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Facts
The assessee challenged the validity of notices issued under Section 148 of the Income Tax Act for assessment years 2017-18 and 2018-19. The notices were issued under the new regime, but the assessee contended they were time-barred and issued without proper sanctioning authority.
Held
The Tribunal held that the notices issued under Section 148 for both assessment years were beyond the prescribed time limits under the new regime and also lacked the approval of the specified authority as per Section 151. Consequently, the reassessment orders were deemed void.
Key Issues
Whether the reassessment notices issued under Section 148 were time-barred and whether the proper sanctioning authority as per Section 151 had approved them.
Sections Cited
147, 148, 148A, 149, 151, 69C
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SMT. BEENA PILLAI
Per: Smt. Beena Pillai, J.M.: The present appeals filed by the assessee arise out of orders dated 29/05/2025 passed by NFAC, Delhi for assessment year 2017-18 and 2018-19.
At the outset the Ld.AR submitted that the facts and circumstances based on which the assessment was reopened in both these years under consideration are identical and similar.
A.Y. 2018-19 Ketukumar Krishnavadan Parikh He submitted that, the assessee is challenging validity of the notice issued u/s.148 of the new scheme of the provision, to be bad in law. 2.1 The Ld.AR submitted that first notice u/s.148 was issued on 29/06/2021 under the old regime for assessment year 2017- 18 and for assessment year 2018-19, the notice was issued on 18/04/2022 under the new regime. He submitted that the assessee is challenging the validity of the notice issued passed for both the years under consideration on two different preposition.
For assessment year 2017-18
For the year under consideration the assessee filed its original return of income on 12/08/2011 declaring total income of Rs.10,08/240/-. Subsequently, the case was reopened by issuing notice u/s. 148 on 29/06/2021. The said notice was deemed to be notice u/s.148A of the Act as per the direction of Hon’ble Supreme Court in case of Union of India Vs. Ashish Agarwal reported in (2022) 138 taxmann.com64. The Ld.AO subsequently passed order u/s.148A(d) of the Act on 12/07/2022 rejecting the objection raised by the assessee. 3.1 The Ld.AO thus issued a notice u/s.148 of the new regime on 12/07/2022 and subsequently, the assessee was completed on 02/03/2023 by making addition of Rs.20,21,000/- u/s.69C of the Act.
Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A).
A.Y. 2018-19 Ketukumar Krishnavadan Parikh 3.2 The Ld.CIT(A) upheld the action of the Ld.AO on merits and dismissed the legal issue raised by the assessee challenging the validity of the notice issued.
Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.
The Ld.AR submitted that, Ground no.2 raised for the year under consideration is challenging the validity of the notice issued u/s.148 dated 12/07/2022. He submitted that the said notice time barred as per the observation of the Hon’ble Supreme Court in case of Union Bank of India Vs. Rajiv Bansal reported in (2024) 167 taxmann.com 70. It is submitted that, the original notice was issued on 29/06/2021. The revenue only had one day to issue the notice under the new scheme of 148. He submitted that after 01/04/2021 to assume jurisdiction to issue notice u/s.148 the same has to be issued within the period prescribed under section 149(1) of the new regime r.w. TOLA. He submitted that the reassessment notice issued u/s.148 of the new regime in pursuance of the deemed notice, ought to be issued within the time limit surviving. He placed reliance on the following observation of Hon’ble Supreme Court in case of Union of India Vs. Rajiv Bansal (supra) :
“114, In view of the above discussion, we conclude that: a. After 1 April 2021, the Income-tax Act has to be read along with the substituted provisions; b. TOLA will continue to apply to the Income-tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income-tax Act falls for completion between 20 March 2020 and 31 March 2021; A.Y. 2018-19 Ketukumar Krishnavadan Parikh c. Section 3(1) of TOLA overrides Section 149 of the Income- tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under section 148; d. TOLA will extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(() has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(2) has extended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 tuil the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment notice under section 148 of the new regime within the time limit surviving under the Income-tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside;”
He thus submitted that in the present facts of the case the notice under old regime was issued to the assessee on 29/06/2021, that was deemed to be the notice issued on 31/03/2021, for the purposes of proceedings u/s.148A and to issue notice u/s.148 of the new regime. The Ld.AR submitted that as present assessment year falls within the period of 3 years as per the new regime there was no further time available to the A.Y. 2018-19 Ketukumar Krishnavadan Parikh revenue to issue notice under the new regime beyond the time stipulated under TOLA r.w. 149(1) of the Act. In the present facts of the case the assessing officer had only 1 day time to issue notice under the new regime upon the expiry. He thus submitted that as to notice under new scheme of section 148 was issued on 12/07/2022, the said notice become barred by limitation. 5.1 On the contrary, the Ld.DR relied on the orders passed by the authorities below. I have perused the submissions advanced by both sides in light of records placed before this Tribunal.
The Ld.AO alleged that assessee obtained accommodation entry in the form of bogus loan. It is noted that the income chargeable to tax that is alleged to have escaped assessment is less than Rs.50 lakhs. Admittedly, the notice under section 148 dated 29/06/2021 was issued after the expiry of three years from the end of the relevant assessment year. Three years from the end of the assessment year under consideration lapsed on 31/03/2021. In the present facts, the notice under section 148 of the new regime was issued on 12/07/2022. As per section 149(1)(b) of the new regime, re-assessment proceedings should have been initiated under the new regime, after the expiry of three years from the end of the relevant assessment year 2017- 18, only if, the income chargeable to tax that escaped assessment is more than Rs.50 lakhs. Hon'ble Supreme Court in the case of Rajeev Bansal (supra) elaborately dealt with this issue:
Notices have to be judged according to the law existing on the date the notice is issued. Section 149 of the old regime primarily provided two time limits: (i) four years for all situations and (ii) beyond four years and within six years if the income chargeable to tax which escaped assessment amounted to Rupees one lakh or more. After 1 April 2021, A.Y. 2018-19 Ketukumar Krishnavadan Parikh the time limits prescribed under the new regime came into force. The ordinary time limit of four years was reduced to three years. Therefore, in all situations, reassessment notices could be issued under the new regime if not more than three years have elapsed from the end of the relevant assessment year. For example, for assessment year 2018- 2019, the four year period would have expired on 31 March 2023 under the old regime. However, if the notice is issued after 1 April 2021, the three year time limit prescribed under the new regime will be applicable. The three year time limit will expire on 31 March 2022.
The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.
Another important change under section 149(1)(b) of the new regime is the increase in the monetary threshold from Rupees one lakh to Rupees fifty lakhs. The old regime prescribed a time limit of six years from the end of the relevant assessment year if the income chargeable to tax which escaped assessment was more than Rupees one lakh. In comparison, the new regime increases the time limit to ten years if the escaped assessment amounts to more than Rupees fifty lakhs. This change could be summarized thus:
Regime Time limit Income chargeable to tax which has escaped assessment Old regime Four years but not more Rupees one lakh or more than six years New regime Three years but not Rupees fifty lakhs or more more than ten years
Given Section 149(1)(b) of the new regime, reassessment notices could be issued after three years only if the income chargeable to tax which escaped assessment is more than Rupees fifty lakhs. The proviso to Section 149(1)(b) limits the retrospectivity of that provision with respect to the time limits specified under section 149(1)(b) of the old regime.
A.Y. 2018-19 Ketukumar Krishnavadan Parikh 52. In Ashish Agarwal (supra), this Court held that the benefit of the new regime must be provided for the reassessment conducted for the past periods. The increase of the monetary threshold from Rupees one lakh to Rupees fifty lakh is beneficial for the assesses. MrVenkataraman has also conceded on behalf of the Revenue that all notices issued under the new regime by invoking the six year time limit prescribed under Section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs." "53. The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under Section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under Section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.
The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs. ii. TOLA can extend the time limit till 31 June 2021 54. The proviso to Section 149(1)(b) of the new regime uses the expression "beyond the time limit specified under the provisions of clause (b) of sub section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021." Thus, the proviso specifically refers to the time limits specified under section 149(1)(b) of the old regime. The Revenue accepts that without application of TOLA, the time limit for issuance of reassessment notices after 1 April 2021 expires for assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 in the following manner: (i) for the assessment years 2013-2014 and 2014-2015, the six year period expires on 31 March 2020 and 31 March 2021 respectively; and A.Y. 2018-19 Ketukumar Krishnavadan Parikh (ii)for the assessment years 2016-2017 and 2017-2018, the three year period expires on 31 March 2020 and 31 March 2021 respectively. ……………………………….
After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions. The substituted provisions apply retrospectively for past assessment years as well. On 1 April 2021, TOLA was still in existence, and the Revenue could not have ignored the application of TOLA and its notifications. Therefore, for issuing a reassessment notice under Section 148 after 1 April 2021, the Revenue would still have to look at: (i) the time limit specified under Section 149 of the new regime; and (ii) the time limit for issuance of notice as extended by TOLA and its notifications. The Revenue cannot extend the operation of the old law under TOLA, but it can certainl benefit from the extended time limit for completion of actions falling for completion between 20 March 2020 and 31 March 2021. ………….. "69. For instance, Section 149(1)(a) of the new regime specified the time limit of three years from the end of the relevant assessment year for reopening of the assessment. For assessment year 2017-2018, the three year period expired on 31 March 2021. The expiry of time fell within the time period contemplated by Section 3 of TOLA read with its notifications. Resultantly, the Revenue had time until 30 June 2021 to issue a reassessment notice for assessment year 20172018 under Section 149(1)(a). This harmonious reading gives effect to the legislative intention of both the Income Tax Act and TOLA. Moreover, Sections 147 to 151 are machinery provisions. Therefore, they must be given an interpretation that is consistent with the object and purpose of the Income Tax Act. ………………. "75. After 1 April 2021, the new regime has specified different authorities for granting sanctions under Section 151. The new regime is beneficial to the assesse because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii)If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the me prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. …….
A.Y. 2018-19 Ketukumar Krishnavadan Parikh 76. Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under Section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction, Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, noncompliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148. ………… 81. This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned." Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under Section 148-A." Although this Court waived off the requirement of obtaining prior approval under Section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under Section 148A(d) or issuing a notice under Section 148. These notices ought to have been issued following the time limits specified under Section 151 of the new regime read with TOLA, where applicable. …………… 89. In Ashish Agarwal (supra), this Court: (1) upheld the judgments of the High Courts; and (ii) deemed the notices issued under Section 148 of the old regime as show cause notices issued under Section 1484(b) of the new regime. By agreeing with the judgments of the High Courts, this Court laid down the law that the provisions of the new regime will be applicable for all the reassessment notices issued under Section 148 after 1 April 2021. As a result of this holding, all the reassessment notices issued in terms of Section 148 of the old regime would have been declared invalid. Therefore, this Court deemed the reassessment notices issued under the old regime after 1 April 2021 as show cause notices issued under Section 148A(b) of the new regime." 6.1 Thus, on the above stated facts and law, in the present case, three years lapsed on 31/06/2021. Further the income alleged to have escaped assessment is Rs.20,21,000/-. Then the order u/s.148A(d) along with notice u/s.148 under new regime issued on 12.07.2022 is beyond the period of limitation specified under section 149(1)(b) of the Act, and deserve to be dropped.
A.Y. 2018-19 Ketukumar Krishnavadan Parikh 6.2 As a consequence the reassessment order passed on 02/03/2023 becomes void ab initio and the addition made therein does not hold any legs to stand in the eyes of law.
Accordingly, Ground No.2 raised by the assessee stands allowed.
For assessment year 2018-19
For assessment year 2018-19, the Ld.AR vide Ground no. 2 and 3 contends that approval was not obtained from appropriate authority as per section 151 before passing order u/s.148(A)(d) and issuing notice u/s.148 under the new regime of the Act. He submitted that, facts are identical for assessment year 2017-18. It is submitted that assessee was issued notice under new regime of section 148 on 18/04/2018, which is after period of 3 years from the end of the relevant assessment year under consideration. It is submitted that the income alleged to have escaped assessment for 2018-19 is Rs. 25,41,000/-. The Ld.AR submitted that the last date to issue notice u/s.148 within the 3 years was 31/03/2022 for income that is escaped to have assessment is less than 50,00,000/-. 7.1 The Ld.AR submitted that as per reopened provisions under new regime amended by Finance Act 2021 the first proviso to section 148, refers to provision specifying the authority whose approval is to be obtained before issuing notice u/s.148. He submitted that section 151 describes the specified authority for the purpose of section 148 and 148A under the new regime based on the time limits within which reopening proceedings are initiated and the monetary limit of alleged escaped income. The A.Y. 2018-19 Ketukumar Krishnavadan Parikh Ld.AR referring to the decision of Hon’ble Supreme Court in case of Union of India vs. Rajiv Bansal (supra) submitted that the sanctioning authority to issue notice beyond 3years as per section 151(ii) is Principle Chief Commissioner or Principle Director General or Chief Commissioner or Director General referring to the impugned notice dated 18/04/2022. The Ld.AR submitted that the order u/s.148A(d) as well as the notice u/s.148 was issued after obtaining sanction from PCIT Mumbai – 17, and thus the said impugned notice is invalid and bad in law. 7.2 On the contrary, the Ld.DR submitted that at the time when the notice was issued the procedure as alleged due by Hon’ble Supreme Court in case of Union of India Vs. Ashish Agarwal (Supra) was valid and therefore the Ld.AO was justified taking approval of PCIT Mumbai for assessment year 2018-19. He also placed reliance on Instruction no. 22 in respect of his submission.
I have perused the submissions advance by both sides in the light of record placed before this Tribunal.
Following observations by Hon’ble Supreme Court in case of Union of India Vs. Rajiv Bansal is very much necessary to be address the argument advanced by both sides. 8.1 Hon’ble Supreme Court in the case of UOI &Ors vs. Rajeev Bansal reported in (supra), after considering its own decision in the case of UOI vs. Ashish Agarwal reported in (2022) 138 taxmann.com 64 dealt with the issue in respect of sanction of the specified authority and concluded that TOLA will extend the time limit for the grant of sanction by the authority specified under A.Y. 2018-19 Ketukumar Krishnavadan Parikh section 151 only if the time limit of three years falls between 20/03/2020 and 31/03/2021. For Assessment year 2018-19 Hon’ble Supreme Court has observed that TOLA is not applicable. 8.2 Hon’ble Supreme Court in the case of UOI &Ors vs. Rajeev Bansal reported in (supra) observed and held as under:
Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments. 128 A table representing the prescription under the old and new regime is set out below: Regime Time limits Specified authority Section Before expiry of four years Joint Commissioner 151(2) of the from the end of the relevant old regime assessment year Section After expiry of four years Principal Chief 151(1 of the from the end of the relevant Commissioner or Chief old regime assessment year Commissioner or Principal Commissioner or Commissioner Section Three years or less than Principal Commissioner 151(i) of the three years from the end of or Principal Director or new regime the relevant assessment Commissioner or year Director Section More than three years have Principal Chief 151(ii) of the elapsed from the end of the Commissioner or new regime relevant assessment year Principal Director General or Chief Commissioner or Director General 74. The above table indicates that the specified authority is directly co- related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under Section 148 within four years after obtaining the approval of the Joint Commissioner, and (b) no notice could be issued after the expiry of four years; and A.Y. 2018-19 Ketukumar Krishnavadan Parikh (ii)If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under Section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i)If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii)If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under Section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, noncompliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148.
It is categorically clear from the above that a notice that is issued beyond the period of 3 years the sanctioning authority has to be as per section 151(ii) of the Act, which is Principal Chief A.Y. 2018-19 Ketukumar Krishnavadan Parikh Commissioner or Principal Director General or Chief Commissioner or Director General. In the present facts of the case the notice has been issued with the prior approval of PCIT. Thus the sanction was not obtained by specified authority in accordance with the provisions of the Act u/s. 151 of the new regime, and therefore notice u/s.148 issued beyond the period of 3 years from end of the relevant assessment year is held to be invalid and bad in law. As consequence the assessment order dated 27/03/2024 passed by the Ld.AO become void ab initio and the additions made there is did not have any legs to stand either of law. Accordingly ground no. 2 and 3 raised by the assessee stands allowed. In the result the appeal filed by the assessee for assessment year 2017-18 and 2018-19 stands allowed. Order pronounced in the open court on 29/08/2025