SIEMENS FINANCIAL SERVICES PVT LTD vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 8(2)(1), MUMBAI AND 3 ORS

1/45 902-wp-4888-22.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 4888 OF 2022 Siemens Financial Services Pvt Ltd. ) Plot no.2, Sector No.2, Kharghar S. O. ) Kharghar, Raigarh, Navi Mumbai 410 201 ) ...Petitioner Vs. 1. Deputy Commissioner of Income Tax ) Circle-8(2)(1), Mumbai, Room No.624, ) 6th floor, Aayakar Bhavan, Maharshi Karve ) Road, Mumbai 400 020 ) 2. The Principal Chief Commissioner of ) Income Tax Mumbai, Room No.624, ) 6th floor, Aayakar Bhavan, Maharshi Karve ) Road, Mumbai 400 020 ) 3. The Principal Chief Commissioner of ) Income Tax Mumbai-8, Room No.611, ) 6th floor, Aayakar Bhavan, Maharshi Karve ) Road, Mumbai 400 020 ) 4. Union of India ) Through Joint Secretary & Legal Adviser, ) Branch Secretariat, Department of Legal ) Affairs, Ministry of Law and Justice, ) 2nd Floor, Aayakar Bhavan, M. K.Road, ) New Marine Lines, Mumbai 400 020 ) ..Respondents ---- Mr. P. J. Pardiwalla, Senior Advocate a/w Mr. Jeet Kamdar i/b Mr. Atul K Jasani for Petitioner. Mr. Suresh Kumar a/w Ms Mohinee Chougule for Respondents. ---- CORAM : K.R. SHRIRAM & Dr. N. K. GOKHALE, JJ DATED : 25th AUGUST 2023 (ORAL JUDGMENT PER K. R. SHRIRAM J.) Meera Jadhav CNR No : HCBM020282662022 Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 2023:BHC-OS:9560-DB 2/45 902-wp-4888-22.doc 1 Rule. Rule made returnable forthwith as pleadings are completed. Petitioner is registered with the Reserve Bank of India (RBI) as Non- Banking Finance Company and is classified as an Asset Finance Company. On 28th November 2016, petitioner filed its return of income for A.Y.-2016- 2017 declaring a total income of Rs.44,92,46,370/-. Later petitioner filed revised return of income on 28th March 2018 declaring a total income of Rs.50,67,32,580/-. 2 The return of income was selected for scrutiny and a notice dated 5th September 2018 under Section 143(2) of the Income Tax Act 1961 (the Act) was issued. This was followed by notice dated 5th December 2018 under Section 142(1) of the Act. Petitioner responded by its letter dated 6th December 2018 and submitted the transaction wise summary on expenditure on software consumables. Respondent no.1 passed an assessment order dated 23rd December 2018 under Section 143(3) of the Act without making any adjustments to the total income as reported by petitioner in its revised return of income. 3 Almost three years later, petitioner received notice dated 25th June 2021 under Section 148 of the Act, stating that there was reason to believe, petitioner’s income chargeable to tax for A.Y. 2016-2017 has escaped assessment within the meaning of Section 147 of the Act. The impugned notice mentioned that necessary satisfaction of Range 8(2), Mumbai has been obtained. Petitioner was also provided with the reasons recorded for reopening the assessment in response to the request made by petitioner. Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 3/45 902-wp-4888-22.doc 4 Petitioner by its letter dated 22nd July 2021 replied to the notice issued under Section 148 of the Act and submitted that the notice has been issued as per the provisions of Sections 147 to 151 of the Act as they stood prior to their substitution vide Finance Act, 2021 and respondent no.1 should assume jurisdiction post 1st April 2021 in terms of the amended provisions. Petitioner pointed out that the notice dated 25th June 2021 is bad in law and requested respondent no.1 to drop the assessment proceedings. 5 Petitioner was served with the notice dated 26th November 2021 under Section 142(1) of the Act. Petitioner responded vide its letter dated 20th December 2021. Thereafter, respondent no.1 issued the letter / show cause notice dated 31st May 2022 under Section 148A(b) of the Act, wherein respondent no.1 had referred to the notice issued on 25th June 2021 under Section 148 of the Act. In the said notice dated 31st May 2022, respondent no.1 referred to various writ petitions that had been filed in Bombay High Court as well as the other courts challenging the validity of the notices issued under Section 148 of the Act and also referred to the order of the Apex Court in Union of India Vs. Ashish Agarwal 1and stated that the notice under Section 148 of the Act shall be deemed to be issued under Section 148A of the Act as substituted by the Finance Act 2021 and shall be treated as show cause notice in terms of Section 148A(b) of the Act. Respondent no.1, therefore, 1. (2022) 138 taxmann.com 64(SC) Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 4/45 902-wp-4888-22.doc treated the notice issued under Section 148 of the Act as show cause notice in terms of Section 148A(b) of the Act. Respondent no.1 also relied on information and material annexed to the show cause notice suggesting that the income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act and also relied on the approval of the competent authority annexed to the impugned show cause notice. 6 The annexure to the impugned show cause notice mentioned the following: a) On perusal of the records, it is noticed that the Petitioner has debited an amount of Rs. 6,41,87,931/- on account of software consumables as other expenses to the profit and loss account and as per the information gathered Respondent No. 1 alleged that the said expense is a capital expenditure which is not allowable as per section 37 of the Act and attracts depreciation at 60%. Thus, the remaining 40% of the software consumable amounting to Rs. 2,56,75,172/- should be disallowed and added back to the business income of petitioner. b) Respondent no.1 alleged that it resulted in underassessment of income of Rs. 2,56,75,172/-. The reasons recorded relied on the finding of respondent no.1 to form the basis for reason to believe that income chargeable to tax of Rs. 2,56,75,172/- has escaped assessment within the meaning of section 147 of the Act. c) The reasons recorded alleged that the requisite material facts were embedded in such a manner that material evidence could not be discovered by respondent no.1 and the issues were never examined by respondent no.1 during the course of regular assessment. The reasons alleged that petitioner has failed to disclose fully and truly all material facts necessary for its assessment and therefore, it is a fit case for reopening the assessment within the meaning of section 147 of the Act. d) Respondent no.1 alleged that CBDT vide Notification No. 20/2021 has revised the due date relating to issuing the notice under section 148 of the Act as per the time limit specified in section 149 or sanction under section 151 of the Act if it expires on March 31, 2021 to April 30, 2021. Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 5/45 902-wp-4888-22.doc 7 Petitioner responded vide its communications dated 9th June 2022 and 7th July 2022. Various grounds were taken in its response. Respondent no.1, by an order dated 31st July 2022 passed under Section 148A(d) of the Act, rejected the submissions of petitioner and in paragraph 9 of the impugned order stated as under: “9. In response to notice issued u/s 148A(b) of the I.T. Act dated 01.06.2022, the assessee has filed reply vide letter dated 05.07.2022. The reply of the assessee is considered carefully, however, the same is not acceptable. The assessee has not submitted any documentary evidence in support of its claim. Overall, the submission made by the assessee is not satisfactory.” 8 Respondent no.1 issued an intimation letter for notice under Section 148 of the Act on 31st July 2022 and thereafter issued the notice dated 31st July 2022 under Section 148 of the Act stating that respondent no.1 has information suggesting that income chargeable to tax has escaped assessment within the meaning of Section 148 of the Act. None of the boxes in the said notice have been ticked and respondent no.1 has not provided what information is available with him for issuing the impugned notice. At this stage, petitioner filed this petition impugning the show cause notice dated 31st May 2022, the order dated 31st July 2022 passed under Section 148A(d) of the Act and the notice dated 31st July 2022 under Section 148 of the Act. 9 Mr. Pardiwalla appearing for petitioner submitted that the impugned notice dated 31st May 2022, order dated 31st July 2022 and intimation letter dated 31st July 2022 are: a) beyond limitation, b) signed by the wrong specified authority, c) lack “information” as required under Section 148, d) Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 6/45 902-wp-4888-22.doc results from change of opinion and e) is in violation of Section 151A of the Act. 10 Mr. Pardiwalla on the suggestions made by the court confined his submissions primarily to “signed by the wrong specified authority” and “change of opinion”. The court felt, if petitioner succeeds on these two points and primarily on the point of wrong ‘specified authority’, the court need not go into the other grounds raised. 11 On the wrong ‘specified authority’, Mr. Pardiwalla submitted as under: a) The provisions of Section 149(1)(b) as introduced by the Finance Act, 2021 provides that a notice under section 148 of the Act can be issued beyond a period of three years and upto a period of ten years from the end of the relevant assessment year only if the Assessing Officer has in his possession books of account or other documents or evidence which reveal that income chargeable to tax represented in the form of an asset which has escaped assessment amounts to or is more than Rs. 50 lakhs. b) There is no income chargeable to tax which is represented in the form of an “asset” which has escaped assessment as expenditure on computer software consumables cannot be the asset as per Section 149 of the Act. Hence, the extended period of time limits specified in Section 149 (1)(b) cannot apply to petitioner and hence notice issued on 31st July 2022 is bad-in-law. c) As per section 151 of the Act, the specified authority who has to grant his sanction for the purposes of section 148 and section 148A is the Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 7/45 902-wp-4888-22.doc Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. d) For A.Y.-2016-2017, three years elapsed on 31st March 2020 and hence the provisions of Section 151(i) and 151(ii) of the Act would have to be fulfilled, which have not been complied with. e) Respondent no.1 has mentioned in the impugned order dated 31st July 2022 that prior approval has been taken from respondent no.3 under Section 151 (i) of the Act. Such sanction would be bad in law as respondent no.1 should have complied with Section 151(ii) and not Section 151(i) of the Act. Hence, respondent no.3 cannot be a specified authority as per Section 151 of the Act. f) Respondent no.1 cannot rely on the provisions of the Taxation and other laws (Relaxation and Amendment of certain provisions) Act, 2020 (TOLA) and the notification issued thereunder as Section 151 of the Act has been amended by Finance Act 2021 and the provisions of amended Section would have to be complied with by respondent no.1, w.e.f. 1st April 2021. Hence, as the sanction of the specified authority has not been obtained, the impugned order and impugned notice both dated 31st July 2022 are bad-in- law and should be quashed and set aside. g) The approval given by respondent no.3 is without any application of mind and is mechanical approval as respondent no.3, if properly Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 8/45 902-wp-4888-22.doc instructed, could never have granted such approval on the facts and circumstances of the case of petitioner. h) In any event, deduction of expenditure on computer software as revenue expenditure was correct and query had been raised during the assessment proceedings by the Assessing Officer. Petitioner has provided all the details in addition to the documents which were filed alongwith return of income and the Assessing Officer has accepted the explanation given by petitioner. Relying on the judgment of Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax-2(1)2, Mr. Pardiwalla submitted that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose his satisfaction in respect of the query raised. i) The change in the language of Section 147 of the Act has not made any difference because if we accept what revenue says that will still give arbitrary powers to the Assessing Officer to reopen the assessments on the basis of mere change of opinion which cannot be per se reason to reopen. There is a conceptual difference between power to review and power to re- assess. If we accept revenue’s submissions then in the garb of re-opening the assessment review would take place. The concept of change of opinion is an in-built test to check abuse of power by the Assessing Officer, as held in the 2. (2014) 44 taxmann.com 304(Bombay) Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 9/45 902-wp-4888-22.doc judgment of the Apex Court in CIT Vs. Kelvinator of India Ltd.3 j) Even the recent judgment of Learned Single Judge of Madras High Court in Dr. Mathew Cherian Vs. Assistant Commissioner of Income Tax4, the court has held that whether under old or new regime of reassessment, it is settled position that the issues decided categorically by judicial precedent should not be revisited in the guise of reassessment. 12 Mr. Suresh Kumar for revenue, at the outset, submitted that sanction of the authority has been taken in view of the instructions given by the Central Board of Direct Taxes on 11th May 2022. Mr. Suresh Kumar submitted that the instructions reads as under : “Hon'ble Supreme Court has upheld the views of High Courts that the benefit of new law shall be made available even in respect of proceedings relating to past assessment years Decision of Hon'ble Supreme Court read with the time extension provided by TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and the new section 149 of the Act is to be applied at that point. Based on above, the extended reassessment notices are to be dealt with as under: (i) AY 2013-14, AY 2014-15 and AY 2015-16: Fresh notice under section 148 of the Act can be issued in these cases, with the approval of the specified authority, only if the case falls under clause (b) of sub- section (1) of section 149 as amended by the Finance Act, 2021 and reproduced in paragraph 6.1 above. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (ii) of that section. (ii) AY 16-17. AY 17-18: Fresh notice under section 148 can be issued in these cases. with the approval of the specified authority, under clause (a) of sub-section (1) of new section 149 of the Act, since they are within the period of three years from the end of the relevant assessment year. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (i) of that section.” 3. 320 ITR 561 (SC) 4. (2023) 151 taxmann.com 154 (Madras) Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 10/45 902-wp-4888-22.doc 13 Mr. Suresh Kumar also submitted as under: a) That in the instance case, the period that has elapsed is three years or less than three years because the assessment year is of AY-2016-2017, as provided under Section 3 of TOLA and extended by Notification dated 31st March 2020 and subsequently until 31st March 2021, the three years would have expired on 31st March 2020 and has got extended till 30th June 2021. The provisions of TOLA read with judgment of the Apex Court in Ashish Agarwal (Supra), the sanction has been rightly granted by the Principal Commissioner and there is no violation of Section 151 of the Act as alleged or at all. b) The contention of petitioner that TOLA only seeks to extend the period of limitation and does not affect the scope of section 151 is misplaced because Section 151 is time dependent and that the notice as issued being within three years, it is only Section 151(i) which would apply. c) If petitioner’s submissions are accepted, it would apply to a hybrid view in the sense that petitioner seeks to partly apply unamended law and partly the amended law. As held by the Apex Court in Ashish Agarwal (Supra), the notice issued by the Department after 1st April, 2021 is deemed to be a Notice under the amended Section 148A(b). This would mean that on 31st March 2020 the time period of 3 years would have expired and hence, TOLA would be and is squarely applicable. d) The judgments prior to TOLA are not applicable because the amended provisions were not considered at that stage. Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 11/45 902-wp-4888-22.doc e) Under TOLA, time for issuing notice stood extended and hence the notice issued under Section 149(1)(b) was within time. The same principle would apply to a notice issued under Section 148A(d) or notice issued under Section 148 alongwith order passed under Section 148A(d). The main thrust,however, was on instructions dated 11th May 2022. 14 On the change of opinion, Mr. Suresh Kumar submitted:- (a) In view of the change in the language of amended Section 147 of the Act, it would not be applicable. (b) In any event, the material furnished expressly records that the income of the year under consideration has escaped assessment because of failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. The Assessing officer has noted that assessee has not fully and truly disclosed the material facts. The Assessing Officer has also recorded that even though assessee has produced books of account, audited profit and loss account and balance sheet, requisite material facts as noted in the reasons for reopening were embedded in such manner that material evidence could not be discovered by the Assessing Officer with due diligence and accordingly attracted the provisions of explanation of sub Section (1) of Section 147 of the Act. c) Therefore, it is not a case of change of opinion but the case where assessee has failed to make true and full disclosure. 15 In rejoinder, Mr. Pardiwalla submitted that in the instructions dated Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 12/45 902-wp-4888-22.doc 11th May 2022, it is expressly mentioned that it applies only to the notices that were issued between 1st April 2021 and ending on 30th June 2021 and in any event, even assuming if what Mr. Suresh Kumar argues that it would travel back in time to their original date is accepted, will not be applicable to the case at hand because: a) The instructions itself restricted it to notice issued during the period between 1st April 2021 and 30th June 2021, where paragraph no.1 reads as under: 1. Hon'ble Supreme Court, vide its judgment dated 04.05.2022 (2022 SCC Online SC 543), in the case of Union of India v. Ashish Agarwal has adjudicated on the validity of the issue of reassessment notices issued by the Assessing Officers during the period beginning on 1st April, 2021 and ending with 30th June 2021, within the time extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 2020 [hereinafter referred to as "TOLA"] and various notifications issued thereunder (these reassessment notices hereinafter referred to as "extended reassessment notices"). b) In any case in Tata Communications Transformation Services Ltd. Vs. Assistant Commissioner of Income Tax5 this court held that only the time for issuance of notice was extended and the law has not been amended. The court has also expressly observed that TOLA is not applicable to A.Y.-2015-2016 or any subsequent years and, therefore, reliance on TOLA would be of no assistance. In Ashish Agarwal (Supra), the Apex Court did not interfere with this view expressed by the Bombay High Court. c) This court in J. M. Financial & Investment Consultancy Services Pvt Ltd. Vs. Assistant Commissioner of Income Tax, Circle 3(2)(1) & ors6 has held 5. (2022) 443 ITR 49 (Bombay) 6. (Order passed in Writ Petition No. 1050 of 2022 dated 4-4-2022) Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 13/45 902-wp-4888-22.doc that for A.Y. 2015-2016, the six years limitation was expiring on 31st March 2022, TOLA will not be applicable and in any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. Mr. Pardiwalla emphasised on paragraphs 6 and 7 of the order in J.M.Financial (Supra) which read as under: 6. Even for a moment we agree with the view expressed by the Principal Commissioner of Income Tax, still it applies to only cases where the limitation was expiring on 31 st March 2020. In the case at hand, the assessment year is 2015-2016 and, therefore, the six years limitation will expire only on 31 st March 2022. Certainly, therefore, the Relaxation Act provisions may not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. 7. In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31st March 2021 issued under Section 148 of the Act, which is impugned in this petition. In view thereof, the consequent orders and notices will also have to go. d) This court in case of Sidhmicro Equities (P) Ltd. Vs. Deputy Commissioner of Income Tax7 had followed its own judgment in the case of J. M. Financial (supra) and held that the sanction that was given, was invalid. The Apex Court in Deputy Commissioner of Income Tax Vs. Sidhmicro Equities (P) Ltd.8 upheld the view expressed by the Bombay High Court. 7. (2023) 150 taxmann.com 460 (Bombay) 8. (2023) 150 taxmann.com 461 (SC) Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 14/45 902-wp-4888-22.doc OUR FINDINGS / CONCLUSIONS:- 16 Before we proceed further, it would be useful to reproduce Sections 147, 148, 148A, 149 and 151 of the Act as it was then applicable : “147. Income escaping assessment—If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Explanation.—For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with. 148. Issue of notice where income has escaped assessment.—Before making the assessment, reassessment or recomputation under section147, and subject to the provisions ofsection148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) ofsection148A, requiring him to furnish within a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice: Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) ofsection148A to the effect that it is a fit case to issue a notice under this section: Provided also that any return of income, required to be furnished by Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 15/45 902-wp-4888-22.doc an assessee under this section and furnished beyond the period allowed shall not be deemed to be a return under section139. Explanation 1.—For the purposes of thissectionandsection148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,— (i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii) any information received under an agreement referred to insection90 orsection90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court. Explanation 2.—For the purposes of this section, where,— (i) a search is initiated under section132 or books of account, other documents or any assets are requisitioned under section132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section133A, other than under sub- section(2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section132 or under section132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section132 orsection132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 16/45 902-wp-4888-22.doc Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to insection151. 148A. Conducting inquiry, providing opportunity before issue of notice under section148.—The Assessing Officer shall, before issuing any notice under section148,— (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,— (a) a search is initiated under section132 or books of account, other documents or any assets are requisitioned under section132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section132 or requisitioned under section132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section132 or requisitioned under section132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee. Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 17/45 902-wp-4888-22.doc Explanation.—For the purposes of this section, specified authority means the specified authority referred to insection151. 149. Time limit for notice.—(1) No notice under section148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more: Provided that no notice under section148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, a notice under section148 orsection153A orsection153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section(1) of thissectionorsection153A orsection153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section153A, orsection153C read withsection153A, is required to be issued in relation to a search initiated under section132 or books of account, other documents or any assets requisitioned under section132A, on or before the 31st day of March, 2021: Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section148, where,— (a) a search is initiated under section132; or (b) a search under section132 for which the last of authorisations is executed; or (c) requisition is made under section132A, after the 15th day of March of any financial year and the period for issue of notice under section148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section148 in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section148 emanates from a statement recorded or documents Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 18/45 902-wp-4888-22.doc impounded under section131 or section133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of, — (a) a search under section132 which is initiated; or (b) a search under section132 for which the last of authorisations is executed; or (c) a requisition made under section132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) ofsection148A in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) ofsection148A or the period during which the proceeding under section148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) ofsection148A does not exceed seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.—For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (1A) Notwithstanding anything contained in sub-section(1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section(1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section(1), a notice under section148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be. (2) The provisions of sub-section(1) as to the issue of notice shall be subject to the provisions of section151 . 151. Sanction for issue of notice.—Specified authority for the purposes ofsection148 andsection148A shall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 19/45 902-wp-4888-22.doc (ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year : Provided that the period of three years for the purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section(1) ofsection149.” SPECIFIED AUTHORITY :- 17 Section 148 provides that before making the assessment, reassessment or recomputation under Section 147 and subject to provisions of Section 148A, the Assessing Officer shall serve on the assessee a notice alongwith a copy of the order passed, if required under clause (d) of Section 148A. It also says no notice under Section 148 shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. No such approval shall be required where the Assessing Officer, with the prior of the approval of the specified authority, has passed an order under clause (d) of Section 148A to the effect that it is a fit case to issue a notice under Section 148 of the Act. 18 Section 148A provides that the Assessing Officer shall, before issuing any notice under Section 148 ………….. (d)- decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under Section 148, by passing an order, with the prior approval of specified authority, within one month from the end of Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 20/45 902-wp-4888-22.doc the month …………………”. The explanation below Section 148A says - for the purposes of this Section, specified authority means the specified authority referred to in Section 151. 19 Under Section 149(1)(a), no notice under Section 148 shall be issued for the relevant assessment year if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b). Clause (b) of Section 149(1), provides if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargable to tax, represented in the form of an asset, (as relevant to this case) which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year. Explanation below 4th proviso says that for the purposes of clause (b) of this sub section, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. 20 Under Section 151 “specified authority” for the purposes of Section 148 and Section 148A shall be, if three years or less than three years have elapsed from the end of the relevant assessment year, Principal Commissioner or Principal Director or Commissioner or Director. If more than three years have elapsed from the end of the relevant assessment year, then Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 21/45 902-wp-4888-22.doc 21 Admittedly, in this case, the approval/sanction for order under Section 148A(d) of the Act has been granted by the Principal Commissioner of Income Tax-8. The entire controversy is, therefore, (a) whether the Principal Commissioner was the specified authority, who could have granted the approval / sanction ?, (b) if not, the effect thereof ? 22 In our view, the approval is not valid. Hence, the impugned order passed under Section 148A(d) read with notice issued under Section 148 of the Act dated 31st July 2022 is not valid and has to be quashed and set aside. 23 The first proviso to section 148 of the Act refers to the approval of the specified authority being obtained before a notice under section 148 of the Act can be issued. Explanation 3 to section 148 of the Act specifies that the meaning of the term ‘specified authority’ as provided for in section 151 of the Act is to apply for the purpose of section 148. Section 148A(d) of the Act also requires the Assessing Officer to pass an order after considering the reply of the assessee as to whether or not it is a fit case to issue a notice under section 148 of the Act and such an order under section 148A(d) of the Act has to be passed with the prior approval of the specified authority. The Explanation to section 148A of the Act also incorporates the meaning of ‘specified authority’ as provided for in section 151 of the Act. 24 As per section 151 of the Act, the ‘specified authority’ who has to grant his sanction for the purposes of section 148 and section 148A is the Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 22/45 902-wp-4888-22.doc Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. The present petition relates to the AY 2016-17, and as the impugned order and impugned notice are issued beyond the period of three years which elapsed on 31st March, 2020 the approval as contemplated in section 151(ii) of the Act would have to be obtained which has not been done by the Assessing Officer. The impugned notice mentions that the prior approval has been taken of the ‘Principal Commissioner of Income-tax – 8’ (‘PCIT-8’) which is bad in law as the approval should have been obtained in terms of section 151(ii) and not section 151(i) of the Act and the PCIT-8 cannot be the specified authority as per section 151 of the Act. Further, even in the affidavit-in-reply, the department has accepted that the approval obtained is of the ‘Principal Commissioner of Income-tax – 8’ and, hence, such an approval would be bad in law. 25 TOLA, enacted on 29th September 2020 and came into force on 31st March 2020. It inter alia, provided for a relaxation of certain provisions of the Income-tax Act, 1961. Where any time limit for completion or compliance of an action such as completion of any proceedings or passing of any order or issuance of any notice fell between the period 20th March 2020 to 31st December 2020, the time limit for completion of such action stood extended to 31st March 2021. Thus, TOLA only seeks to extend the period of Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 23/45 902-wp-4888-22.doc limitation and does not affect the scope of section 151. 26 The Assessing Officer cannot rely on the provisions of TOLA and the notifications issued thereunder as section 151 has been amended by Finance Act, 2021 and the provisions of the amended section would have to be complied with by the Assessing Officer, w.e.f., 1st April 2021. Hence, the Assessing Officer cannot seek to take the shelter of TOLA as a subordinate legislation cannot override any statute enacted by the Parliament. Further, the notification extending the dates from 31st March 2021 till 30th June 2021 cannot apply once the Finance Act, 2021 is in existence. The sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151(ii) of the Act and since the sanction has been obtained in terms of section 151(i) of the Act, the impugned order and impugned notice are bad in law and should be quashed and set aside. 27 This Court, in a series of judgments, has held that TOLA cannot apply in respect of reassessment proceedings for AY 2015-16 and subsequent years:- (a) Tata Communications Transformation Services Ltd (supra), paragraph 49(c) reads as under: “49. Some more reasons why the reopening notices must go are: (a) …………….. Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 24/45 902-wp-4888-22.doc (b) …………….. (c) In any case, Relaxation Act is not applicable for Assessment Years 2015-2016 or any subsequent year and, hence, the question of applicability of the Notification Nos.20 and 38 of 2021 does not arise. The time limit to issue notice under section 148 of the Act for the Assessment Years 2015- 2016 onwards was not expiring within the period for which section 3(1) of Relaxation Act was applicable and, hence, Relaxation Act could never apply for these assessment years. As a consequence, there can be no question of extending the period of limitation for such assessment years.” (b) Judgment in Tata Communications (Supra) has been affirmed by the Supreme Court in Ashish Agarwal (supra) in paragraph 7, where, the Supreme Court states that it is in complete agreement with the view of the High Courts. It reads as under: “7. Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.” (c) J.M. Financial (supra) – paragraphs 5 to 7 read as under: “5 Respondents have relied upon a letter dated 18th March 2021 issued by one Income Tax Officer, who has given an opinion to the Additional Commissioner of Income Tax that in view of the Taxation and other Laws (Relaxation of Certain Provisions) Act, 2020 (Relaxation Act), limitation, inter alia, under provisions of Section 151(1) and Section 151(2), which were originally expiring on 31st March 2020 stand extended to 31st March 2021. According to the Income Tax Officer, in view of the above, Assessment Year 2015-2016 which falls under the category within four years as on 31st March 2020, the statutory approval for issuance of notice under Section 148 of the Act for the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. Mr. Sharma clarifies that the Income Tax Officer is only conveying the view of the Principal Commissioner of Income Tax because this letter has been issued on the letterhead of Principal Commissioner of Income Tax. 6 Even for a moment we agree with the view expressed by the Principal Commissioner of Income Tax, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 25/45 902-wp-4888-22.doc hand, the assessment year is 2015-2016 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions may not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. 7 In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31st March 2021 issued under Section 148 of the Act, which is impugned in this petition. In view thereof, the consequent orders and notices will also have to go.” (d) MA Multi-Infra Development Pvt Ltd v. ACIT9 – paragraph 7 reads as under: “7. Be that as it may, in our view, the present case is squarely covered by the view taken by this Court in J.M. Financial & Investment Consultancy Services (P) Ltd. (Supra). We accordingly hold that the approval for issuance of notice u/s. 148 ought not have been obtained from the Additional Commissioner of Income Tax but from the authority specifcally mentioned u/s. 151(ii) of the Act.” (e) DCW Limited v. ACIT10 – paragraphs 5,6, 7 & 8 read as under: “5. In the aforementioned case, which also pertained to assessment year 2015-16 and in which approval was granted on 26 th March 2021 by the ‘Additional Commissioner of Income Tax’, was held to be bad inasmuch as it was held that having been issued beyond the period of four years from the relevant assessment year, the approval ought to have been accorded by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax and not by the Additional Commissioner of Income Tax. The Court also held that the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘Relaxation Act’) may have extended the time to issue a notice under section 148 of the Act but did not have the effect of amending the provisions of section1 151 of the Act. This Court held : “5 Respondents have relied upon a letter dated 18th March 2021 issued by one Income Tax Offcer, who has given an opinion to the Additional Commissioner of Income Tax that in view of the Taxation and other Laws (Relaxation of Certain Provisions) Act, 2020 (Relaxation Act), limitation, inter alia, under provisions of Section 9. (WP No. 1650 of 2022 dated 9-1-2023) 10. [WP No. (L) 6546 of 2022 dated 4-7-2022] Meera Jadhav Uploaded on - 07/09/2023 Downloaded on - 27/10/2026 22:43:58 26/45 902-wp-4888-22.doc 151(1) and Section 151(2), which were originally expiring on 31st March 2020 stand extended to 31st March 2021. According to the Income Tax Officer, in view of the above, Assessment Year 2015-2016 which falls under the category within four years as on 31st March 2020, the statutory approval for issuance of notice under Section 148 of the Act for the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. Mr. Sharma clarifes that the Income Tax Offcer is only conveying the view of the Principal Commissioner of Income Tax because this letter has been issued on the letterhead of Principal Commissioner of Income Tax. 6 Even for a moment we agree with the view expressed by the Principal Commissioner of Income Tax, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at hand, the assessment year is 2015-2016 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions may not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151of the Act.” 6. In the present case, counsel for the respondents reiterated the stand of the revenue as was taken before the Court in the aforementioned case. However, we do not fnd any reason to take a view different from the one which has already been taken by this Court in the