AJAY MULTI PROJECTS PRIVATE LIMITED,MUMBAI vs. DCIT, CIRCLE 4(1)(1), MUMBAI, MUMBAI

The Ld. CIT(A), NFAC, erred in confirming the addition of Rs. 50,00,000/-made by the Ld. AO u/s. 68 r.w.s. 115BBE of the Act.

The addition made is bad in law as the same is gross violation of principles of natural justice, inasmuch as the Appellant was not provided an opportunity to cross examine the person on whose statement reliance has been placed.

The Ld. CIT(A) erred in confirming the levy of interest u/s. 234A, 234B, 234C and 234D of the Act.”

The brief facts of the case are that the assessee is a Non- Banking Finance Corporation (NBFC) company and engaged in the business of share trading and investments in shares and securities and finance activities. The assessee had filed its return of income on 06/09/2017, declaring total income at Rs. 24,24,140/-. The same was processed u/s. 143(1) of the Act on 01/06/2018. Notice u/s. 143(2) and 142(1) were issued and served upon the assessee. Also, notice u/s. 148 was issued to the assessee on 29/07/2022. In response to the said notice, the representative of the assessee appeared before the Ld. AO and filed requisite details through E- proceedings. We noticed that the assessment order in this case was passed on 30/05/2023, u/s. 147 r.w.s. 144B of the Act, determining total income at Rs. 74,24,140/- after making addition u/s. 68 of the Act as unexplained money.

At the very outset, Ld. AR recked up ground no. 5 which is legal in question and relates to challenging the sanction obtained A.Y. 2017-18 4 Ajay Multi Projects Pvt. Ltd. by AO u/s. 151 of the Act. Therefore, we take up this ground as the same goes to the roots of the case.

After hearing the Counsels at length and after going through the records, we found that notice u/s. 148 of the Act in the present case was issued on 29/07/2022 and in the said notice, it has been specifically mentioned that the same is being issued with the prior approval of Ld. PCIT. This issue has already been decided by the coordinate bench of ITAT in the case of M/s. Nickson Morris Rodricks vs. ITO – 42(1)(3) in order dated 26/03/2025, and the operating portion is contained at para no. 7 to 9 and the same is reproduced hereinbelow: 7. We have heard the counsels for both the parties, perused the material placed on record and judgments cited before us and the orders passed by the revenue authorities. It is undisputed fact that the impugned notice u/s 148 of the Act was issued by the department on 29.07.2022 for the year under consideration as in sub para (3) of the impugned notice it clearly mentioned that the said notice is being issued after obtaining the prior approval of PCIT instead of PCCIT as is required u/s 151 of the Act. In this regard, we placed reliance upon the decision of the Coordinate Bench of ITAT in (supra), wherein the ‘identical issue’ was decided in favour of assessee and the operative portion of the decision is reproduced herein below: 4. We have heard both the sides and have perused the material on record in relation to this issue. We have also taken into consideration the judicial precedents cited during the course of hearing. 5 In the facts and circumstances of the present case the issue that arises for consideration is whether the Principal Commissioner of Income Tax or the Principal Chief ; A.Y. 2017-18 5 Ajay Multi Projects Pvt. Ltd. Commissioner of Income Tax was the Specified Authority for seeking approval for passing order under Section 148A(d) of the Act and issuance of notice under Section 148 of the Act (new regime) for the Assessment Year 2017-18. 6 In this regard we deem it appropriate to refer to judgment of the Hon’ble Supreme Court in the case Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC)[03/10/2024]. The Hon’ble Supreme Court had, while dealing with the issue of approval from specified authority in terms of Section 151 of the Act, made the following observations: “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 (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; ; A.Y. 2017-18 6 Ajay Multi Projects Pvt. Ltd. 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.

Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre-conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly 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(i) has an extended time till 30 June 2021 to grant approval. 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, ; A.Y. 2017-18 7 Ajay Multi Projects Pvt. Ltd. then the specified authority under section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.

For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30 June 2021.

Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages: a. Section 148A(a) - to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022; c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and d. Section 148 - to issue a reassessment notice; 80. In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts "shall be deemed to have been issued under section 148-A of the Incometax Act as ; A.Y. 2017-18 8 Ajay Multi Projects Pvt. Ltd. substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b)." Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of U P [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267.

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.” (Emphasis Supplied)

Since in the present case the notice was issued on 29.07.2022 u/s 148 of the Act after obtaining the approval of PCIT, accordingly we conclude that in the present case the approval has been obtained by the authority specified u/s 151(i) of the new regime instead of authority specified u/s 151(ii) of the new regime. Non compliance by the AO with the provisions contained in Sec. 148A(d) r.w.s 151(ii) of the new regime affects jurisdiction of the AO to issue a notice u/s 148 of the Act. Accordingly, we quash the proceedings being in violation of the provisions of the Act.” 7. Considering the fact that in the present case also undisputedly the impugned notice has been issued by the department on 29/07/2022 for the year under consideration and the same was issued after obtaining the prior approval of PCIT instead of PCCIT as is required u/s. 151 of the Act. Therefore, while relying upon the decision of the coordinate benches and also considering the facts of the present case, we are of the view that the impugned notice is not in accordance with the provisions of law, as the approval has been sought from the appropriate specific authority u/s. 151(i) of the new regime instead of authorities specified u/s. 151(ii) of the new regime. Therefore, a non- compliance by the AO with the provisions contained in Section 148A(d) r.w.s. 151(ii) of the new regime effects the jurisdiction of ; A.Y. 2017-18 12 Ajay Multi Projects Pvt. Ltd. the AO to issue a notice u/s. 148 of the Act. Accordingly, we quash the proceedings being in violation of the provisions of the Act. 8. Accordingly, the ground no. 5 raised by the assessee is allowed. 9. Since, we allowed the ground no. 5 raised by the assessee, there is no need to adjudicate other grounds raised