LAXMAN BALKRISHNA PATIL,THANE vs. THE INCOME TAX OFFICER, WARD 28(1), VASHI NAVI MUMBAI

None appeared on behalf of the assessee despite notice. Having regard to the nature of the jurisdictional issue arising from the material available on record, we proceed to dispose of the appeal ex parte qua the assessee after hearing the learned Departmental Representative and perusing the orders of the authorities below.

The assessee has raised the following grounds of appeal:

NFAC CIT(A) erred in confirming in levying interest u/s 234B of Rs. 76,82,350/-.

NFAC CIT(A) erred in confirming in initiating penalty u/s 271F, 271(1)(b), 271(1)(c) on the additions.

NFAC CIT(A) has erred in confirming addition made by AO of treating the Bank Deposits as alleged cash deposits.

NFAC CIT(A) has erred in dismissing appeal as Ex-Party, even though, third party evidence has been submitted with appeal.

Your appellant craves leave to add, alter, amend, or modify all or any of the above Ground/s of appeal on or before the date of hearing as he may be advised from time to time.

The facts, in brief, are that the assessee is an individual. The Assessing Officer noticed through information available on the Insight Portal and SFT database that during the relevant previous year the assessee had allegedly made substantial bank deposits, received contractual receipts and purchased immovable property. Since no return of income had been filed for Assessment Year 2015-16, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment.

The assessment order records that a notice under section 148A(b) of the Act was issued on 23.03.2022 calling upon the assessee to explain the aforesaid transactions. Since no compliance was made, the Assessing Officer passed an order under section 148A(d) and thereafter issued notice under section 148 on 06.04.2022. Subsequently, assessment was completed under section 147 read with section 144 of the Act on 25.01.2024 determining total income at Rs. 2,09,02,340/-.

In appeal, the learned CIT(A) dismissed the appeal ex parte and confirmed the action of the Assessing Officer. Aggrieved, the assessee is in further appeal before us.

Ground Nos. 1 and 2 challenge the validity of reassessment proceedings and the jurisdiction assumed by the Assessing Officer under sections 147/148 of the Act. Since these grounds go to the root of the matter, they are taken up first.

The learned Departmental Representative supported the orders of the lower authorities. It was submitted that the notice under section 148A(b) had been issued on 23.03.2022 and, therefore, the reassessment proceedings had been validly initiated before expiry of the limitation period. It was contended that the proceedings could not be regarded as time barred merely because the notice under section 148 came to be issued subsequently on 06.04.2022 after completion of the procedure prescribed under section 148A.

We have considered the submissions of the learned Departmental Representative and perused the material available on record.

The chronology emerging from the assessment order is undisputed. Notice under section 148A(b) was issued on 23.03.2022. Thereafter, an order under section 148A(d) was passed and notice under section 148 was issued on 06.04.2022. 12. The controversy before us is whether issuance of notice under section 148A(b) within the period of limitation would save the reassessment proceedings when the jurisdictional notice under section 148 itself was issued after expiry of the limitation period prescribed under the Act.

The reassessment scheme substituted by the Finance Act, 2021 with effect from 01.04.2021 introduced section 148A as a pre-condition to issuance of notice under section 148. The notice issued under section 148A(b) is only a show cause notice granting an opportunity to the assessee before reopening the assessment. The actual assumption of jurisdiction takes place only upon issuance of notice under section 148 after completion of the procedure contemplated under section 148A.

The legal position regarding limitation under the substituted reassessment provisions now stands authoritatively settled by the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC). The Hon'ble Supreme Court, after considering the effect of the Finance Act, 2021, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and the decision in Union of India vs. Ashish Agarwal, held that the Assessing Officer is required to issue the reassessment notice under section 148 within the time limit surviving under the Income-tax Act read with TOLA and that notices issued beyond the surviving period are time barred.

At the outset, it would be relevant to note that while addressing the interplay between the substituted provisions of sections 147 to 151, TOLA and the decision in Ashish Agarwal (supra), the Hon'ble Supreme Court specifically recorded the submissions advanced on behalf of the Revenue. In paragraph 19(e), the Revenue itself furnished a tabulation indicating the assessment years to which TOLA would apply and the assessment years to which TOLA would not apply. The Hon'ble Supreme Court reproduced the following table:

Thereafter, while examining the scope and effect of section 3(1) of TOLA, the Hon'ble Supreme Court categorically held that TOLA extends limitation only in respect of actions which fell for completion during the period from 20.03.2020 to 31.03.2021 and that TOLA cannot be utilised to extend the statutory period of six years prescribed under the erstwhile section 149. The relevant observations contained in paragraph 72 are reproduced below:

The non obstante clause in section 3(1) has to be read as controlling the provisions of the specified Acts, including the provisions of the Income-tax Act. In the context of the issuance of a reassessment notice, the non obstante clause will override the provisions of the Income-tax Act in case of any direct conflict or inconsistency. Section 3(1) overrides section 149 only to the extent of relaxing the time limit for issuance of reassessment notice under section 148. The time limit for issuance of reassessment notices, which fall for completion between 20-3-2020 and 31-3-2021, has been extended till 30-6-2021. However, the non obstante clause under section 3(1) of TOLA will operate neither to extend the time limit of three years from the end of the relevant assessment year under section 149(1)(a) of the new regime nor to extend the time limit of six years from the end of the relevant assessment years under section 149(1)(b) of the old regime."

The Hon'ble Supreme Court thereafter summarized its conclusions in paragraph 114 and, inter alia, held as under:

Applying the aforesaid principles to the facts of the present case, we find that the assessment year involved before us is Assessment Year 2015-16. The assessment order itself records that notice under section 148A(b) was issued on 23.03.2022. Thereafter, the Assessing Officer passed an order under section 148A(d) and issued notice under section 148 on 06.04.2022. 20. The contention of the Revenue that issuance of notice under section 148A(b) on 23.03.2022 saves the reassessment proceedings cannot be accepted. A notice under section 148A(b) is merely a show-cause notice issued as part of the preliminary enquiry contemplated under section 148A. Such notice does not confer jurisdiction upon the Assessing Officer to reopen an assessment. Jurisdiction is assumed only upon issuance of notice under section 148 after completion of the procedure prescribed under section 148A.

Therefore, for the purpose of examining limitation, the relevant date is the date of issuance of notice under section 148 and not the date of issuance of notice under section 148A(b).

In the present case, the jurisdictional notice under section 148 was admittedly issued only on 06.04.2022. As noted hereinabove, the Hon'ble Supreme Court in Rajeev Bansal (supra), while specifically dealing with Assessment Year 2015-16, recorded that the six-year limitation expired on 31.03.2022 and that TOLA was not applicable to Assessment Year 2015-16. The Revenue itself conceded before the Hon'ble Supreme Court that notices pertaining to Assessment Year 2015-16 would not be entitled to the benefit of TOLA. Consequently, once the notice under section 148 came to be issued only on 06.04.2022, i.e., after expiry of the limitation period on 31.03.2022, the assumption of jurisdiction under section 147 read with section 148 becomes unsustainable in law.

Respectfully following the law laid down by the Hon'ble Mumbai, Dated 19/06/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant प्रत्यथी / The Respondent. 2. 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.