DCIT CENTRAL CIRCLE- 7(1), MUMBAI, MUMBAI vs. PADMAVATI INVESTMENT, GUJRAT

In the instant case, the Assessing officer {AO}, vide assessment order dated 27.09.2023 passed u/s 143(3) r.w.s. 147 of the Act, made additions aggregating to Rs.2,35,58,714/- (Rs.2,27,87,877/- on account of bogus loan and Rs.2,77,397/- on account of disallowance of interest expenses u/s 69C of the Act).

Thus, the Assessee, being aggrieved, challenged the said additions by filing the first appeal before the Ld. Commissioner on merits as well as on legal aspects.

Though the Ld. Commissioner deleted the additions by deciding the appeal on merits, he did not adjudicate the legal issues raised by the Assessee. Thus, the Revenue, being aggrieved by the decision on merits, and the Assessee, being aggrieved by the non-adjudication of the legal issues, preferred their respective appeal and Cross Objection (CO).

Since the Assessee, by way of the CO, has raised the legal issues involved in the matter, for the sake of brevity, we deem it appropriate to decide the CO filed by the Assessee first.

Coming to the Cross Objection, the Assessee has, more or less, challenged the reopening proceedings initiated u/s 147 of the Act and the notice dated 30.07.2022 issued u/s 148 of the Act, mainly on the ground that the sanction granted by the Ld. PCIT-3 on 26.07.2022 is not in consonance with the relevant unamended provisions of law, i.e., Section 151(ii) of the Act, as applicable to the facts of the present case.

The Revenue, refuted the claim of the Assessee, by supporting the reassessment proceedings by contending that the proceedings in the instant case had commenced earlier by issuance of notice dated 29.06.2021 u/s 148 of the Act after obtaining sanction from the Range Head-4(1), Ahmedabad. Further the proviso to Section 151, inserted with effect from 01.04.2023, has retrospective application and, therefore, the sanction granted by the Ld. PCIT for issuance of notice u/s 148 of the Act, would not vitiate the reopening proceedings.

Heard the parties and perused the material available on record. Admittedly, the case of the Assessee was reopened after 03 years from the end of the relevant assessment year, and it is the mandate of law, as enshrined in Section 151(ii) of the Act w.e.f. 01.04.2021, that where a case is reopened after 03 years from the end of the relevant assessment year, then prior sanction of the prescribed sanctioning authority under sub-clause (ii) of Section 151 of the Act is required to be obtained.

Admittedly, in the instant case, the final notice dated 30.07.2022 issued u/s 148 of the Act was issued pursuant to the sanction granted by the Ld. PCIT (supra) but not from the Ld. PCCIT or any other sanctioning/ competent Authority. Therefore, in view of the aforesaid statutory provision and the judgments of the Hon'ble Jurisdictional High Court in the cases of Vodafone Idea Limited vs. Deputy Commissioner of Income Tax & Others [(2024) 468 ITR 346 (Bom.)], Writ Petition No. 2768 of 2022, decided on 06.02.2024 and Mystique Media Private Limited vs. Income Tax Officer-10(2)(4), Mumbai & Others, Writ Petition No. 12562 of 2024, decided on 15.04.2024, wherein the Hon'ble High Court also dealt with a notice issued u/s 148 of the Act dated 07.04.2022 for A.Y. 2018- 19, being beyond three years from the end of the relevant assessment year, and ultimately held the sanction granted by the Ld. PCIT to be invalid by observing that the proviso to Section 151 had been inserted only with effect from 01.04.2023 and, therefore, was not applicable to the facts of the case before it. 3

Thus, in view of the aforesaid judgments and the relevant unamended statutory provisions, as applicable to the facts of the present case, the notice issued u/s 148 of the Act under consideration, along with the assessment order dated 27.09.2023 passed in pursuance thereto, is liable to be quashed. Accordingly, the same are hereby quashed.

Resultantly, the CO filed by the Assessee is allowed.

As we have quashed the notice issued u/s 148 of the Act along with the assessment order passed in pursuance thereto by allowing CO filed by the Assessee, thus, the appeal filed by the Revenue has become infructuous and, therefore, needs no adjudication.

In the result, the appeal filed by the Revenue is dismissed being infructuous and the Cross Objection filed by the Assessee is allowed.