ALBERT JOSEPH ROZARIO,MUMBAI vs. ITO, INT. TAX, CIRCLE 4(1)(1), MUMBAI, MUMBAI

In response to the show cause notice, there was no compliance on the part of the assessee. Thereafter, the AO proceeded and passed the draft assessment order u/s 144C(1) dated 21-03-2024 and brought to tax the sum of Rs. 4,47,74,410/- as un-explained investment, invoking the provisions of section 69 of the Act. Separately an amount of Rs. 1,03,53,786/- was brought to tax being the difference between stamp duty value and the purchase consideration and treated as income of the assessee under the head „income from other sources‟ u/s. 56(2)(x) of the Act.

Against the draft order passed u/s. 144C(1) of the Act, dt. 21-03- 2024, the assessee filed his objections before the DRP. The DRP after taking into consideration the assessee‟s submissions, supporting evidences, remand report from the AO and the fact that the assessment proceedings are underway in the hands of the wife of the assessee, Mrs. Cecilia Rozario, the ld DRP vide its order u/s 144C(5) dated 30/11/2024 directed the AO that the assessment in assessee‟s case be rendered as a protective assessment while the assessment of Mrs. Cecilia Rozario remains substantive. As per the DRP, this will prevent double taxation on the same income while reserving the option to activate assessee‟s assessment should in the hands of Mrs. Cecilia Rozario be annulled or otherwise revised, making the assessee the source of investments and the AO was accordingly directed to maintain the case of the assessee as protective only with the substantive assessment to be pursued in Mrs. Cecilia Rozario‟s case and the AO was also directed to intimate these directions to the AO of Mrs. Cecilia Rozario. Regarding the addition made by the AO, invoking the provisions of section 56(2)(x) of the Act, the assessee‟s objections were disposed off as not maintainable and addition made by the AO was held to be good in law.

Following the aforesaid directions of the DRP, the AO passed the final assessment order u/s. 147 r.w.s. 144C(13) of the Act, vide order dt. 30-12- 2024; wherein the unexplained investment of Rs 4,47,74,410/- was brought to tax on protective basis u/s. 69 of the Act and income from other sources of Rs 1,03,53,786/- was also brought to tax as originally done in the draft assessment order as so confirmed by the Ld.DRP and thereafter, the income was assessed at Rs. 5,51,28,196/-. Against the said final assessment order, the assessee is in appeal before us.

In his appeal, the assessee has taken various grounds of appeal, however, during the course of hearing, the arguments are advanced by both the parties only on the Ground No. 1 so taken by the assessee wherein the assessee has challenged the issuance of notice u/s. 148 dt. 23-04-2022 as bad in law on account of invalid approval u/s. 151 of the Act.

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, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148,"

Further reference was drawn to the first proviso to section 148, as it then stood at the relevant time, which requires a notice u/s. 148 of the Act to be issued with the prior approval of specified authority. It was further submitted that as per the Explanation 3 to section 148, specified authority means specified authority referred to in section 151 of the Act. It was submitted that the specified authority as per law as amended by the Finance Act, 2021 is as under:

It was submitted that the law which was prevalent as understood by the assessee and even by the Tax Department as per their internal instruction dt. 01-08-2022 is that after the end of the three years from the end of the relevant assessment year, approval u/s. 151(ii) has to be obtained. It was submitted that for the impugned assessment year i.e., A.Y. 2018-19, the notice u/s. 148 as well as the order u/s. 148A(d) of the Act have been issued on 23-04-2022; whereas the three years from the end of the relevant assessment year have expired on 31-03-2022. Therefore, the same has been issued beyond three years from the end of the relevant assessment year. It was submitted that in the instant case, the approval has been taken from the Commissioner of Income Tax (Intl. tax) as evident from the notice issued by the AO u/s 148 and the order passed u/s 148A(d) whereas the same has to be taken from Principal Commissioner of Income Tax as provided u/s. 151(ii) of the Act, which make the entire proceedings illegal and vitiated.

It was further submitted that the issue is now squarely covered by the decision of the jurisdictional High Court in the case of KPMG LLP vs. ACIT, WP (St) No. 5390 of 2024 (Bom) and Holiday Developers Private Limited vs. ITO, WP No. 3679 of 2023 (Bom). It was further submitted that even the Co-ordinate Mumbai Benches of the Tribunal in the case of Arihant Engineers vs. ITO in dated 01/10/2024, has decided the identical issue in favour of the assessee.

Per contra, the Ld. Sr.DR contested the plea taken by the Ld.AR and drawn our reference to the provisions of section 151 as amended by the Finance Act, 2022 and the provisions of section 151 of the Act as amended by the Finance Act, 2023 which reads as under:

It was submitted that section 151 of the Act as it stands now and during the relevant point of time was introduced by the Finance Act 2021 w.e.f. 01-04-2021. The Finance Act, 2022 did not make any amendments to the said section. However, the Finance Act, 2023 made two amendments. Firstly, it omitted the words "where there is no Principal Chief Commissioner or Principal Director General" appearing in clause (ii) of section 151. Secondly, it inserted a Proviso to section 151 stating 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) of section 149. It was submitted that even though both amendments are stated to be with effect from 01-04-2023, however, in the interest of justice and in the context of the Memorandum explaining the provisions in the Finance Bill, 2023 (the Memorandum) the said amendments should be considered to be retrospective i.e with effect from 01-04-2021. In support of his argument, the Ld. DR drawn our attention to the relevant clauses of the Memorandum. It was submitted that adverting to clauses 69, 70 and 71 of the Finance Bill, 2023, the Memorandum has explained the amendments in section 151 in the following words: "7. Section 151 of the Act contains provisions relating to the specified authority who con grant approval for the purposes of sections 148 and 148A of the Act. The said section provided that the authority would be the Principal Chief Commissioner and where there is no Principal Chief Commissioner, the Chief Commissioner shall give approvals beyond a period of three years.

It was seen that the clause (ii) of the said section was resulting in misinterpretation as well as confusion with regards to the specified authority for the cases where re-opening was being done after three years from the relevant assessment year. Therefore, to clarify the position of law in this regard, an amendment has been proposed to provide that the specified authority under clause (ii) of section 151 of the Act shall be Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

At the same time, to give further clarity with regards to the specified authority a proviso is proposed to be inserted in the section 151 to provide that while computing the period of three years for the purposes of determining the specified authority the period which has been excluded or extended as per the provisos in section 149 of the Act from the time limit for issuance of notice under section 148 of the Act shall be taken into account.

It was submitted that upon perusal of the Memorandum it may be appreciated that the intention of the Legislature is to clarify the position of law. The language of the Memorandum indicates that proviso to section 151 is intended to be curative and declaratory of the law as it always was and therefore, the said proviso may kindly be regarded as to be applied retrospectively. It was submitted that if the proviso to section 151 is considered as retrospective, then in calculating the period of 3 years from the end of A.Y 2018-19, the time period given to the assessee as per the show-cause issued u/s 148A(b) dated 23-03-2022 as per 5th proviso to sub-section (1) of section 149 comprising of 26 days (23-03-2022 to 17-04- 2022) to respond on or before 18-04-2022, to notice u/ 148A(b) dated 23- 03-2022 shall be excluded and thereby the period of 3 years from end of the impugned assessment year 2018-19 would be reckoned as ending on 26-04-2022. It was submitted that if the same is found acceptable to the Bench, the sanction given by the ld CIT(IT)-4, Mumbai, on 21-04-2022 for passing order u/s 148A(d) and notice u/s 148 is valid and the ground raised by the assessee is liable to be dismissed.

In support of the argument that proviso to section 151 of the Act, should be regarded as retrospectively applicable w.e.f. 01-04-2021, it was submitted that there are various judicial precedents wherein, the provisions of the Income Tax Act, have been held to be retrospective in their application even though, indicated otherwise in the Finance Act.

In this regard, reliance was placed on the judgment of Hon'ble Supreme Court in the case of Commissioner of Income-tax, Ahmedabad vs. Gold Coin Health Food (P.) Ltd [2008] 172 Taxman 386 (SC). The issue before the Hon'ble Supreme Court was whether the amendments to Explanation 4 to Section 271(1)(c) made applicable from 01-04-2003 by Finance Act had retrospective applicability or not. The Hon'ble Apex Court held that the said amendments are clarificatory and applicable even retrospectively. The said judgment has been rendered by a larger Division Bench comprising of 3 Judges of the Supreme Court and it has reversed the earlier judgement of another Division Bench in the case of Virtual Soft Systems Ltd. (159 Taxmann 155) in which Revenue's arguments placing reliance on Notes to Clauses relating to the amendment (supra) to submit that the amendment was clarificatory in nature and consequentially it was applicable retrospectively, was not accepted. While reversing the decision in the case of Virtual Soft Systems Ltd., the Supreme Court in the case of CIT Vs. Gold Coin Health Food Pvt.Ltd. allowed the argument of retrospective applicability notwithstanding the fact that the amendment was stated to take effect from 01-04-2003. It was submitted that this aspect of the said decision is very significant because even in the present case before this Bench the amendment in section 151 of the Act has been stated to take effect from 01-04-2023. In the context of the Memorandum and the decision of the Supreme Court cited above, it is essential that the amendment in Section 151 of the Act should be considered as retrospectively applicable from 01-04-2021.

Further, reliance was placed on the decision of the Hon‟ble Supreme Court in the case of CIT vs Poddar Cement Pvt. Ltd & Others (1997) 226 ITR 625 (SC), wherein the Hon'ble Supreme Court, while dealing with the reference/issue related to A.Y 1975-76 and 1976-77 has dealt with the amendment brought out by Finance Act, 1987 and after detailed analysis of the nature of amendment has held that the same is retrospective in nature.

Further, reliance was placed on the decision of the Hon‟ble Supreme Court in the case of ITO Vs. Vikram Sujitkumar Bhatia wherein by order dated 06-04-2023, the Hon‟ble Supreme Court has held that amendment brought to Section 153C vide Finance Act, 2015 which inserted the words 'pertains or pertain to', shall be applicable to searches conducted before 01-06-2015 i.e. date of amendment. It was submitted that in the said case, the Hon‟ble Supreme Court held that if the submission on behalf of the respective assesses that despite the fact that incriminating materials have been found in the form of books of accounts or documents or assets relating to them from the premises of the search person, still they may not be subjected to the proceedings u/s 153C solely on the ground that the search was conducted prior to the amendment is accepted, in that case, the very object and purpose of amendment to Section 153C, which is the assessment of income of any other person, sought to be achieved by way of substitution of the words "belongs or belong to' with the words 'pertains or pertain to' shall be frustrated. It was submitted that the principle that can be drawn from this judgment of the Hon‟ble Supreme Court is that any interpretation which may frustrate the very object and purpose of the Act/Statute shall be avoided by the Court. In the context of the present case, it was submitted that this principle needs to be applied, as otherwise, if the proviso to section 151 is not considered as retrospective by this Bench, it will frustrate and defeat the very object of the said proviso which is to clarify calculation of the extended time limit for sanction of PCIT to pass order u/s 148A(d) and enable issuance of notice u/s 148 for assessment/re-assessment of escaped income in cases which are reopened within 3 years from end of the assessment year.

It was further submitted that the ld AR has relied upon the case of Holiday Developers Pvt. Ltd. Vs. ITO, Ward-5(1)(1), Mumbai wherein by Judgement dated 29-01-2024 and in the case of KPMG LLP VS. ACIT(IT), Circle-2(1)(2), Delhi & Ors., wherein by judgment dated 21-02-2024, the Hon‟ble Bombay High Court has quashed and set aside reopening notices for AY. 2018-19 on the ground that sanction granted by PCIT in these cases after the end of 3 years from end of the assessment year is invalid as the sanctioning authority was PCCIT and not PCIT. It was submitted that both these decisions have also relied further on the decision in the case of Siemens Financial Services Pvt. Ltd. Vs. DCIT, 457 ITR 647 (2023) Bom. Regarding these decisions of the Jurisdictional High Court relied upon by the assessee, it was submitted that no argument regarding retrospective application of proviso to Section 151 was presented before the Hon'ble Bombay High Court in all these cases which have been decided against the Revenue. It was further submitted that as SLP has been filed against the above orders of the Hon'ble Bombay High Court, the matter may be kept in abeyance till the disposal of such SLP by the Hon‟ble Supreme Court.

It was submitted that the intention of the Legislature is clear and the proviso has been expressly inserted w.e.f. 01-04-2023, and therefore, it cannot be argued at this stage by the Revenue that the amendment is retrospective in nature. The Circular No. 1/2024 (supra) issued by the Board is also very clear in this regard, which is binding on the Department and no contrary contentions can be raised by the Department [UCO Bank v. Commissioner of Income-tax [1999] 237 ITR 889 (SC)]. It was submitted that wherever the Legislature wanted to amend any provision with retrospective effect, the same has been duly done. For instance, the Finance Act, 2023, which inserted the proviso to section 151, made, inter alia, the following amendments with retrospective effect:

We have heard the rival contentions and perused the material available on record. The relevant provisions of the Act, as amended by the Finance Act, 2021, read as follows: "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 purpose of assessment or reassessment 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 section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, 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 set- ting 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 section 139: 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. Explanation 1. For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,- (i) any information flagged 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;

Section 147 of the Act provides that where any income chargeable to tax has escaped assessment for any assessment year, the AO may assess or re-assess such income for such assessment year subject to the provisions of section 148 to section 153. Section 148 provides that before making the assessment or re-assessment, the AO shall serve on the assessee a notice requiring him to furnish return of his income in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year. The provisions of section 148 are subject to the provisions of section 148A of the Act and it also requires that while issuing notice to the assessee, a copy of the order passed u/s. 148A(d) is to be served on the assessee. The proviso to section 148 provides that no notice shall be issued unless there is information with the AO which suggests that income chargeable to tax has escaped assessment for the relevant assessment year and the AO has obtained prior approval of the specified authority to issue such notice. The specified authority has further been defined by way of Explanation 3 as the authority referred to in section 151 of the Act.

Thereafter if we look at the provisions of section 148A of the Act, it talks about conducting an enquiry by the AO with the prior approval of the specified authority with respect to information which suggests that the income chargeable to tax has escaped assessment. It further provides that an opportunity of being heard has to be provided to the assessee with the prior approval of specified authority by serving upon him a notice u/s 148A(b) to show cause within such time as may be specified in the notice not being less than seven days, but not exceeding thirty days from the date on which such notice is issued as to why the notice u/s. 148 should not be issued on the basis of information which suggest that income chargeable to tax has escaped assessment for the relevant assessment year.

Thereafter, Section 149 talks about time limit for issuance of notice u/s. 148 of the Act, it provides that no notice u/s. 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). Under clause (b) it provides that no notice u/s. 148 shall be issued for the relevant assessment year if three years, but not more than ten years have elapsed from the end of the relevant assessment year unless the AO has in his possession books of account or other documents or evidence which reveal that income chargeable to tax represented in the form of asset which has escaped assessment amount to or is likely to amount to Rs. 50 lakhs or more for that year. It has been further provided by way of 3RD proviso to section 149 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) of section 148A or the period during which the proceedings u/s. 148A is stayed by an order or injection of any court shall be excluded. By way of 4th proviso to section 149, it has been further provided that where immediately after exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the AO for passing an order under clause (d) of section 148A is less than seven days such remaining period shall be extended to seven days and period of limitation in sub-section (1) to section 149 shall be deemed to be extended accordingly. By way of sub-section (2) to section 149, it has again been provided that the provisions of sub-section (1) to section 149 as to the issue of notice shall be subject to the provisions of section 151 of the Act.

Section 151 of the Act talks about the specified authority for the purposes of Section 148 and 148A. It provides that the specified authority shall be 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; or Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year.

As evident from the aforesaid reading of the provisions as amended by the Finance Act 2021, all the provisions have been inter-linked and therefore have to be read harmoniously to arrive at any conclusion in the instant case as to the period of limitation u/s. 149 and issuance of notice u/s. 148 as to whether issued within three years or beyond three years from the end of relevant assessment year and as to whether there is breach or a violation of the said provisions and there is any action on the part of the Assessing officer which defeat the provisions so laid down in the statute in terms of seeking approval from specified authority as so defined u/s. 151 of the Act.

Applying the aforesaid provisions in the instant case, we find that basis specific information in respect of the assessee through the ITBA software that the assessee has carried out certain transactions in the nature of purchase of immoveable property amounting to Rs. 8,31,45,549/- and the fact that the assessee did not file any original return of income, proceedings u/s. 148A were initiated by the AO and an opportunity of being heard as per the provisions of section 148A(b) of the Act was provided to the assessee with the prior approval from competent authority vide notice dt. 23-03-2022, wherein the assessee was asked to show cause as to why notice u/s. 148 shall not be issued and to furnish necessary explanation along with certain documentation on or before the 18th of April, 2022. There is no dispute that the said show cause notice u/s 148A(b) was issued and served on the assessee through ITBA portal and through Speed Post at the last known address of the assessee. In response to the said show cause dated 23-03-2022, there was no reply which was furnished by the assessee, a fact which is also not in dispute. Thereafter, the AO basis material available on record recorded his finding stating that it is a fit case for issuance of notice u/s. 148 of the Act and thereafter, an order u/s. 148A(d) of the Act was passed on 23-04-2022. The said order was passed after seeking prior approval of the Commissioner of Income Tax(IT)-4, Mumbai, dt. 21-04-2022. Separately, notice u/s. 148 was issued on 23-04-2022 with the prior approval of Ld. Commissioner of Income Tax(IT)-4, Mumbai, dt. 21-04-2022.

Therefore, the relevant dates for the purposes of determining the limitation, for issuance of notice u/s 148, in terms of section 149 in the instant case are as follows. The date of issuance of show case u/s. 148A(b) was 23-03-2022. From issuance of said notice, the time period allowed to the assessee was till 18-04-2022 to respond to the show-cause and the date of finally passing of the order u/s. 148A(d) was 23-04-2022 and issuance of notice u/s 148 was also 23-04-2022.

As evident from the aforesaid third proviso to section 149 for the purposes of computing the period of limitation, the time allowed to the assessee as per the show cause notice issued under clause (d) of section 148A has to be excluded. Therefore, in the instant case, the period starting from 23rd March, 2022 till 18th April, 2022 has to be excluded by the AO for the purposes of computing the period of limitation under sub- section (1) to section 149 for the purpose of issuance of notice u/s. 148 of the Act. Where the said period is excluded in the instant case, three years period from end of the relevant AY. 2018-19 expires on 26-04-2022. Therefore, in the instant case, the matter falls under clause (a) to sub- section (1) to section 149 as the notice has been issued on 23-04-2022 i.e, prior to expiry of three years from the end of the relevant assessment year. Therefore, the contention of the ld AR that the notice u/s 148 has been issued beyond the period of three years from the end of the relevant assessment year 2018-19 cannot be accepted.

Further, in terms of 4th proviso to section 149, as noted above, where immediately after exclusion of the period referred to 3rd proviso, the period of limitation available to the AO for passing an order under clause (d) of section 148A is less than seven days such remaining period shall be extended to seven days and period of limitation in sub-section (1) to section 149 shall be deemed to be extended accordingly. In the instant case, since no reply has been furnished by the assessee in response to show-cause u/s 148A(b), the period of limitation for passing the order under section 148A(d) expires on 30th May, i.e, one month from the end of the month allowed to the assessee to furnish his reply. Since the said period available to the AO to pass the order is more than 7 days, no effect has to be given to the 4th proviso for purposes of determining the period of limitation in terms of sub-section (1) to section 149 of the Act.

In such a case where the notice u/s 148 has been issued within three years from the end of the impugned assessment year 2018-19, where we look at the specified authority in terms of section 151 whose approval is required before issuance of notice u/s 148, the specified authority shall be the Principal Commissioner or Principal Director or Commissioner or Director as per clause (i) to section 151 of the Act. In the instant case, the sanction has been accorded by the Ld. Commissioner of Income Tax(IT)-4, Mumbai, vide his order dt. 21-04-2022 which is the competent authority as so defined. We therefore don‟t find any deviation and the action of the AO cannot be faulted in terms of seeking the approval from an authority which is not a specified authority and as such, no violation of provisions of section 151 of the Act.

We, therefore, have a situation where the notice u/s. 148 has been issued within a period of three years from the end of the relevant assessment year and the approval has been duly taken by the AO before issuance of such notice from the Ld. Commissioner of Income Tax(IT)-4, Mumbai. It is at the time when the AO seeks to issue the notice u/s. 148 that he has to determine whether the period of limitation falls under three years from the end of the relevant assessment year or beyond three years from the end of the relevant assessment year and for the purposes of determining the said period of limitation, the AO has to necessarily take into consideration and give effect to the proviso to section 149 of the Act. As we have discussed supra, in the instant case, the time allowed to the assessee to respond to the show cause issued under 148A(b) has to be necessarily excluded by the AO for the purposes of computing the period of limitation. There is no discretion as such which has been provided to the AO to exclude the said period allowed to the assessee to respond or for that matter, no liberty has been provided to the assessee to claim non- applicability of the said proviso for the reason that he chooses to remain silent and didn‟t respond to the show-cause issued under 148A(b). In either case, period allowed to the assessee to respond to the show-cause has to be excluded. Once the period of limitation is so determined by the AO, thereafter, it is for the AO to reach out to the specified authority and for the purposes, he has to identify the specified authority as so defined in section 151 of the Act. The applicability of section 151 in terms of determining the specified authority to seek necessary approval will therefore arise once the period of limitation is determined and crystallised by the AO u/s 149 of the Act. We, therefore, find that in the instant case, the notice u/s. 148 has been issued to the assessee within a period of three years from the end of the relevant assessment year after obtaining approval of the specified authority as so provided under the statute.

Coming to the decisions of the Hon‟ble Bombay High Court in cases of Holiday Developers Private Limited vs. ITO, W.P. No. 3679 of 2023, dt. 29th January, 2024, Vodafone Idea Limited vs. DCIT, W.P. No. 2768 of 2022, dt. 6th February, 2024 and KPMG LLP vs. ACIT, W.P.(ST)No. 5390 of 2024, dt. 21st February, 2024, we find that in these cases, the ground raised

We also refer to the decision of the Co-ordinate Bench of the Tribunal in the case of Arihant Engineers vs. ITO, dt. 01- 10-2024 relied upon by the ld AR and again, we find that the Co-ordinate Bench of the Tribunal has referred to the decision of the Hon‟ble Bombay High Court in the case of Siemens Financial Services (P.) Ltd., vs. DCIT (supra) and has decided the matter holding that the notice u/s. 148 has been issued in contravention of the provisions of section 151. There also, we find that there has been no contentions which have been raised or advanced by either of the parties as far as determining the period of limitation in terms of section 149, it was taken as an undisputed fact that the same has been issued beyond the period of three years from the end of the relevant assessment year and the matter was thus limited to determining the specified authority in terms of section 151 of the Act.

Now, coming to the decision of the Hon‟ble Bombay High Court in the case of Siemens Financial Services (P.) Ltd., vs. DCIT (supra), which has also been followed by the Co-ordinate Bench of the Tribunal in the case of Arihant Engineers vs. ITO (supra), we refer to the relevant findings of the Hon‟ble Bombay High Court in the said decision, which reads as under:

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.

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.

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 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.

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 limitation and does not affect the scope of section 151.

On careful perusal of the said decision, we find that the contentions before the Hon‟ble Bombay High Court were limited to determining the specified authority u/s. 151 of the Act and as far as the period of limitation u/s. 149 and in particular the proviso to section 149, there have been no contentions which have been raised by the Counsel before the Hon‟ble Bombay High Court as evident from para 10 and 11 of the said decision where it was submitted that for assessment year 2016-17, three years have elapsed on 31/03/2020 and the AO should have sought approval and complied with section 151(ii) and not section 151(i) of the Act. In light of the same, there was no occasion for the Hon‟ble Bombay High Court to consider the provisions of section 149 of the Act and it was therefore, taken as an undisputed fact that the notice u/s. 148 has been issued beyond the period of three years and consequentially the specified authority as contemplated u/s. 151(ii) of the Act was held applicable instead of the specified authority as so defined in section 151(i) of the Act, from whom the AO has sought the necessary approval and it was accordingly held that such an approval obtained u/s 151(i) would be bad in law.

We, therefore, find that in none of the aforesaid decisions, the provisions of section 149 have been contended and examined by the Hon‟ble High Court and the Coordinate Benches and, therefore, all these decisions does not support the case of the assessee as in the instant case, we have discussed supra, that as per 3rd proviso to section 149, notice u/s. 148 has been issued within the period of three years from the end of the relevant assessment year and for the purposes of determining the period of limitation, the period allowed to the assessee in terms of responding to the show cause u/s. 148A(d) of the Act has to be necessarily excluded and once the same is determined, the notice has been issued within a period three years from the end of the relevant assessment year and before issuance of such notice, the approval has been rightly taken from the specified authority as so defined u/s 151(i) of the Act.

In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the contention raised by the Ld. AR that notice u/s. 148 dt. 23-04-2022 has been issued without seeking approval of the specified authority cannot be accepted and is hereby rejected.

In light of the aforesaid discussion, we do not deem it necessary to examine the contention raised by the Ld.DR in terms of the proviso to section 151 of the Act as inserted by the Finance Act, 2023 and whether the same can be read retrospective. As we are of the considered opinion that it is for the AO to determine at the relevant point in time when he is issuing the notice u/s. 148 as to whether the notice is issued within period of three years from the end of the relevant assessment year or beyond the period of three years from the end of the relevant assessment year and, thereafter, basis the said determination to seek approval from the specified authority as so provided in section 151 of the Act. It is for the AO to reach out to the specified authority to seek its approval and for the purposes it has to necessarily adhere to the provisions of section 149 of the Act and which as we have discussed supra, where taken into consideration in the instant case, the notice has been issued within three years from the end of the relevant assessment year and the approval has been rightly taken from the competent authority in terms of section 151 of the Act dehor the amendment brought in by the Finance Act 2023. The amendment which has been brought in by the Finance Act, 2023 therefore need not be examined at this stage and the same is left open to be examined at the appropriate stage, should the need for the same arise in future.

On merits, we find that no arguments have been advanced by either of the parties and given that the assessment has been done on a protective basis in the hands of the assessee, in absence of any information available on record in terms of the current status of the substantive additions in the hands of the wife of the assessee, we deem it appropriate to set aside the matter to the file of the AO to decide the same afresh as per law taking into consideration the status of the proceedings in the hands of the wife of the assessee after providing reasonable opportunity to the assessee.

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 22-07-2025 Sd/- Sd/- [RAHUL CHAUDHARY] [VIKRAM SINGH YADAV] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 22-07-2025 TNMM