MURALI KASTURI,HYDERABAD vs. ITO, WARD-13(1), HYDERABAD

Succinctly stated, the AO, on the basis of information that the assessee had, during the year under consideration, carried out substantial financial transactions, viz., (i) salary received during the year: Rs.29,768/-; and (ii) cash deposits made in his savings bank account: Rs.1,16,88,000/-, but had not filed his return of income for the year under consideration, initiated proceedings under Section 147 of the Act. Notice under Section 148 of the Act, dated 31/03/2021was issued to the assessee, wherein he was called upon to furnish his return of income in compliance thereto. However, the assessee failed to comply with the said notice and did not furnish his return of income.

During the course of the assessment proceedings, the AO issued notices under Section 142(1) of the Act. However, the assessee did not comply with the said notices and failed to furnish the requisite details as were called for by the AO.

The AO, taking cognizance of the fact that the assessee had neither complied with the notice issued under Section 148 of the Act and filed his return of income, nor complied with the notices issued under Section 142(1) of the Act by furnishing the requisite details and information called for, was constrained to proceed with the assessment and frame the same to the best of his judgment under Section 144 of the Act. Accordingly, the AO, vide his order passed under Section 147 r.w. Section 144 r.w. Section 144B of the Act dated 27.03.2022, after making two additions, viz., (i) cash deposits made in the bank account: Rs. 1,16,88,000/- ; and (ii) salary received during the year: Rs.29,768/-, determined the total income of the assessee at Rs.1,17,17,768/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A), assailing both the validity of the jurisdiction assumed by the AO for framing the impugned assessment as well as the additions made on merits. However, the CIT(A), not finding favor with the contentions so advanced, dismissed the appeal.

The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by the Ld. AR to drive home his contentions.

Shri Y. B. Bhanu Narayan Rao, Ld. Authorized Representative (for short, “AR”) for the assessee, at the threshold of hearing of the appeal, based on his multi-facet contentions, assailed the validity of the jurisdiction assumed by the AO for framing the assessment vide his order passed under Section 147 r.w. Section 144 r.w. Section 144B of the Act dated 27.03.2022.

Elaborating upon his contention, the Ld. AR submitted that though the notice under Section 148 of the Act bears the date 31.03.2021, the same was, in fact, issued only on 05.04.2021. The Ld. AR, in support of his aforesaid contention, took us through the copy of the notice issued under Section 148 of the Act dated 31.03.2021 and drew our attention to the fact that the digital signature (DSC) of the ITO, Ward-13(1), Hyderabad, appended thereon reflected the date and time as 05.04.2021 at 4:37 PM. The Ld. AR, in order to dispel any doubt regarding the aforesaid factual position, further drew our attention to the footnote of the notice issued under Section 148 of the Act read along with the extract of the calendar for April, 2021. It was submitted by him that though the date mentioned therein was not legible because of the question mark (?) appearing on part of the face of the digital signature, but the accompanying calendar unmistakably revealed that the notice had been digitally signed on Monday, i.e., 05.04.2021 (Pages 66-67 of the Assessee’s Paper Book). Further to dispel any doubt regarding the veracity of his aforesaid claim that the notice under Section 148 of the Act was, in fact, issued only on 05.04.2021, the Ld. AR took us through the screenshots downloaded from the assessee’s Income-tax e-filing portal, which unequivocally revealed that the impugned notice was digitally signed on 05.04.2021.

Carrying his contention a step further, the Ld. AR submitted that it is a settled position of law that a notice can be said to have been “issued” only when it is digitally signed and dispatched. It was, thus, contended that although the face of the notice bears the printed date of 31.03.2021, the said date is of no legal consequence, inasmuch as the notice was actually issued only on 05.04.2021, i.e., the date on which it was digitally signed and dispatched by the AO.

The Ld. AR submitted that as per Section 149(1)(b) of the Act, no notice under Section 148 for A.Y. 2013-14 could have been issued beyond six years from the end of the relevant assessment year, which period had expired on 31.03.2020. It was submitted that even if the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”) and the notifications issued by the CBDT pursuant thereto were taken into consideration, the outer limit for issuance of such notice stood extended only up to 31.03.2021. According to the Ld. AR, as the notice under Section 148 of the Act, though dated 31.03.2021, had in fact been issued only on 05.04.2021, i.e., beyond even the extended period of limitation, the same was ex facie barred by limitation. The Ld. AR, on the basis of the aforesaid factual and legal position, submitted that as the notice issued under Section 148 of the Act, being barred by limitation, was invalid in the eyes of law, the assessment framed by the AO vide his order passed under Section 147 r.w. Section 144 r.w. Section 144B of the Act dated 27.03.2022, being founded on an invalid notice, could not be sustained and was liable to be quashed.

Elaborating on another facet of his challenge to the assumption of jurisdiction by the AO, the Ld. AR submitted that once it stood irrefutably established that the notice under Section 148 of the Act had been issued only on 05.04.2021, the AO was mandatorily required to follow the procedure prescribed under the substituted provisions of Sections 147 to 151 of the Act, including the procedure contemplated under Section 148A of the Act, which had come into force with effect from 01.04.2021. It was submitted that as the impugned notice had been issued without adhering to the mandatory procedure prescribed under the substituted statutory provisions, the consequential assessment was liable to be quashed on this count as well. 7

Alternatively, the Ld. AR submitted that even otherwise, once it was accepted that the notice under Section 148 of the Act had been issued on 05.04.2021, i.e., beyond a period of three years from the end of the relevant assessment year, the approval contemplated under Section 151(ii) of the Act was required to be obtained from the Principal Chief Commissioner of Income-tax or the competent authority specified therein. However, in the present case, the approval had admittedly been accorded by the PCIT, Hyderabad-4, who was not the authority competent to grant such approval under the amended statutory provisions. It was, therefore, submitted that the very assumption of jurisdiction by the AO suffered from a fundamental jurisdictional defect on this count also.

Per contra, the Ld. Senior Departmental Representative (for short, “DR”), on being confronted with the aforesaid serious jurisdictional infirmities pointed out by the Ld. AR, could not effectively rebut the same and merely relied upon the orders of the authorities below.

We have given thoughtful consideration to the multi-facet contentions advanced by the Ld. AR based on which the validity of the jurisdiction assumed by the AO for issuing notice under Section 148 of the Act, as well as the consequential assessment framed by him, has been assailed before us.

Admittedly, it is a matter of fact borne from the record that the notice issued under Section 148 of the Act bears the printed date of 31.03.2021. However, a bare perusal of the said notice reveals that the digital signature (DSC) appended thereon by the ITO, Ward-13(1), Hyderabad, reflects that it was digitally signed on Monday at 4:37 PM in the month of April, 2021. Although the exact date in the digital signature is not clearly legible, the material placed before us unmistakably demonstrates that the notice was digitally signed and, consequently, issued only in the month of April, 2021. In fact, the said factual position is irrefutably fortified by the screenshots downloaded from the assessee’s Income- tax e-filing portal, which reveal that the impugned notice under Section 148 of the Act was issued on 05.04.2021. In our view, the said factual finding assumes crucial significance, as it goes to the very root of the validity of the assumption of jurisdiction by the AO

We, thus, on the basis of the aforesaid facts, proceed on the premise that the notice under Section 148 of the Act dated 31.03.2021 was, in fact, issued by the AO only on 05.04.2021.

Coming to the validity of the jurisdiction assumed by the AO on the basis of the notice under Section 148 of the Act dated 31.03.2021, which was issued on 05.04.2021, we find substantial force in the Ld. AR’s contention that as per the unamended provisions of Section 149(1)(b) of the Act, applicable to A.Y. 2013- 14, a notice under Section 148 of the Act, which in the normal course under the pre-amended law could have been issued within a period of six years from the end of the relevant assessment year, i.e., latest upto 31.03.2020, even after taking into consideration the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the notifications issued by the CBDT pursuant thereto, could have been issued within the extended period that expired on 31.03.2021. We, therefore, concur with the Ld. AR’s contention that as the notice under Section 148 of the Act, though dated 31.03.2021, was in fact issued beyond the period prescribed under law on 05/04/2021, the same was clearly barred by limitation.

Apart from the aforesaid, we find considerable merit in the Ld. AR’s contention that once it stands established that the notice under Section 148 of the Act was issued only on 05.04.2021, the reassessment proceedings were necessarily required to be initiated in accordance with the substituted provisions of Sections 147 to 151 of the Act, which had come into force with effect from 01.04.2021. In other words, the AO was mandatorily required to follow the procedure contemplated under Section 148A of the Act before issuing a notice under Section 148 of the Act. Admittedly, no such procedure was followed in the present case. We are, therefore, of the considered view that on this count also, the impugned assessment framed by the AO vide his order passed under Section 147 r.w. Section 144 r.w. Section 144B of the Act dated 27.03.2022 cannot be sustained.

We, thus, in the backdrop of our aforesaid deliberations, are unable to persuade ourselves to subscribe to the view taken by the authorities below. Accordingly, the impugned assessment framed by the AO vide his order passed under Section 147 r.w. Section 144 r.w. Section 144B of the Act dated 27.03.2022 is vitiated on account of an invalid assumption of jurisdiction on multiple grounds, as discussed by us hereinabove. Resultantly, the assessment framed by the AO under Section 147 r.w. Section 144 r.w. Section 144B of the Act dated 27.03.2022 is quashed for want of a valid assumption of jurisdiction.

Before parting, we may herein observe that as we have quashed the assessment for want of a valid assumption of jurisdiction, therefore, we refrain from adverting to and adjudicating the remaining grounds whereby the assessee has assailed the additions made by the AO on other legal issues as well as merits, which, thus, are left open.

In the result, the appeal filed by the assessee is allowed in terms of our aforesaid observations.