IMAGINE SPACES LLP,SHALIMAR MORYA PARK NEW LINK ROAD ANDHERI WEST vs. INCOME TAX OFFICER, WARD 24(2)(1), , PIRAMAL CHAMBER, LALBAUG, PAREL, MUMBAI,

In response to the notice under section 148, the assessee filed its return of income on 29.04.2021. Thereafter, notice under section 143(2) was issued and the reasons recorded for reopening were furnished to the assessee. The assessee raised objections to the reopening, which were disposed of by the Assessing Officer by a speaking order dated 22.03.2022. Notices under section 142(1) were also issued calling for details relating to the financial statements, nature of business, loans taken, confirmations, bank statements, cash flow and fund flow statements and other supporting evidence regarding the loan transactions. The assessee furnished ledger accounts, bank statements evidencing receipt of loans and payment of interest, acknowledgements of returns of income of the lender companies, TDS certificates in respect of interest paid and ROC master data showing that the lender companies were active. It was also stated that the loans were repaid in the immediately succeeding financial year along with interest.

The Assessing Officer, however, relied upon the investigation report, which contained an alleged fund trail involving various intermediary and shell entities and concluded that the lender companies lacked creditworthiness and that the transactions represented accommodation entries. The Assessing Officer further observed that the assessee had failed to satisfactorily explain the source of repayment of the loans. According to the Assessing Officer, the assessee had thus failed to discharge the onus cast upon it under section 68 of the Act to establish the identity and creditworthiness of the creditors and the genuineness of the transactions. The Assessing Officer accordingly treated the entire amount of Rs.8,87,00,000/- received from the three lender companies as unexplained cash credits under section 68 of the Act. Consequently, the total income of the assessee was assessed at Rs.9,02,00,570/- as against the returned income of Rs.15,00,574/-.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the assessment order, grounds of appeal, statement of facts, written submissions and material available on record, upheld the validity of the reassessment proceedings as well as the addition of Rs.8,87,00,000/- made under section 68 of the Act. The Ld. CIT(A) rejected the contention of the assessee that the reopening was based upon borrowed satisfaction and held that the Assessing Officer had before him specific and tangible information relating to the assessee and the alleged accommodation entries. The Ld. CIT(A) also rejected the contention regarding violation of principles of natural justice and, on merits, held that the assessee had failed to satisfactorily establish the creditworthiness and genuineness of the loan transactions and the source of repayment. The addition of Rs.8,87,00,000/- was accordingly confirmed. Aggrieved by the said order, the assessee is in appeal before us.

During the course of hearing before us, the Learned Authorized Representative (ld.AR) of the assessee, at the outset, confined his arguments to Ground No. 1 and submitted that the notice issued under section 148 of the Act was barred by limitation and, therefore, was without jurisdiction. In support of his contention, he drew our attention to pages 9 and 10 of the factual paper book containing the notice under section 148. It was submitted that the notice under section 148 for Assessment Year 2014-15 bears the date 31.03.2021 and was enclosed along with the email addressed to the email ID of the assessee, but the said electronic communication was delivered to the assessee only on 01.04.2021 at 3:53 a.m. The ld.AR further drew our attention to page 13 of the factual paper book, wherein the printout of the dashboard containing the details of the proceedings is placed. It was submitted that the ITBA portal itself clearly records that the notice under section 148 was issued on 01.04.2021. According to the ld.AR, therefore, merely because the notice document bears the date 31.03.2021, it cannot be treated as having been issued on that date when the electronic record maintained by the Department itself shows the date of issuance as 01.04.2021.

The ld.AR submitted that the notice under section 148 was consequently issued beyond the period prescribed under section 149 of the Act. He submitted that what is relevant, in the case of an electronic notice, is the point of time at which the notice actually leaves the control of the originator and enters a computer resource outside the control of the originator. In the present case, according to the ld.AR, the notice was delivered to the assessee at 3:53 a.m. on 01.04.2021 and, more importantly, the ITBA record itself records the date of issuance as 01.04.2021. He accordingly submitted that the notice issued under section 148 is barred by limitation and that the entire reassessment proceedings arising therefrom are liable to be quashed.

In support of his contention, the ld.AR relied upon four decisions of the Hon’ble High Courts, namely, Shah Nanji Nagsi Exports Pvt. Ltd. v. Deputy Commissioner of Income-tax [2025] 175 taxmann.com 1067 (Bombay), Suman Jeet Agarwal v. Income-tax Officer [2022] 143 taxmann.com 11 (Delhi), Daujee Abhushan Bhandar (P.) Ltd. v. Union of India [2022] 136 taxmann.com 246 (Allahabad), and Kanhubhai M. Patel (HUF) v. Hiren Bhatt (2011) 334 ITR 25 (Guj.). It was submitted that the decision of the Hon’ble Bombay High Court in Shah Nanji Nagsi Exports Pvt. Ltd. (supra) is particularly relevant and factually similar to the case of the assessee. The ld.AR submitted that in the said case the Hon’ble Bombay High Court considered a notice under section 148 sent to the assessee on 01.04.2021 and held that, since the notice had not been issued within the time frame prescribed under section 149(1) of the Act read with section 13(1) of the Information Technology Act, 2000, the notice was liable to be quashed.

The ld.AR further submitted that the Hon’ble Delhi High Court in Suman Jeet Agarwal v. Income-tax Officer (supra) held that where notices were sent through the registered email ID of the respective Assessing Officers, though not digitally signed, the same would constitute valid service and the date and time of dispatch as recorded in the ITBA portal would be taken as the date of issuance of the notice. It was submitted that this principle assumes significance in the present case because the ITBA portal, which records the proceedings, itself shows the date of issuance of the notice as 01.04.2021. The ld.AR also relied upon the decision of the Hon’ble Allahabad High Court in Daujee Abhushan Bhandar (P.) Ltd. v. Union of India (supra), wherein it was held that mere digital signing of a notice does not amount to issuance of the notice and that, in the case of an electronic record, the relevant point of time is when such digitally signed notice in the form of an electronic record enters a computer resource outside the control of the originator, namely, the Assessing Authority.

The Learned Departmental Representative (ld.DR), on the other hand, relied upon the orders of the authorities below and supported the validity of the notice issued under section 148 as well as the assessment order. It was submitted that the notice bears the date 31.03.2021 and that the reassessment proceedings had accordingly been initiated within the prescribed period. The ld.DR therefore submitted that the grounds raised by the assessee deserve to be dismissed.

We have heard the rival submissions and perused the material available on record. We have also carefully considered the factual paper book placed before us, particularly pages 9 and 10 containing the notice under section 148 and the accompanying electronic communication, as well as page 13 containing the printout of the ITBA dashboard recording the proceedings. The short issue which arises for our consideration is whether, on the facts of the present case, the notice under section 148 can be regarded as having been issued on 31.03.2021 merely because the notice bears that date, or whether the date of issuance has to be determined with reference to the electronic record maintained by the Department.

In this regard, we find considerable force in the contention of the ld.AR that the decision of the Hon’ble Bombay High Court in Shah Nanji Nagsi Exports Pvt. Ltd. v. Deputy Commissioner of Income-tax [2025] 175 taxmann.com 1067 (Bombay) is directly relevant to the issue before us. In the said case, the Hon’ble Bombay High Court considered the validity of a notice under section 148 in the context of the prescribed limitation and held that where the notice was sent to the assessee on 01.04.2021 and was not issued within the time frame prescribed under section 149(1) of the Act read with section 13(1) of the Information Technology Act, 2000, the notice was liable to be quashed. The factual similarity is apparent. In the present case also, though the notice under section 148 bears the date 31.03.2021, the material placed before us establishes that the electronic communication was delivered to the assessee at 3:53 a.m. on 01.04.2021 and, significantly, the ITBA portal records the date of issuance of the notice as 01.04.2021.

We also find the decision of the Hon’ble Delhi High Court in Suman Jeet Agarwal v. Income-tax Officer [2022] 143 taxmann.com 11 (Delhi) to be relevant. The said decision recognises the significance of the electronic record in determining the date and time of dispatch of a notice transmitted through the registered email ID of the concerned Assessing Officer. In the present case, the electronic record maintained in the ITBA portal specifically records the issuance of the notice under section 148 as having taken place on 01.04.2021. Thus, the departmental electronic record itself supports the contention of the assessee that the notice was issued on 01.04.2021.

The decision of the Hon’ble Allahabad High Court in Daujee Abhushan Bhandar (P.) Ltd. v. Union of India [2022] 136 taxmann.com 246 (Allahabad) is also germane to the issue. The Hon’ble High Court held that mere digital signing of a notice does not, by itself, amount to issuance of the notice and that, in the case of an electronic record, the relevant point of time is when the electronic record enters a computer resource outside the control of the originator. Applying the said principle to the facts before us, the ITBA dashboard placed at page 13 of the factual paper book records the date of issuance of the notice as 01.04.2021. The communication accompanying the notice, placed at pages 9 and 10, also shows delivery to the assessee at 3:53 a.m. on 01.04.2021. Thus, both the departmental record and the electronic communication support the case of the assessee.

As regards the decision of the Hon’ble Gujarat High Court in Kanhubhai M. Patel (HUF) v. Hiren Bhatt (2011) 334 ITR 25 (Guj.), we find that the said decision concerns the issue of issuance of a manually dispatched notice, wherein the relevant date was considered with reference to the date on which the notice was handed over for service to the proper officer of the post office. The factual situation before us is materially different, since the notice in the present case was transmitted electronically. We therefore find that the decision of the Hon’ble Gujarat High Court does not have the same factual relevance as the decision of the Hon’ble Bombay High Court in Shah Nanji Nagsi Exports Pvt. Ltd. (supra), which directly concerns the issuance of an electronic notice under section 148.

In the present case, the limitation prescribed for issuance of notice under section 148 expired on 31.03.2021. Though the notice bears the date 31.03.2021, the electronic communication was delivered to the assessee at 3:53 a.m. on 01.04.2021 and, more importantly, the ITBA dashboard recording the proceedings specifically shows the date of issuance of the notice as 01.04.2021. In our considered view, when the electronic record maintained by the Department itself records the issuance of the notice on 01.04.2021, the mere fact that the notice document bears the date 31.03.2021 cannot determine the actual date of issuance for the purpose of limitation. The ratio laid down by the Hon’ble Bombay High Court in Shah Nanji Nagsi Exports Pvt. Ltd. (supra) is therefore squarely applicable to the facts of the present case.

We accordingly hold that the notice under section 148 was issued on 01.04.2021 and not on 31.03.2021. Since the notice was issued beyond the period prescribed under section 149 of the Act, the same is barred by limitation. Consequently, the notice issued under section 148 is invalid and without jurisdiction, and the reassessment proceedings initiated in pursuance thereof cannot be sustained in law. Ground No. 1 raised by the assessee is accordingly allowed.

Since we have allowed Ground No. 1 holding the notice issued under section 148 is barred by limitation and without jurisdiction, the remaining grounds do not require adjudication. Ground No. 2, relating to the alleged violation of principles of natural justice, is therefore left open and is not adjudicated upon. Likewise, Ground No. 3, challenging the addition of Rs.8,87,00,000/- made under section 68 of the Act, is also left open and is not adjudicated upon. We make it clear that no opinion is being expressed on the merits of the said grounds.

In the result, the appeal filed by the assessee is allowed in terms of Ground No. 1. Ground Nos. 2 and 3 are left open and are not adjudicated upon.