee did not file his original return of income for the year under consideration. Based on specific information received in accordance with Risk Management Strategy formulated by Central Board of Direct Taxes (CBDT) through Insight portal under the head “RMS-non-filer of return”, it was suggested that income chargeable to tax has escaped assessment on account of purchase of an immovable property by the assessee amounting to Rs.1,20,40,517/-. Based on this information, proceedings u/s.148A were initiated for which order u/s.148A(d) was passed on 27.04.2022. Subsequently notice u/s.148 was issued on 27.04.2022. 4.1. Chronology of events which took place in the present case for which the relevant material is on record is tabulated below for ready reference: Sl. No. Event Description Event Date

03.2024

12.2024

Before the ld. Assessing Officer, assessee made his submission explaining the nature and source of investment made by it. Ld. Assessing Officer accepted investment to the extent of Rs.24,87,152/- and made the addition of Rs.76,79,400/- which according to him remained unexplained and applied the provisions of section 69. The addition so made was proposed by draft order u/s.144C(1), whereupon assessee raised objections before the Dispute Resolution Panel (DRP). Ld. Assessing Officer has also proposed an addition of Rs. 18,73,965 u/s. 56(2)(vii)(b) on account of difference between the stamp duty value and the purchase consideration of the property. Thus, both the additions proposed by the ld. Assessing Officer in the draft order went before the ld. DRP for its consideration. Assessee furnished his objections on both the issues. On the first issue relating to proposed addition of Rs. 76,79,400/-, ld. DRP accepted these submissions made by the assessee and directed the ld. Assessing Officer to grant relief to the assessee on this account. However, for the second proposed addition of Rs. 18,73,965/-, ld. DRP directed the ld. Assessing Officer to make the addition. Thus, final assessment order was passed by the ld. Assessing Praful Arjun Rane AY 2015-16

Before us, assessee has raised the legal ground. We have heard both the parties on their submissions relating to legal ground. We have also perused the judicial precedents relied upon for which relevant judicial orders are placed on record. Assessee has also furnished a paper book containing 63 pages to demonstrate its factual matrix relating to the legal issue, so raised. Merits of the case have not been argued upon by either party, nor any submission made to that effect.

1. It is noted that the notice u/s.148 is issued on 27.04.2022, which according to the assessee is barred by limitation, since it has been issued after expiry of 6 years from the end of the relevant assessment year i.e., AY 2015-16. According to the assessee, it is contrary to the mandate of the first proviso below section 149(1)(b) and therefore is invalid, bad in law and leading the impugned assessment proceedings as well as the impugned assessment order bad in law liable to be quashed ab initio.

To delve on the issue in hand before us, let us take note of the provisions contained in section 149 under the new regime introduced by the Finance Act, 2021, prescribing limitation on issue of notice u/s. 148 of the Act. Section 149 of the Act reads as under: Time limit for notice.

(1) No notice under section 148 shall be issued for the relevant assessment year,-

1. Finance Act, 2021 amended re-assessment related provisions w.e.f. 01.04.2021. These amended provisions made a significant change in the way re-assessment proceedings are initiated and the limitation period in relation thereto. One of the key amendments is introduction of section 148A. Pursuant to section 148A, it is mandatory for the Assessing Officer Praful Arjun Rane AY 2015-16

3. This proviso to section 149 provided a defense and limitation on issuance of notices under the new regime of re-assessment relating to the Assessment Years covered by the old regime. Thus, first proviso to section 149 under the new regime limits the retrospective operation to protect the interest of assessees. Section 149(1)(b) of the old regime provided a time limit of six years from the end of the relevant assessment year for issuing notice under Section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, 6th year expired on 31.03.2022. The notice under Section 148 of the Act, in the present case, is issued on 27.04.2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said section as per the old regime.

4. In the present context, we need to deliberate on the purpose of first proviso to section 149 under the new regime so as to decide on the issue raised by the assessee in the present appeal. The first proviso to Section 149 of the Act provides that no notice under Section 148 shall be issued at any point of time in a case for a relevant assessment year beginning on or before the 1st day of April 2021, if a notice under Section 148 could not have been issued at that time on account of being beyond the time limit specified under the provision of clause (b) of sub-section (1) of this Section, as it stood immediately before the commencement of the Praful Arjun Rane AY 2015-16

It is pertinent to take note of the observations and findings of the Hon'ble Supreme Court in the case of Union of India and others vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC), wherein the first proviso to section 149(1)(b) has been deliberated in detail. Relevant paragraphs are extracted below for ready reference: “46. The ingredients of the proviso could be broken down for analysis as follows: (1) no notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of 149(1)(b) of the old regime. Thus, a notice could be issued under Section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under Section 149(1)(b) of the old regime. ……………. 49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under Section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under Section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses. …………. Praful Arjun Rane AY 2015-16

The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under Section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year, and (iv) all notices issued invoking the time limit under Section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.

Similar issue had come up before the Hon'ble Juri ictional High Court of Bombay in the case of Hexaware Technologies Ltd. vs. ACIT in Writ Petition No.1778 of 2023, dated 03.05.2024, wherein Hon'ble Court while dealing with the provisos to section 149(1)(b) under the new regime for the Assessment Years covered by the erstwhile provisions of section 149(1) observed that the section has to be interpreted so as to give meaning to all the words and phrases used in the said section. It could not be interpreted in such a way so as to render any part or phrase in the said section otiose. According to the Hon'ble Court, terms “at that time” in the first proviso refers to the date on which notice u/s.148 is to be issued by the Assessing Officer. The term “at that time” has to refer to the term “at any time” used earlier in the said proviso. According to the Hon'ble Court the reference to “at any time” is to the date of the notice to be issued by the Assessment officer and therefore, the term “at that time” would also refer to the said date. Thus, on the said date, if a notice could not have been issued under the provision of section 149(1)(b) of the old regime for any Assessment Year beginning on or before 01.04.2021, the notice cannot be issued even under the new regime. Praful Arjun Rane AY 2015-16

1. Hon'ble Court took into consideration the stand of the Revenue to interpret the first proviso to section 149 of the Act to be applicable only for Assessment Years 2013-14 and 2014-15, i.e., for the Assessment Years where the period of limitation has already expired on 01.04.2021 which was held to be not correct because that would render the first proviso to section 149 under a new regime redundant and otiose. According to the Hon'ble Court, if such a stand of the Revenue is accepted then, it would amount to re-writing the proviso to section 149(1)(b). Hence such an interpretation as canvassed by the Revenue is clearly not permissible in law. Hon'ble Court thus, concluded that the first proviso to section 149(1)(b) is an exception to the period of limitation and provides for a restriction on the notices issued u/s.148 which are issued for Assessment Years up to 2021-22 beyond a certain date. It also took into account the extension of time as contained in fifth and sixth proviso to section 149(1)(b) while concluding on the period of limitation available for issuing the notice u/s.148. Hon'ble Court, thus concluded that if a notice is not issued within the time prescribed under the first proviso to section 149(1)(b) then, such period cannot be extended by fifth proviso and sixth proviso.

2. Relevant paragraph is extracted below: “30. With respect to applicability of the fifth proviso and the sixth proviso to Section 149(1)(b) of the Act for extension of limitation for issuing the notice under Section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed in Section 149(1) of the Act, i.e., three years or ten years, as the case may be. Fifth proviso or sixth proviso extend limitation for issuing notice under Section 149 of the Act, however, the first proviso is an exception to the period of limitation and provides for a restriction on the notices under Section 148 being issued for Assessment Years upto 2021-22 beyond a certain date. Therefore, the way the Section would operate, is first to decide whether a notice issued under Section 148 of the Act is within the period of limitation in terms of Section 149(1)(a) or (b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the Praful Arjun Rane AY 2015-16

In this background from the perusal of provisions contained in section 149(1), we note that it states that no notice u/s.148 shall be issued for the relevant Assessment Year prescribing the conditions and time limit. It does not refer to show cause notice/s.148A(b). The first proviso to section 149(1)(b) also carves out an exception to the limitation in respect of notice u/s.148 and not under section 148A(b). Further, Hon'ble High Court of Bombay in the case of Hexaware Technologies Ltd. (supra) in para-30 has categorically held that if a notice u/s.148 is not with the time prescribed under the first proviso to section 149(1)(b) then, such period cannot be extended by fifth proviso and sixth proviso to the said section.

1. Admittedly, the undisputed fact in the present case is that impugned notice issued u/s.148 is dated 27.04.2022 which is after the limitation expired on 31.03.2022 within the meaning of first proviso to section 149(1)(b). In view of the above stated deliberations, on the factual matrix of the present case and the applicable law including the jurisprudence discussed above, we hold that notice for Assessment Year 2015-16 issued on 27.04.2022 u/s.148 of the new regime is barred by limitation and hence bad in law, liable to be quashed, resulting in impugned re-assessment proceedings as well as the impugned assessment order bad in law. Praful Arjun Rane AY 2015-16

Also, we find that this issue has been settled in the case of Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC) wherein reference is made to the submissions made on behalf of the Revenue vide para 19 which is relevant and the same is reproduced hereunder:- “19. Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue:

1. Thus, it can be seen that Revenue conceded before the Hon’ble Supreme Court in para 19(f) for dropping all the notices issued on or after 01.04.2021 for A.Y. 2015-16 as they will not fall for completion during the period prescribed under TOLA.

This issue had come up before the Hon'ble Delhi High Court in the case of IBIBO Group Pvt. Ltd. vs. ACIT, WP(C) 17639 of 2022, dated 13.12.2024 wherein re-assessment action for Assessment Year 2015-16 was held to be not sustainable. Hon'ble Court quashed the notice issued u/s.148 as well as order passed u/s. 148A(d), dated 23.07.2022 for Praful Arjun Rane AY 2015-16

1. In the case of present assessee, since the notice issued u/s.148 is dated 27.04.2022, period of six years expired on 31.03.2022 and is thus barred by limitation. Accordingly, notice so issued and re-assessment completed thereafter u/s. 147 is liable to be quashed, in view of the decision of Hon'ble Supreme Court in the case of Rajeev Bansal (supra) which was followed by Hon'ble Delhi High Court in the case of IBIBO (supra).

2. Hon'ble Supreme Court while dismissing the SLP filed by Revenue in the case of ACIT vs. Nehal Ashit Shah in SLP (Civil) Diary No(s). 57209/2024, dated 04.04.2025 held that it does not survive for further consideration. While holding so, Hon'ble Court noted in para 5 as under: “5. In this regard, reference could also be made to paragraph 19(e) and (f) in the case of Union of India vs. Rajeev Bansal, Civil Appeal No.8629 of 2024 on 03.10.2024 (2024 SCC ONLINE 754) under which the learned Additional Solicitor General for India has made a concession insofar as the assessment year 2015- 16 is concerned.”

3. In view of above stated deliberation, both on facts and law including the applicable jurisprudence, we hold that notice for A.Y. 2015- 16 issued on 27.04.2022 u/s 148 of the new regime is barred by limitation and hence bad in law, liable to be quashed, resulting in impugned reassessment proceedings as well as the impugned reassessment order bad in law. Accordingly, additional ground raised by the assessee is allowed. Praful Arjun Rane AY 2015-16

4. Since, the impugned order itself has been held to be bad in law in terms of our above stated observations and findings, grounds raised by the assessee in Form 36 are rendered academic and therefore, not adjudicated upon.

In the result, appeal of the assessee is allowed.

The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT