HIRUS TRADE PVT. LTD.,KOLKATA vs. I.T.O., WARD - 9(1), KOLKATA

The facts as noted are that, the assessee is a company which had filed its return of income u/s 139(1) of the Act for AY 2018-19 on 11.10.2018 declaring total income of Rs.4,96,990/-. The assessee was in receipt of notice u/s 148A(b) of the Act dated 19.03.2022 issued by the ld. AO with the prior approval of PCIT-1, Kolkata requiring the assessee to furnish reply on or before 06.04.2022. The ld. AO passed the order u/s 148A(d) of the Act on 11.04.2022 and issued notice u/s 148 of the Act dated 11.04.2022, both with the approval of PCIT-1, Kolkata. Subsequently, statutory notices u/s 143(2) and 142(1) were issued to the assessee and in compliance to such notices, the assessee made time to time compliances and submitted details and explanations as called for. The ld. AO completed the assessment u/s 147/143(3) of the Act vide order dated 05.05.2023at total income of Rs.1,38,13,417/-.

Aggrieved by the said order, the assessee preferred an appeal before the ld. CIT(A) who dismissed the appeal of the assessee both on legal issues and merits.

Being aggrieved, the assessee has preferred the present appeal before us.

We first take up Ground No. 1 of the appeal in which the assessee has challenged the validity of the order passed u/s148A(d) and notice u/s 148 of the Act on several fronts. The ld. AR pointed out that, notice u/s 148 of the Act dated 11.04.2022 has been issued by the ld. AO beyond a period of three years from the end of the relevant assessment year, viz., beyond 31.03.2022, and, therefore, as per the mandate of Section 151 of the Act, as was made available on the statute vide the Finance Act, 2021 w.e.f. 01.04.2021, the said notice could have been issued only after obtaining the prior approval of CCIT or PCCIT u/s 151(ii) of the Act. The ld. AR submitted that as the impugned notice under Section 148 of the Act dated 11.04.2022 was issued without obtaining the approval of the prescribed authority, the said notice and the impugned

The ld. DR appearing for the Revenue submitted that, the ld. AO had sought to issue notice in terms of the Section 149(1)(a) of the Act and therefore, the sanction obtained from PCIT u/s 151 of the Act was saved by the fifth proviso to Section 149(1) read with proviso to Section 151 of the Act, for reckoning the period of three years from the end of the relevant assessment year as envisaged in Section 149(1)(a) of the Act. He thus contended that, the reopening of the assessment was done in accordance with law.

The ld. AR in his rejoinder argued that there was nothing contained in the notice or the order u/s 148A(d) or 148 of the Act which suggested that the AO had sought to issue notice u/s 149(1)(a) of the Act. He pointed out that, the information value exceeded Rs.50 lacs and in absence of anything contrary discernible from the records, the notice having been issued beyond three years was to be examined in light of Section 149(1)(b) r.w. 151(ii) of the Act. The Ld. AR alternatively contended that if the Revenue sought shelter of Section 149(1)(a) of the Act, the notice u/s 148 of the Act dated 11.04.2022 was barred by limitation and that the fifth and sixth proviso cannot come to the rescue of the Revenue as they cannot override the restriction placed in first

After hearing the rival contentions and perusing the materials available on record, we find that the assessee has challenged the validity of the notice issued u/s 148 of the Act dated 11.04.2022. In this case, as it pertains to Assessment Year 2018-19, three years period in terms of Section 149(1)(a) would have expired on 31.03.2022 and the six-year period expired on 31.03.2025. Having perused the show cause notice u/s 148A(b) of the Act dated 19.03.2022, it is noted that, the information value of the issue(s) raised in the notice was exceeding Rs.50 lacs. In the present case, that, the order u/s 148A(d) and the notice u/s 148 of the Act came to be issued on 11.04.2022 which is beyond the prescribed period of three years i.e. after the end of 31.03.2022. The approval before passing of the order has been obtained from the PCIT, which is permissible only where less than three years have elapsed from the end of the relevant assessment year. In the present case, the period of three years ended on 31.03.2022. Hence, the order u/s 148A(d) and notice u/s 148 of the Act was required to be issued after obtaining sanction from CCIT or PCCIT.

The ld. DR however argued that the ld. AO had initially issued notice u/s 148A(b) of the Act within the period of three years and therefore,he had rightly sought approval of PCIT for passing order u/s 148A(d) & issuing notice u/s 148 of the Act u/s 151(i) beyond three years, as it was saved in terms of proviso to Section 151 of the Act. We however are unable to agree with the ld. DR, as it is seen that, on exact same set of facts and circumstances, the Hon’ble Telangana High Court in the case of Deloittee Consulting India (P.) Ltd. v. Assessment Unit (supra) had quashed the reopening of assessment, by holding that the proviso inserted in Section 151 of the Act by the Finance

Also, we find that recently, the Hon’ble Supreme Court in its order passed in ACIT v. LinkedIn Singapore Pte. Ltd [2025] 180 taxmann.com 158 (SC) and ACIT Vs Prakash Pandurang Patil (supra) on similar facts, has dismissed the SLP against the orders of the Bombay High Court wherein the impugned order passed under section 148A(d) and impugned notice issued under section 148 were quashed, as the approval for initiation of reassessment proceedings after expiry of 3 years from the end of relevant assessment year, was granted by CIT instead of CCIT.

Also, the ld. AR has rightly pointed out that the notice u/s 148A(b), the order u/s 148A(d) and the notice u/s 148 of the Act was silent as to under which limb i.e. clause (a) or (b) of Section 149(1) was the same being issued. There is nothing on record to show that the AO had availed the benefit of fifth or sixth proviso to Section 149 or the proviso to Section 151 of the Act, particularly when the information value exceeded Rs.50 lacs and the case could have been reopened u/s 149(1)(b) of the Act.

Keeping in view the above decisions (supra), we thus conclude that as the order u/s. 148A(d) was passed beyond three years from the relevant AY2018-19and approval was obtained from PCIT instead of CCIT, consequently, the notice issued u/s 148 of the Act as well as the assessment framed vide order dated 20.03.2024, are invalid and, are hereby quashed.

In the result, the appeal of the assessee is allowed.