WATERFRONT CONSTRUCTIONS PVT LTD,PUNE vs. ACIT, C.C-1(3), PUNE, PUNE

The Ld. CIT(A) upheld the action of the Assessing Officer.

Aggrieved with such order of the Ld. CIT(A) the assessee is in appeal before the Tribunal by raising the following grounds:

After hearing both the sides and considering the fact that the additional grounds raised by the assessee are purely legal in nature and all material facts necessary for adjudication of the issue are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon’ble

The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the notice issued u/s 148 and submitted that the escaped income amounts to less than Rs.50 lakhs. Referring to the provisions of clause (b) of sub-section (1) of section 149 of the Act, he submitted that the notice u/s 148 of the Act can be issued, after the expiry of the period of 3 years from the end of the relevant assessment year, only if the income that has escaped assessment amounts to Rs.50,00,000/- or more. He submitted that in the present case, the period of 3 years from the end of the assessment year 2016-17 under consideration has expired

He accordingly submitted that since the notice issued u/s 148 is not in accordance with law, therefore, such assessment proceedings and the subsequent penalty proceedings consequent to such assessment proceedings are not valid in law. He submitted that although the assessee has not challenged the validity of such re-assessment proceedings during the quantum proceedings, however, in view of various decisions as mentioned above, the penalty levied by the Assessing Officer and upheld by the Ld. CIT(A) is liable to be quashed which is on the basis of assessment order which is not sustainable in law.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A). He submitted that the assessee has never raised such a ground before the lower authorities. Further, the assessee in response to the notice issued u/s 148 has declared additional income of Rs.28,50,000/- on account of cash paid to various persons based on the seized documents at page No.14 and 15 of loose paper bundle No.1 found during the course of search and seizure action in the business premises of the assessee. Therefore, the penalty levied by the Assessing Officer which is in accordance with law has been rightly sustained by the Ld. CIT(A). He accordingly submitted that the grounds raised by the assessee including the additional grounds should be dismissed.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that during the course of search action in the premises of the assessee certain loose papers and doucments were found according to which the assessee has made cash payment to various persons. The case of the assessee was accordingly reopened by recording reasons and notice u/s 148 of the IT Act, 1961 was issued. We find the assessee in response to the same filed the return of income declaring an additional income of Rs.28,50,000/- which constitutes the cash paid to various persons based on seized documents page Nos.14 and 15 of loose paper bundle No.1 found during the course of search and seizure action in the business premises of the assessee. It is also an admitted fact that such return of income was 8 accepted by the Assessing Officer in the order passed u/s 143(3) r.w.s. 147 of the Act. We find based on this additional income the Assessing Officer, invoking the provisions of Explanation 5A to section 271, levied penalty of Rs.9,42,295/- u/s 271(1)(c), the reasons of which have already been reproduced in the preceding paragraphs. We find the Ld. CIT(A) upheld the action of the Assessing Officer levying the penalty u/s 271(1)(c) of the Act. It is the submission of the Ld. Counsel for the assessee that as per clause (b) of sub-section (1) of section 149 of the Act, no notice u/s 148 of the Act can be issued after the expiry of a period of 3 years from the end of the relevant assessment year unless such escaped assessment amounts to Rs.50,00,000/- or more. It is also his submission that since in the instant case the period of 3 years from the end of the relevant assessment year 2016-17 has expired on 31.03.2020 and the notice u/s 148 has been issued on 09.03.2023 in respect of the escaped income of Rs.28,50,000/- which is below the specified escaped amount of Rs.50,00,000/- or more for the relevant assessment year, therefore, such re-assessment proceedings are not in accordance with law and therefore, the penalty levied by the Assessing Officer on the basis of such re- assessment order is not sustainable.

We find some force in the above arguments of the Ld. Counsel for the assessee. It is an admitted fact that the case of the assessee was reopened on account of escaped income of Rs.28,50,000/-. The assessment year involved in the instant case is assessment year 2016-17. We find the notice u/s 148 dated

(1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); [(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if 28[a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: [Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,— (a) a search is initiated under section 132; or (b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 10 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,— (a) a search under section 132 which is initiated; or (b) a search under section 132 for which the last of authorisations is executed; or (c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:] Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A 30[does not exceed seven days], such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.—For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. [(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.”

As per clause (b) of sub-section (1) of section 149 of the Act, no notice u/s 148 of the Act shall be issued for the relevant assessment year if three years, but not more than ten years, have elapsed from the end of the relevant assessment year and the escaped assessment amounts to or is likely to amount to fifty lakh rupees or more. Since admittedly in the instant case more than 3 years have elapsed from the 11 relevant assessment year but the escaped income is less than Rs.50 lakhs, therefore, such issue of notice u/s 148 is invalid being not in accordance with law and therefore, the assessment order is liable to be quashed. Since the assessee in the instant case has not challenged the validity of the assessment, however, has challenged the same during the penalty proceedings and since it has been held in various decision that the assessee can always make a new plea before the appellate authorities during penalty proceedings, therefore, such reopening of the assessment being not in accordance with law, the penalty levied by the Assessing Officer u/s 271(1)(c) which has been confirmed by the Ld. CIT(A) is liable to be quashed. We hold and direct accordingly. The penalty levied by the Assessing Officer u/s 271(1)(c) and upheld by the Ld. CIT(A) is directed to be deleted.

In the result, the appeal filed by assessee is allowed.

The concerned Pr.CIT, Pune

DR, ITAT, ‘B’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, ////