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Facts
The assessee appealed against an order by the CIT(A) which upheld the reassessment order for AY 2014-2015. The reassessment was initiated under Section 147 read with Section 144B of the Income Tax Act, 1961, based on an alleged sham transaction of shares amounting to INR 4.14 Crores.
Held
The Tribunal held that the notice issued under Section 148 of the Act and the subsequent order under Section 148A(d) were time-barred. This was because the procedures were not completed within the surviving time limit prescribed by the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal.
Key Issues
Whether the reassessment proceedings and the notice issued under Section 148 were time-barred due to non-compliance with the 'surviving time limit' as interpreted by the Supreme Court.
Sections Cited
147, 148, 144B, 250, 68, 148A, 149, 151, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, D BENCH, MUMBAI
order : 20.05.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1. 1. The Assessee has preferred the present appeal against the Order, dated 08/10/2024, passed by the National Faceless Appeal Centre (NFAC), [hereinafter referred to as the ‘CIT(A)’], under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], whereby the Ld. CIT(A) had disposed off the appeal of the Assessee against the Assessment Order, dated 30/05/2023, passed under Section 147 read with Section 144B of the Act, for the Assessment Year 2014-2015.
2. The relevant facts in brief are that notice under Section 148 of Assessment Year 2014-2015 the Act (old regime) was issued to the Assessee for the Assessment Year 2014-2015 on 26/06/2021 (i.e., after the expiry of 4 years but before the expiry of 6 years from the end of Assessment Year 2014-2015). Subsequently, in compliance with the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal 444 ITR 1 (SC) [04/05/2022], communication, dated 31/05/2022, was sent to the Assessee intimating that the aforesaid notice issued under Section 148 of the Act (under old regime) would be treated as the show-cause notice issued in terms of Section 148A(b) of the Act (under new regime introduced by the Finance Act, 2021 w.e.f. 01/04/2021). The Assessing Officer also shared with the Assessee material/information on the basis of which the Assessing Officer had formed a belief that income had escaped assessment. The Assessee filed reply on 11/06/2022. Thereafter, order under Section 148A(d) of the Act was passed on 30/07/2022 after taking approval from the Principal Commissioner of Income Tax, Mumbai. This was accompanied by issuance of notice on 30/07/2022 under Section 148 of the Act (new regime). The reassessment proceedings culminated into passing of the Assessment Order, dated 30/05/2023, passed under section 147 read with Section 144B of the Act. The Assessing Officer made an addition of INR.4.14 Crores under Section 68 of the Act holding that the transaction of purchase/sale of shares of M/s.Tilak Ventures Limited, an alleged penny stock company, was a sham transaction undertaken by the Assessee.
The appeal preferred by the Assessee against the aforesaid Assessment Order was dismissed by the CIT(A) vide Order, dated 08/10/2024.
Being aggrieved, the Assessee has preferred the present appeal 2 Assessment Year 2014-2015 before the Tribunal.
When the appeal was taken up for hearing, the Learned Authorized Representative for the Assessee advanced arguments on admission of Additional Ground (raised vide letter dated 03/03/2025) which reads as under:
“1. On the facts and circumstances of the case and in law, the notice issued u/s 148 of the I.T.Act, 1961 by the Ld. A.O. and the reassessment order passed thereafter is grossly incorrect, invalid and bad-in-law.
On the facts and circumstances of the case and in law, the Ld. A.O. has erred by issuing the notice under Section 148 of the I.T.Act, 1961 after the Surviving Time Limit. In this regard, the assessee relies on the judicial decision of Hon’ble Supreme Court in case of Union of India Vs. Rajeev Bansal [2024] 167 taxmann.com 70(SC). The details of notice issued are as follow: Sr. Particulars Date Surviving No. Time Limit 1 Notice issued u/s 148 26/06/2021 2 Due date for issuance under old 30/06/2021 4 days regime 3 Notice issued under Section 148A(b) 31/05/2022 4 Last date to file reply as per notice 20/06/2022 u/s 148A(b) 5 Reply filed by assessee on 11/06/2022 6 Due date for issuance under new 15/06/2022 4 days regime 7 Order passed u/s 148A(d) 30/07/2022 8 Notice issued u/s 148 30/07/2022 ..“ 6. Having considered the rival submission on admission of additional ground and on perusal of the Additional Ground No. 1 and 2 above, we are of the view that the additional grounds raised
by the Assessee are legal grounds which can be adjudicated after taking into consideration material on record without inquiring into new facts. Therefore, the additional grounds raised by the Assessee are admitted in view of the judgment of the Hon’ble Supreme Court in the case of National
3. Assessment Year 2014-2015 Thermal Power Co. Ltd. Vs. CIT: 229 ITR 383. Accordingly, we proceed to adjudicate the grounds/additional grounds raised by the Assessee in the present appeal.
We would first take up additional grounds raised
by the Assessee since the same goes to the root of the matter and challenges the validity of the reassessment proceedings on the ground that the same do not confirm to the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 469 ITR
46. (SC)[03/10/2024].
We have considered the rival submissions and have perused the material on record in relation to additional grounds raised by the Assessee, and have also taken into consideration the judicial precedents cited during the course of hearing.
There is no dispute as to facts. It is admitted position that the notice issued under Section 148 of the Act (old regime) on 30/07/2022 was treated as notice issued under Section 148A(b) of the Act by the Assessing Officer. Thereafter, order under Section 148A(d) of the Act was passed on 30/07/2022, and the same was followed by issuance of notice, dated 30/07/2022, under Section 148 of the Act (new regime). Thus, the notice under Section 148 of the Act (new regime) was issued after the expiry of 6 years from the end of the relevant assessment year on 31/03/2021 (extended to 30/06/2021 by TOLA1).
The contention raised on behalf of the Assessee is that the Assessing Officer has passed order under Section 148A(d) of the Act after the expiry of ‘Surviving Period’ as computed according the judgment of the judgment of the Hon’ble Supreme Court in the case Rajeev Bansal (supra). Therefore, both, the order under 1 The Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020 4 Assessment Year 2014-2015 Section 148A(d) of the Act and the notice issued under Section 148 of the Act (new regime) are barred by limitation. Per Contra, the stand taken by the Learned Departmental Representative is that there is no infirmity in the order passed by the CIT(A).
We note that the Hon’ble Supreme Court had, in the case Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC), made the following observations in relation to the interplay between the judgment of Hon’ble Supreme Court in the case of Ashish Agarwal (supra) and TOLA:
b. Interplay of Ashish Agarwal with TOLA 108.The Income-tax Act read with TOLA extended the time limit for issuing reassessment notices under section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. [Lord Asquith, in his concurring opinion, observed:
If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021.
If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the 5 Assessment Year 2014-2015 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 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 therefrom."] 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. 111.The clock started ticking for the Revenue only after it received the response of the assesses 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 with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime. 112.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 6 Assessment Year 2014-2015 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.
In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013- 2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred. (Emphasis Supplied)
On perusal of the above it becomes clear that the Hon’ble Supreme Court has clarified that in case where reassessment notices were issued from 01/04/2021 to 30/06/2021 under the old regime, the assessing officer was required to complete the procedures contained in Section 148A of the Act within the ‘surviving time limit’ which can be calculated by computing the number of days between the date of issuance of the deemed notice under Section 148A(b) of the Act and 30/06/2021 [i.e. the extended the time limit provided by TOLA for issuing reassessment notices under section 148, which fell for completion from 20 March 7 Assessment Year 2014-2015 2020 to 31 March 2021]. The clock of limitation which had stopped 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 under Section 148A(b) of the Act (under new regime)], would start running again when final reply to the notice deemed to have been issued under Section 148A(b) of the Act is received by the Assessing Officer. It was clarified that a reassessment notice issued beyond the surviving time limit would be time-barred.
We find in the present case notice under Section 148 of the Act (old regime) was issued on 26/06/2021 and was deemed to be notice issued under Section 148A(b) of the Act (new regime). Thus, the surviving time limit can be calculated by computing the number of days between the date of issuance of the deemed notice (i.e., 26/06/2021) and 30/06/2021, which comes to 4 days. The clock started ticking only after Revenue received the response of the Assesses to the show causes notices on 11/06/2022. Once the clock started ticking, the Assessing officer was required to complete these procedures within the surviving time limit of 4 days which expired on 15/06/2022. Since the period was less than 7 days, it could be extended to 7 days taking the time limit for issuing notice to 18/06/2022 in view of the Fourth Proviso to Section 149(1) of the Act. In the present case, the order under Section 148A(d) of the Act was issued ion 30/07/2022 and on the same date notice under Section 148 of the Act was issued. Both the aforesaid dates, fell beyond the extended surviving time limit which expired on 18/06/2022. Therefore, the order passed under Section 148A(d) of the Act as well as the notice issued under Section 148 of the Act are time- barred and therefore, bad in law. It would be pertinent to note that the amendments to Section 149 and 151 of the Act 8 Assessment Year 2014-2015 introduced by way of Finance Act, 2023, which were made after 18/06/2022, would not apply to the present case since the extended surviving time limit had already lapsed by then and therefore, could not have been extended.
Therefore, in view of the above, notice, dated 30/07/2022, issued under Section 148 of the Act (new regime), the consequential reassessment proceedings and the Assessment Order, dated 30/05/2023, passed under Section 147 read with Section 144B of the Act are quashed. As a result, addition of INR.4.15 Crore made by the Assessing Officer under Section 68 read with Section 115BBE of the Act does not survive and stands deleted. Thus, the additional ground raised by the Assessee is allowed and all the other grounds raised by the Assessee are dismissed.
In terms of the paragraph 14 above, the appeal preferred by the Assessee is allowed.