BALGOPAL HOLDINGS AND TRADERS LIMITED ,MUMBAI vs. DCIT, 6(1)(2), MUMBAI

The grounds of appeal are as under:

Briefly stated facts of the case are that the assessee filed return declaring income of Rs 1,90,71,240/-. Subsequently, based on certain inputs from the Investigation wing of the Department, notice u/s 148 of the Act was issued. The report pertained to Client Code Modification alleging wrong doing on the site of NSEL in connivance with brokers who indulged in unique client code modification contrary

Aggrieved, the assessee filed contesting the action of the AO both on legal grounds of validity of reopening as also on merits. The ld.CIT(A) dismissed all the ground upholding the addition made.

Before us, the assessee has filed several grounds of appeal challenging the validity of notice u/s 148 of the Act and the consequent assessment order. At the outset, the ld.AR has raised a preliminary ground claiming that in this case, notice u/s 148 of the Act was barred by time limitation as the same dated 31.03.2021, was issued to the assessee on01.04.2021.We take up the issue first. In this regard, our attention has been drawn to the copy of e-proceeding filed before us which showed

1 It is submitted that in similar situation in a plethora of decisions by various courts of law, it has been held that the notice being time barred, relevant assessment order would be ab initio void. Reliance has been placed on Kanubhai M.Patel (HUF) (2011) 12 taxmann.com 198(Guj), Daujee Abhushan Bhandar P.Ltd (2022) 136 taxmann.com246(All), Sumanjeet Agrawal(2022) 143 taxmann.com 11(Del)and Kalyan Chillara v. Dy. CIT (2024)465 ITR 729

2 Without prejudice, it was submitted that despite specific request reasons for reopening not supplied despite three reminders. Reliance was placed on the decision in the case of Paresh Babhbhai Bahalani(2023) 156 taxmann.com 517(Guj) wherein the impugned notice u/s 148 was held to be invalid as the AO did not disclose the nature of transactions to the assessee.

Per contra, the ld.DR has vehemently opposed the contentions of the ld.AR claiming that the notice itself mentioned 31.03.2021 and the delay could be due to heavy traffic on the system on the last day of the P a g e | 6 A.Y. 2013-14 Balgopal Holdings and Traders Limited financial year. The AO could do nothing in such a situation, once notice left his control. No fault could be attributed to the AO. On merits, he relied on the orders of the authorities below.

We have carefully considered all the relevant facts of the case, have perused the case laws relied upon by the assessee qua the facts on record in respect of the impugned notice u/s 148 of the Act. It is quite evident from the perusal of the above stated documents that the notice u/s 148 of the Act is although dated 31.03.2021 but has been issued after the end of the relevant assessment year and appears to be barred by time limitation. The limitation for issuing reassessment notice under Section 148 of the Act for the Assessment Year 2013-14 would have expired on 31.3.2020 but the limitation was extended by the Taxation and other laws amendment Act 2020 whereby the limitation stood extended upto 31.3.2021. 6.1 In the case of Daujee Abhushan Bhandar P. Ltd (2022) 136 taxmann.com 246(All), similar question came up for consideration before the hon’ble High Court which held that the said notice u/s 148 of the Act was time bared and accordingly,the assessment order based on such invalid notice was quashed. Relevant parts of the order are reproduced as below:

Subsequently, the Assessing Authority attempted to initiate proceedings under Section 148 of the Act, 1961. For this purpose, a notice under Section 148 of the Act, 1961 for the Assessment Year 2013-14 was l and e-mail was undisputedly received by the petitioner on his registered e-mail I.D. on 06.04.2021. The limitation for issuing notice under Section 148 read with Section 149 of the Act, 1961 was upto 31.03.2021 for the Assessment Year 2013-14. 4. Under the circumstances, the petitioner filed objections before the Assessing Authority. One of the objections raised by the petitioner was that the notice is time barred and thus without jurisdiction as it was issued on 06.04.2021 whereas the limitation for issuing notice under Section 148 read with Section 149 of the Act 1961 expired on 31.03.2021. The objection filed by the petitioner was rejected by the Assessing Authority holding that since the notice was digitally signed on 31.03.2021, therefore, it shall be deemed to have been issued within time i.e. on 31.03.2021. XXXXXXXXXXXXXXX

Learned counsel for the petitioner submits that digitally signing a notice is an act different from the act of issuing the notice. Section 149 provides limitation for issuance of the notice under section 148. When the notice has been issued to the petitioner by the Assessing Authority beyond the period of limitation i.e. after. 31.03.2021, therefore, the notice is time barred and no proceeding can be carried by the Assessing Authority pursuant to the impugned notice under Section 148 of the Act, 1961. 9. In support of the submissions, learned counsel for the petitioner has referred the provisions of Sections 148, 149, 282(1)(c) and 282 A of the Act, 1961 and Rule 127 A of the Income Tax Rules 1962 (hereinafter referred to as "the Rules 1962") and some definition clauses, Sections 3 and 13 of the Information Technology Act, 2000 (hereinafter referred to as "the Act, 2000".

Learned counsel for the petitioner also relied upon a judgment of Gujrat High Court in Kanubhai M. Patel (HUF) v. Hiren Bhatt or His Successors to Office (2011) 12 taxmann.com 198 (Guj.) ( paras 15, 15.1 & 16) and the judgment of this court dated 28.08.2017 in Writ Tax No. 822 of 2016 (Smt. Kusum Agarwal Vs. Asst. Commissioner Of Income Tax, Agra And Another).

Sri Gaurav Mahajan, learned counsel for the Income Tax Department submits that issue of notice means, the date on which the notice is , 1961 has been signed by the Assessing Authority on 31.03.2021 i.e. well within the period of limitation, therefore, the impugned notice is wholly valid and the writ petition is not maintainable.

In support of his submissions Sri Gaurav Mahajan, has relied upon a judgment of Hon'ble Supreme Court in the case of R.K. Upadhyaya v. Shanabhai P. Patel (1987) 166 ITR 163. 13. Both the learned counsels for the parties have jointly stated that the limitation for issuing reassessment notice under Section 148 of the Act 1961 for the Assessment Year 2013-14 would have expired on 31.3.2020 but the limitation was extended by the Taxation and other laws amendment Act 2020 whereby the limitation stood extended upto 31.3.2021. Thus, learned counsels for both the parties are agreed that the limitation for issuance of notice under Section 148 of the Act, 1961 for the Assessment Year 2013 -14 was available to the Assessing Authority upto 31.03.2021. 14. ………………..

Sub Section (1) of Section 149 starts with a prohibitory words that "no notice under Section 148 shall be issued for the relevant Assessment Year after expiry of the period as provided in sub Clauses (a) (b) and (c)". There is no dispute that the notice must be issued by the Assessing Authority within the period of limitation as provided in Section 149 of the Act, 1961. Section 282 of the Act, 1961 provides for mode of service of notices. Section 282 A provides for authentication of notices and other documents by signing it. Sub- Section 1 of Section 282 A uses the word " "Signed" and "issued in paper form" " or "communicated in electronic form by that authority in accordance with such procedure as may be prescribed". Thus, signing of notice and issuance or communication thereof have been recognised as different acts.

Rule 127 A(1) of the Rules 1962 provides that every notice or other document communicated in electronic form by an authority under the Act shall be deemed to be authenticated in case of electronic mail or electronic mail message (e-mail) if the name and office of such income tax authority is printed on the e-mail body, if the notice or other document is in the e-mail body itself, or is printed on the attachment to the e-mail, if the notice or other document is in the attachment and the e-mail, is issued from the designated e- mail address of such income tax authority. Thus, the issuance of notice and other document would take place when the e-mail is issued from the designated e-mail address of the concerned income tax authority.

Since Section 149 of the Act 1961 requires notice to be issued by Income Tax Authority, therefore, in terms of sub Section (1) of Section 282 A it has to P a g e | 9 A.Y. 2013-14 Balgopal Holdings and Traders Limited be signed by that authority and to be issued in paper form or communicated in electronic form by that authority in accordance with procedure prescribed.

The communication in electronic form has been prescribed in Rule 127 A of the Rules 1962 which provides a procedure for issuance of every notice or other document and the e-mail in electronic form/electronic mail which has to be issued from the designated e-mail address of such income tax authority.

Thus, after digitally signing the notice the income tax authority has to issue it to the assessee either in paper form or through electronic mail. Sub- Section (1) of Section 13 of the Act 2000 provides that dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator. The aforesaid sub Section (1) of Section 13 indicates the point of time of issuance of notice. Therefore, after a notice is digitally signed and when it is entered by the income tax authority in computer resource outside his control i.e. the control of the originator then that point of time would be the time of issuance of notice.

The words "issue" or "issuance of notice" have not been defined under the Act 1961. However, the point of time of issuance of notice may be gathered from the provisions of the Act, 1961, the Rules, 1962 and the Act, 2000, as discussed above. Similar would be the position if the meaning of the word "issue" may be gathered in common parlance or as per dictionary meaning. ……………………………. Considering the definition of the word issue, it is apparent that merely signing the notices on 31.03.2010, cannot be equated with issuance of notice as contemplated under section 149 of the Act. The date of issue would be the date on which the same were handed over for service to the proper officer, which in the facts of the present case would be the date on which the said notices were actually handed over to the post office for the purpose of booking for the purpose of effecting service on the petitioners. Till the point of time the envelopes are properly stamped with adequate value of postal stamps, it cannot be stated that the process of issue is complete. In the facts of the present case, the impugned notices having been sent for booking to the Speed Post Centre only on 07.04.2010, the date of issue of the said notices would be 07.04.2010 and not 31.03.2010, as contended on behalf of the revenue. In the circumstances, impugned the notices under section 148 in relation to assessment year 2003-04, having been issued on 07.04.2010 which is clearly beyond the period of six years from the end of the relevant assessment year, are clearly barred by limitation and as such, cannot be sustained."

In writ Tax No.822 of 2016 Smt. Kusum Agarwal Vs. Asst. Commissioner Of Income Tax, Agra And Another, decided on 28.08.2017 the Division Bench of this Court has held/observed as under: "Sri R.R. Agarwal has cited Kanubhai M. Patel (HUF) v. Hiren Bhatt or His Successors to Office (2011) 12 taxmann.com 198 (Guj.). In this case also, the P a g e | 10 A.Y. 2013-14 Balgopal Holdings and Traders Limited dispute was with regard to the issuance of notice u/s 148 of the Act and the limitation provided u/s 149 of the Act. The Division Bench of the Court held that merely signing of notice on a particular date cannot be equated with the date of issuance of the notice as contemplated u/s 149 of the Act. The notice therein was signed on the last date of limitation, i.e. 31.03.2010 and was actually handed over to the post office for the purposes of effecting service upon the assessee on 07.04.2010. The same is the situation in the case we are dealing with inasmuch as the notice was signed on 31.03.2016 and was handed over the postal authorities for effecting service upon the petitioner on 01.04.2016 as per the track report of the India Post. There is no evidence otherwise on record to establish that the notice was handed over to the post office for effecting service upon the petitioner on 31.03.2016. In view of the aforesaid facts and circumstances of the case, we hold that the notice u/s 148 of the Act was issued to the petitioner beyond the last date of limitation prescribed and as such, is barred by time."

In the case of Delhi Khurana (paras 14 & 15) (1993) 3 SCC Hon'ble Supreme Court has explained the meaning of the word "issue" and held/observed as under :- "14. 'Issue' of the chargesheet in the context of a decision taken to initiate the disciplinary proceedings must mean, as it does, the framing of the chargesheet and taking of the necessary action to despatch the chargesheet to the employee to inform him of the charges framed against him requiring his explanation; and not also the further fact of service of the chargesheet on the employee. It is so, because knowledge to the employee of the charges framed against him, on the basis of the decision taken to initiate disciplinary proceedings, does not form a part of the decision making process of the authorities to initiate the disciplinary proceedings, even if framing the charges forms a part of that process in certain situations. The conclusions of the Tribunal quoted at the end of para 16 of the decision in Jankiraman which have been accepted thereafter in para 17 in the manner indicated above, do use the word 'served' in conclusion No.(4), but the fact of 'issue' of the chargesheet to the employee is emphasised in para 17 of the decision.

The meaning of the word 'issued', on which considerable stress was laid by learned counsel for the respondent, has to be gathered from the context in which it is used. Meanings of the word ''issue' given in the Shorter Oxford English Dictionary include 'to give exit to; to send forth, or allow to pass out; to let out; .... to give or send out authoritatively or officially; to send forth or deal out formally or publicly-, to emit, put into circulation'. The issue of a charge-sheet, therefore, means its despatch to the government servant, and this act is complete the moment steps are taken for the purpose, by framing the charge-sheet and despatching it to the government servant, the further

In the case of State of Andhra Pradesh and others Vs. CH. Gandhi (2013) 5SCC 111(para 19) Hon'ble Supreme Court explained the meaning of word "issue" in the context of a service matter and reiterated its earlier judgment in the case of H.C. Khurana (supra) observing as under :- "

Be it noted, in the said case, the decision rendered in Union of India and others v. K.V. Jankiraman and others [(1991) 4 SCC 109] was explained by stating thus: - "13. ... 'The word ''issued' used in this context in Jankiraman it is urged by learned counsel for the respondent, means service on the employee. We are unable to read Jankiraman in this manner. The context in which the word ''issued' has been used, merely means that the decision to initiate disciplinary proceedings is taken and translated into action by despatch of the charge- sheet leaving no doubt that the decision had been taken. The contrary view would defeat the object by enabling the government servant, if so inclined, to evade service and thereby frustrate the decision and get promotion in spite of that decision.'"

Thus, considering the provisions of Section 282 and 282 A of the Act, 1961 and the provisions of Section 13 of the Act, 2000 and meaning of the word "issue" we find that firstly notice shall be signed by the assessing authority and then it has to be issued either in paper form or be communicated in electronic form by delivering or transmitting the copy thereof to the person therein named by modes provided in section 282 which includes transmitting in the form of electronic record. Section 13(1) of the Act, 2000 provides that unless otherwise agreed, the dispatch of an electronic record occurs when it enters into computer resources outside the control of the originator. Thus, the point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator i.e. the assessing authority that shall the date and time of issuance of notice under section 148 read with Section 149 of the Act, 1961. 30. In view of the discussion made above, we hold that mere digitally signing the notice is not the issuance of notice. Since the impugned notice under Section 148 of the Act, 1961 was issued to the petitioner on 06.04.2021 through e-mail, therefore, we hold that the impugned notice under section 148 of the Act, 1961 is time barred. Consequently, the impugned notice is quashed.

The writ petition is allowed.”

2 In the case of Sumanjeet Agrawal(2022) 143 taxmann.com 11(Del), identical issue came up before the Hon’ble Court for adjudication. Here also the notices u/s 148 of the Act were generated and sent for dispatch through electronic mail by the jurisdictional Assessing Officer using the income tax business application software. The facts on record showed that though the notices were generated by the jurisdictional Assessing Officer using the income tax business application software on March 31, 2021, the same were dispatched through the income tax business application’s e-mail system, using the income tax business application servers on or after April 1, 2021 and/or dispatched by the jurisdictional Assessing Officer through normal post on or after April 1, 2021. The matter was decided in favour of the assessee holding the notice as bared by time limitation.

3 In the case of Kalyan Chillara v. Dy. CIT (2024)465 ITR 729 (Telangana)(HC), on identical issue,it was observed that the last date for service of notice and initiating proceedings under section 148 of the Act was coming to an end on March 31, 2021 and in the majority of the cases, the notice was dated March 31, 2021 but had been issued from the office of the Department either on April 1, 2021 or on subsequent dates, on writ petitions contending that the notices were barred by P a g e | 13 A.Y. 2013-14 Balgopal Holdings and Traders Limited limitation, allowing the petitions, that all the notices under section 148 had been issued (not served) on April 1, 2021 or on a later date. The question of service of these notices and the date of service of notices upon the assessees was of no relevance or consequence since the notices had been dispatched from the Department on or after April 1, 2021 which itself was beyond the period of limitation. It was held that all the notices issued under section 148, dated March 31, 2021, were barred by limitation under sections 148 and 149, since these notices had left the Income-tax Business Application portal on or after April 1, 2021 and therefore, were unsustainable.

4 Since the facts in the instant case are exactly identical which has not been controverted by the ld.DR as well, respectfully following the decisions of the Hon’ble High Courts(supra),we hold that in this case, the notice u/s 148 of the Act was barred by time limitation and was void ab initio. Consequently, the assessment order passed in consequence to such invalid notice could not be considered valid and is liable to be quashed. We order accordingly quashing the notice u/s 148 of the Act as well as the consequent assessment order, thus allowing this legal ground in favour of the assessee.

As we have already quashed the impugned notice u/s 148 of the Act as also the assessment order, we find no reasons to adjudicate the other grounds of appeal which are, therefore, left open.

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