INTERWORLD DIGITAL CINEMA (P) LTD.,MUMBAI vs. ACIT, CIRCLE 16(1), MUMBAI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI CHALLA NAGENDRA PRASAD, VICE PRESIDENT & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 3944/Mum/2026 (Assessment Year: 2016-17) Interworld Digital ACIT Circle 16(1) Cinema (P) Ltd. Room No. 439, Aayakar Vs. 110, Linkway Estate, Bhawan, Churchgate, New Link Road, Malad Mumbai – 400 051 West, Mumbai-400064 PAN/GIR No. AACCD9797Q (Applicant) (Respondent) Assessee by Shri Sanjay Sehgal, Ld. AR Revenue by Shri B. Panda, Ld. DR Date of Hearing 02.07.2026 Date of Pronouncement 07.07.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: These three appeals by the assessee are directed against three separate orders, each dated 05.02.2026, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi[hereinafter referred to as "CIT(A)"], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for Assessment Years 2015-16, 2016-17 and 2017-18. Since the appeals arise from a common factual background, involve substantially common questions concerning the validity and limitation of the reassessment proceedings, and were heard together, they are being disposed of by this consolidated order.

Assessment Assessment Section under Assessed income CIT(A) order Year order which assessment order passed 27.05.2023 25.05.2023 Rs.11,36,56,863/- 27.05.2023 Rs.11,73,94,320/-

Particulars Returned income Rs.Nil/- Rs.87,51,785/- Rs.66,47,180/- Date of original notice 17.06.2021 under section 148 Date of communication treating the notice as 28.05.2022 31.05.2022 deemed notice under section 148A(b) Due date for reply 14.06.2022 under section 148A(b) Date of order under 25.07.2022 section 148A(d) Date of consequential notice under section 25.07.2022

Rs.6,56,05,078/- Rs.7,13,97,135/- plus Additions made plus Rs.3,93,00,000/- plus under section 69A Rs.3,93,00,000/- Rs.50,000/- Assessed income Rs.11,36,56,863/- Rs.11,73,94,320/-

taxmann.com 606 (Bom.). 19. The learned AR accordingly submitted that the consequential notices issued under section 148 were barred by limitation. Since the notices were jurisdictional foundations of the reassessments, the reassessment orders and all consequential proceedings deserved to be quashed. 20. The learned Departmental Representative relied upon the orders of the authorities below. 21. We have carefully considered the rival submissions and perused the orders of the Assessing Officer, the impugned appellate orders, the notices and communications placed on record, and the judgment of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal. 22. The material dates are not in dispute. The original notices were issued on 30.06.2021 for Assessment Years 2015-16 and 2016-17 and on 17.06.2021 for Assessment Year 2017-18. Pursuant to Ashish Agarwal, the information and material were supplied on 28.05.2022 for Assessment Years 2015-16 and 2016- 17 and on 31.05.2022 for Assessment Year 2017-18. The time allowed to respond expired on 11.06.2022 for the first two years and on 14.06.2022 for Assessment Year 2017-18. The consequential notices under section 148 were issued on 25.07.2022, 27.07.2022 and 27.07.2022, respectively.

“107. The third proviso to Section 149 allows the exclusion of time allowed for the assesses to respond to the show cause notice under Section 148A(b) to compute the period of limitation. The third proviso excludes “the time or extended time allowed to the assessee.” Resultantly, the entire time allowed to the assessee to respond to the show cause notice has to be excluded for computing the period of limitation. In Ashish Agarwal (supra), this Court provided two weeks to the assesses to reply to the show cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to Section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices. 108. The Income Tax Act read with TOLA extended the time-limit for issuing reassessment notices under Section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time-limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021. 109. If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under Section 148 of the new regime would have to be issued within the time-limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time-limit surviving under the Income Tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149. 111. The clock started ticking for the Revenue only after it received the response of the assesses to the show cause notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: i. consider the reply of the assessee under Section 148A(c); ii. take a decision under Section 148A(d) based on the available material and the reply of the assessee; and iii. issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time-limit. The surviving time-limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime.” 24. The Hon’ble Supreme Court thereafter held as under:

“113. In the instant appeals, the reassessment notices pertain to the assessment years 2013-14 to 2017-18. To assume jurisdiction to issue notices under Section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under Section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under Section 151. A notice issued without complying with the pre-conditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under Section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time-limit surviving under the Income Tax Act read with TOLA. A reassessment notice issued beyond the surviving time-limit will be time- barred. 114. In view of the above discussion, we conclude that: a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions; b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021; c. Section 3(1) of TOLA overrides Section 149 only to the extent of relaxing the time-limit for issuance of a reassessment notice under Section 148; d. TOLA will extend the time-limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time-limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time-limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time-limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside.” 25. The ratio emerging from the aforesaid judgment is that the limitation clock stopped on the date on which the original notice was issued between 01.04.2021 and 30.06.2021. The number of days remaining between the date of such notice and 30.06.2021 constituted the surviving period. The period from the date of the original or deemed notice until the supply of information and material was to be excluded. The period of two weeks allowed for filing the response was also to be excluded. Once the excluded period came to an end, the Assessing Officer was required to consider the reply, pass the order under section 148A(d), and issue the consequential notice under section 148 within the surviving period.

Date of Surviving Date of Due date Last Date of original or period up supply of for reply permissible consequential Assessment deemed to information date as per notice under Year notice as per surviving section 148 section period 148A(b) 25.07.2022 No effective Proceedings surviving do not period survive beyond beyond the 30.06.2021 permissible period 1 day 18.06.2022 17.06.2021 13 days 31.05.2022 14.06.2022 27.06.2022

(iii) at third stage under Section 148A(d); and (iv) at fourth stage under Section 148. In the case of Ashish Agarwal (supra) the Hon‟ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the „Specified Authority‟ according to Section 151 of the new regime before passing an order under Section 148A(d) or for issuing a notice under Section 148. 8.2 Under new regime, if income escaping assessment is more than Rupees 50 lakhs, a reassessment notice could be issued after the expiry of three years from the end of the relevant assessment year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 8.3 Section 151(ii) of the substituted provisions prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance with the provisions of section 151 vitiates the jurisdiction of the Assessing Officer to issue a notice under section 148. 8.4 Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice. 9. In the present case the period of three years from the end of the Assessment Year 2016-17 fell for completion on 31st March 2020. Since the expiry date fell during the time period of 20th March 2020 and 31st March 2021 contemplated under Section 3(1) of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short „TOLA‟), the authority specified under Section 151(i) of the new regime could have granted sanction till 30th June 2021. On perusal of the order, dated 13.07.2022, passed under Section 148A(d) of the Act, we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed after the expiry of three years from the end of the Assessment Year 2016-17, as per the substituted provisions of re- assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case the approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime. 10. The Hon‟ble Supreme Court in the above case has drawn an illustration in paragraph 78 of it‟s order in the context of Assessment Year 2017-18, wherein it is categorically held that the authority specified under section 151(i) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (here AY 2016-17) expired on 30.06.2021, whereas the Respondent No.1, despite passing the order on 13.07.2022 in repsect of Assessment Year 2016-17, has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(ii). 11. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of the Respondent No. 1 to issue a notice under Section 148 of the Act. 12. We are clearly of the view that the present matter stands covered by the decision of Hon‟ble Supreme Court in the case of UPI v. Rajeev Bansal (supra). We accordingly hold that the order dated 13.07.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 15.07.2022 are bad in law for being violative of the provisions of Section 151(ii) of the Act. Hence they are required to be quashed and set aside. 13. We, accordingly, set aside the impugned order dated 13.07.2022 passed under section 148A(d), the Notice issued under Section 148 and all other proceedings/orders emanating therefrom and allow the writ Petition in terms of Prayer Clause (a) of the petition.” 34. The ratio laid down by the Hon’ble jurisdictional High Court is unambiguous. The authority competent to accord approval is to be determined with reference to the time when the order under section 148A(d) is passed and the notice under section 148 is issued. Where more than three years have elapsed from the end of the relevant assessment year, approval is mandatorily required from the authority specified under section 151(ii). Approval from the Principal Commissioner, who is an authority specified under section 151(i), does not satisfy the statutory requirement. 35. For Assessment Year 2016-17, three years from the end of the relevant assessment year expired on 31.03.2020. TOLA extended the competence of the authority referred to in section 151(i) only up to 30.06.2021. The order under section 148A(d) and the consequential notice under section 148 were issued on 27.07.2022. By that date, the approval could validly have been granted only by the authority specified under section 151(ii). The approval obtained from the Principal Commissioner was, therefore, not an approval by the statutorily designated authority. 36. The facts of Assessment Year 2016-17 are materially indistinguishable from those considered by the Hon’ble jurisdictional High Court in Ramesh Bachulal Mehta. In fact, in the cited case, the order under section 148A(d) was passed on 13.07.2022 and the notice under section 148 was issued on 15.07.2022, whereas in the present case both actions were undertaken even later, on 27.07.2022. Respectfully following the binding judgment of the Hon’ble jurisdictional High Court, we hold that the order under section 148A(d) and the consequential notice under section 148 for Assessment Year 2016-17 are vitiated for non-compliance with section 151(ii). 37. The position for Assessment Year 2017-18 stands on an even clearer footing. Three years from the end of Assessment Year 2017-18 expired on 31.03.2021. In paragraph 78 of Rajeev Bansal, the Hon’ble Supreme Court itself gave an illustration concerning Assessment Year 2017-18 and held that the authority specified under section 151(i) could grant sanction only up to 30.06.2021. 38. Paragraph 78 of Rajeev Bansal, as reproduced by the Hon’ble Bombay High Court, reads as under: “78. For example, the three year time limit for assessment year 2017- 2018 falls for completion on 31st March 2021. It falls during the time period of 20th March 2020 and 31st March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30th June 2021.” 39. The order under section 148A(d) and the notice under section 148 for Assessment Year 2017-18 were issued on 27.07.2022, much after 30.06.2021. Consequently, sanction could have been granted only by the authority specified under section 151(ii). Approval from the Principal Commissioner was without statutory competence and could not confer jurisdiction upon the Assessing Officer. 40. Grant of sanction by the appropriate specified authority is not an empty procedural formality. As held in Rajeev Bansal and reiterated by the Hon’ble Bombay High Court in Ramesh Bachulal Mehta, it is a precondition for assumption of jurisdiction under section 148. Approval by an authority not designated by section 151(ii) goes to the root of the jurisdiction and is not a curable irregularity. 41. We, therefore, hold that the orders dated 27.07.2022 passed under section 148A(d) and the consequential notices of the same date issued under section 148 for Assessment Years 2016-17 and 2017-18 are bad in law for violation of section 151(ii). The same are accordingly quashed. 42. A valid notice under section 148 and compliance with the conditions prescribed under sections

and 151 are jurisdictional prerequisites for making a reassessment under section 147. Once the orders under section 148A(d) and the notices under section 148 are held invalid, the reassessment proceedings founded thereon cannot survive. 43. Consequently, the assessment order dated 27.05.2023 for Assessment Year 2015-16, the assessment order dated 25.05.2023 for Assessment Year 2016-17 and the assessment order dated 27.05.2023 for Assessment Year 2017-18, stated to have been passed under section 147 read with section 144B of the Act, are quashed. 44. The learned CIT(A), by the respective orders dated 05.02.2026 passed under section 250, set aside the assessments to the Assessing Officer for fresh adjudication by proceeding on the premise that they were best judgment assessments under section 144. The assessment orders, however, expressly state that they were passed under section 147 read with section 144B. More importantly, once the jurisdictional notices and the proceedings under sections 148A(d) and 148 are held to be invalid, there remains no valid assessment proceeding capable of being restored to the Assessing Officer. 45. The impugned orders of the learned CIT(A), insofar as they restore the invalid reassessment proceedings to the Assessing Officer, cannot therefore be sustained and are set aside. 46. In view of our decision on the foundational jurisdictional issues, the other grounds concerning the difference between the amounts mentioned in the notices under section 148A(b) and the orders under section 148A(d), the alleged violation of section 151A, the power of the learned CIT(A) under section 251, and the additions on merits have become academic. These issues are, therefore, left open and are not separately adjudicated. 47. In the result, all three appeals filed by the assessee are allowed. Order pronounced in the open court on 07.07.2026. (CHALLA NAGENDRA PRASAD) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 07/07/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //// 1. उि/सहायक िंजीकार ( Asst.