ASSISTANT COMMISSIONER OF INCOME TAX-4(1)(1), MUMBAI, MUMBAI vs. ADDON RETAIL PRIVATE LIMITED, MUMBAI

If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing Addon Retail Private Limited from the fiction. See State of A P v. A P Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing there from."

Thus, the Hon’ble Supreme Court had explained the concept of surviving or balance time limit which is to be calculated by computing number of days between dates of issuance of deemed notice and 30/06/2021. Thereafter, the Hon’ble Supreme Court has elaborated the effect of the legal fiction propounded in the case of UOI vs. Ashish Agarwal which has been explained in para 110 to 112 which is reproduced hereunder:- 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till 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) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.

The clock started ticking for the Revenue only after it received the response of the assessees to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read Addon Retail Private Limited with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime.

Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on 18 August 2022.”

The sequitor of the aforesaid observation and the judgment of the Hon’ble Supreme Court are that-  Firstly, exclusion of the period has been explained; a) the date of issuance notice u/s 148 under the old regime reckoned to be the date of issuance of the deemed notices u/s 148A(b); b) the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assessees is to be excluded from the computation of the period of limitation; c) further, period of two weeks granted to the assessee to reply to the show-cause notice is also to be excluded in terms of third proviso to Section 149;  Secondly, once the response of the assessee to the show- cause notice has been received, then “the clock starts ticking for the Revenue”, that is, after the receipt of reply, ld. AO has to; (a) consider the reply of the assessee u/s.148A(c); (b) take a decision u/s.148A(d) based on the available material and the reply of the assessee; and Addon Retail Private Limited (c) issue a notice u/s.148 if it was a fit case for re- assessment. Once it is found to be a fit case for re-assessment, the limitation clock starts ticking and it is mandatory for the ld. AO to comply with these procedures within the surviving time limit which was available to the ld. AO to issue re-assessment notice u/s.148 of the new regime; and  Lastly, the Hon’ble Supreme Court has given an example as how to calculate the surviving time. Calculation of surviving time has been laid down from the period when the first notice u/s.148 was issued under old regime till the last date of limitation for issuance of notice u/s.148 of the old regime; and that period has been reckoned as the surviving time period left for the ld. AO while issuing notice u/s.148 under the new regime. So whatever surviving time is left the AO has to issue notice within that surviving time.

If the surviving time like here in this case is only two days, because original notice u/s.148 under the old regime was issued on 28/06/2021 and the last date on which notice could have been issued under old regime was up till 30/06/2021; and therefore, the surviving time left was only two days for issuing a notice under the new regime u/s.148 after completion of the procedure laid down u/s. 148A (b) to 148(d). This principle has been summarized in para 114G & H of the Judgment which for the sake of ready reference is reproduced hereunder:- “114. In view of the above discussion, we conclude that (a) ………………………………………………………………………… (b)………………………………………………………………………….. (c)………………………………………………………………………….. (d)………………………………………………………………………….. (e)………………………………………………………………………….. (f)………………………………………………………………………….. (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 April 1, 2021 and June 30, 2021 till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Addon Retail Private Limited Agarwal, and the period of two weeks allowed to the assessees 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 the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. All notices issued beyond the surviving period are time barred and liable to be set aside;” Ergo, ld. AO was required to issue notice u/s.148 of the new regime within the time surviving under the Income Tax Act read with TOLA and any notices issued beyond the surviving period was declared to be time barred by the Hon’ble Supreme Court.

Now here in this case, the chronology of date and issuance of notices for the purpose of calculation of limitation and surviving days as per the decision of the Hon’ble Supreme Court in the case of Rajeev Bansal can be illustrated in the following manner:- Sr. Particulars Date of Surviv No. Notice ing days 1. Notice issued u/s. 148 of the Act under 28.06.2021 old regime.

Due date for issuance of notice under old 30.06.2021 2 regime 3. Notice issued by Ld. A.O. in compliance 24.05.2022 of the decision of Hon'ble Supreme Court in the case of UOI v. Ashish Agarwal [444 ITR ±1 supplying the information.

Here in this case no reply was filed by the assessee in response to show-cause notice u/s. 148A(b) which was fixed by the ld. AO to be furnished on or before 07/06/2022. Once the time limit for reply to the show-cause notice had expired then the Hon’ble Supreme Court in para 111 (supra) have categorically held that ld. AO had to complete the procedure laid down u/s.148A(c), passed u/s.148(d) and issued notice u/s.148 within the surviving time limit which was originally available to the ld. AO. Here in this case the surviving time was only two days which is to be calculated from 28/06/2021 to 30/06/2021 and therefore, only two days shall be available to the ld.AO from the time granted to the assessee to give reply to the notice. Here in this case also the clock started ticking for the ld. AO on the expiry of permissible limit i.e. that is between 07-06-2022 to 09/06/2022. Thus, only 2 days were the surviving time available to the AO and he was required to pass order u/s. 148A (d) and issue notice u/s.148 on or before 09/06/2022. Accordingly, the impugned notice u/s.148 dated 28/07/2022 does not fit in the “surviving time limit” as laid down by the Hon’ble Supreme Court in the case of Rajeev Bansal. Accordingly, we hold that notice u/s.148 dated 28/07/2022 is barred by limitation, therefore, the entire notice is quashed. Consequently, the entire re-assessment proceedings as well as re- assessment order is non-est. Thus, on this ground, entire re- assessment order is quashed and consequently, the Revenue’s appeal is dismissed.

Here in this case also notice has been issued on 29/07/2022 i.e. after three years from the end of the relevant assessment year which expires on 31/03/2020, therefore the specified Addon Retail Private Limited authority as per the provisions of the Act for granting sanction would be PCIT or CCIT. Since notice has been approved by the sanction of PCIT was not the authority to sanction notice after the expiry of three years notice itself is invalid, accordingly, on this point, order of the ld. CIT(A) is confirmed.

However, we are not going on the other issue of annulment of assessment as these grounds are not relevant.

In the result, appeal filed by the Revenue is dismissed.