M/S. JANATHA MARKETERS,MANGALURU vs. INCOME-TAX OFFICER, WARD - 1(1), MANGALORE, MANGALORE

Briefly stated facts of the case are based on the information received regarding “violation of section 269SS of the Act on the sale of immovable property transaction”. The assessee vide document No.1567/2015-16 dated 16.02.2015 sold a non-agricultural immovable property situated at Bangalore for a sum of Rs.26 lakhs. The assessee has not filed the return of income for the Assessment Year 2016-2017. It was also noticed by the AO that the sale deed revealed that Sub-Registrar has valued the property at Rs.41,74,678/- and the stamp duty and registration fee is collected accordingly. The learned AO issued a notice under section 148 of the Act on 21.06.2021 for the Assessment Year 2016-2017. Subsequently, in compliance to the implementation of the judgment, the Hon’ble Supreme Court in the case of UoI Vs. Ashish Agarwal and also the CBDT instruction No.1/2022 dated 11.05.2022, the assessee was provided with a material available for issuance of extended reassessment notice vide letter dated 17.05.2022 requesting the assessee to show cause why a notice under section 148 of the Act should not be issued on the basis of the information that income chargeable to tax has escaped assessment for the Assessment Year 2016-2017. For the deemed notice under section 148A(b) of the Act, the assessee has not furnished any plausible explanations. Therefore, the learned AO passed an Order under section 148A(d) of the Act with the prior approval of PCIT dated 24.06.2022. In response the assessee furnished return of income to comply with the notice issued on 14.08.2022 but has failed to e-verify the same. The AO treated the return filed by the assessee as invalid. Thereafter, notice under section 142(1) of the Act and show cause notice was issued and served on the assessee on various dates. In response, assessee submitted its reply seeking adjournment. However, in reply to the show cause notice, the assessee furnished written submissions along with copy of the sale deed, purchase deed etc. The assessee submitted that the sale was executed on 16.02.2015 and the possession of the property is handed over to the buyer during the Financial Year 2014-15. He therefore further submitted that transaction is taxable in the Financial Year 2014- 15 and not in the Financial Year 2015-16 as contemplated by the Revenue. He also submitted further that the provisions of section 269SS of the Act cannot be applied for the Financial Year 2014-15 as word “specified sum” covering the sale proceeds of land was introduced by Finance Act, 2015 w.e.f. 01.06.2015 and hence cannot be applied to the transactions into by the assessee on 16.02.2015. However, the learned AO contended that the sale deed was registered on 16.05.2015 by the Sub-registrar and since the sale deed is registered in Financial Year 2015-16, assessment needs to be completed for Assessment Year 2016-17. The learned AO therefore being not satisfied with the reply of the assessee considered the SRO value of the property at Rs.41,74,608/- and determined the long-term capital gain at Rs.27,39,078/- for the Assessment Year 2016-17.

On being aggrieved by the Order of the learned AO, assessee carried the matter before the learned CIT(A). Before the learned CIT(A), assessee made similar submissions. The learned CIT(A) considering the totality of the facts and circumstances of the case, held that the AO is justified in assessing the long-term capital gain for the Assessment Year 2016-17 by admitting the SRO value under section 50C of the Act thereby dismissing appeal of the assessee.

On being aggrieved by the Order of the learned CIT(A), assessee is in appeal before us by raising the following grounds:

Ground Nos.1 and 6 are general in nature and needs no adjudication.

Ground No.2 challenges the assumption of jurisdiction by the AO u/s148 of the ACT.

On this issue, the Ld. AR submitted that the Ld AO has not followed proper procedure before and after issuance of notice under section 148 of the Act dt 24.06.2022, by obtaining sanction under section 151 of the Act and consequently, subsequent proceedings on an invalid procedure adopted by the Ld AO becomes void-ab-inito and does not have any legs to stand the test of law which renders the re-assessment order unsustainable in law. The jurisdictional grounds raised by the assessee challenging the order passed u/s. 148A(d) of the Act and notice issued u/s. 148 of the Act both dated 24/06/2022 is not in accordance with the provisions of section 151 of the Act and consequently the subsequent proceedings are invalid and non-est. The learned AR relied on the decision of the Co-ordinate Bench in the case of Shri Rahul Mekha Vs. ITO (International Taxation) in ITA No.813/Bang/2024.

Per contra, the learned DR relied on the Orders of the Revenue authorities.

We have heard the rival contentions and perused the material available on record. The Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 in all cases where the last date for issuance of Notice u/s 148 of the I. Tax Act, stood extended to 30/04/2021 as a result of the Notification dated 31/03/2021, the last date for issuance of such Notice now stood extended to 30/06/2021. Before proceeding further, the provisions of section 151 of the Act as existed on the date of issuance of order under section 148A(d) of the Act and as on the date of notice issued under section 148 of the Act, are reproduced hereunder for ease of reference & convenience: -

Further section 149(1)(b) of the Act is extracted below for reference:

It is clear that clause (b) of subsection 1 of section 149 prohibits the issuance of notice under Section 148 of I.T. Act if three years has elapsed from the end of the relevant Assessment Year unless the case falls under Clause- (b). Accordingly, no notice under Section 148 could be issued after three years from the end of Assessment Year 2016-2017, subject to the exception if the Assessing Officer has material which would reveal that "the income chargeable to tax" which has escaped the assessment amounts or is likely to amount to Rs.50.00 lakh rupees or more.” Hence, assessment is required to be quashed and set aside on this count also.

Accordingly, the consequential reassessment order dated 06.04.2023 passed u/s 147 r.w.s. 144B of the Act are also set aside and quashed. Since, we have adjudicated one of the legal grounds in favour of the assessee, other grounds raised by the assessee becomes academic.