NTT DOCOMO, INC.,MUMBAI vs. ACIT (INTERNATIONAL TAXATION), CIRCLE-3(3)(1)

The ld. AO noted that after the issuance of notice u/s.148 dated 29/06/2021, the judgment of the Hon'ble Supreme Court, in the case of Union of India Vs Ashish Aggrawal in Civil Appeal No 3005/2022 vide order dated 04.05.2022 has been pronounced with directions to deal the such cases where notices u/s 148 was issued between period from 1.04.2021 to 30.06.2021. Accordingly, as per the direction of the Hon’ble Supreme Court in the case of Union of India vs. Ashish Aggrawal (supra), the ld. AO supplied the information and material relied upon for recording the reasons for reopening was given to the assessee vide letter dated 27/05/2022 giving opportunity to reply within two weeks. Later on, the assessee’ case was transferred to DCIT (IT)3(3)(1), Mumbai after obtaining requisite approval from the competent authority. However, ld. AO passed his order u/s. 148A(d) on 30/07/2022 and issued notice to the assessee u/s.148 on 30/07/2022.

Before us, ld. Counsel submitted that now in view of the judgment of judgment of the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (2024) 469 ITR 46 the AO had to pass the order u/s 148A (d) and issue notice u/s 148 NTT Docomo, Inc. within the surviving time once the time limit for filing of reply by the assessee is over. Here in this case, notice u/s.148 of the Act under the old regime was issued on 29/06/2021 and the time limit for issuance of notice u/s.148 under the old regime was 30/06/2021 as held by the Hon’ble Supreme Court in the case of Ashish Agarwal (supra). Thereafter, the ld. AO had issued a notice in compliance of the decision of the Hon’ble Supreme Court in the case of Ashish Agawwal (Supra) supplying the information in his show-cause notice u/s. 148A(b) on 27/05/2022. The time granted under the said show-cause notice was two weeks, however, the assessee has filed response on 22/06/2022 as per the judgment of the Hon’ble Supreme Court. After all the exclusion, ld. AO had only two days to issue the notice under the new regime i.e. between 29/06/2021 to 30/06/2021. Accordingly, notice issued u/s.148 on 30/07/2022 is barred by limitation.

On the other hand, ld. DR submitted that Section 148A clearly provides that ld. AO has period of 30 days from the end of the month to issue notice and order u/s. 148A(d) after the assessee had filed reply. Thus, the principle laid down by the Hon’ble Supreme Court in the case of Rajeev Bansal will not apply.

We have heard both the parties and perused the relevant facts and the dates for adjudicating the issue of limitation which for the sake of ready reference is reproduced hereunder:-

NTT Docomo, Inc. Particulars Date Notice issued under section 148 by the Delhi 29 June 2021 DCIT Letter from the Delhi DCIT referring to Ashish 2 7 May 2022 Agarwal's Response of the assessee 22 June 2022 Order u/s 148A(d) and notice u/s 148 by the 30 July 2022 AO Time limit as per SC ruling in the case of Rajeev Bansal Date / period Notice issued under the old regime 29 June 2021 After all exclusions, the AO had 2 days to issue of a notice under the new regime (i.e. 29 June 2021 to 30 June 2021) Response by the assessee to the letter dated 27 May 22 June 2022 2022 Last date for issuance of the notice under the new 24 June 2022 regime (22 June 2022 plus 2 days)

The Hon’ble Supreme Court in the case of Rajeev Bansal explaining the ratio laid down in similar judgment of Ashish Bansal wherein the Hon’ble Supreme Court had exercised its discretionary jurisdiction under Article 142 of the Constitution of India while explaining the old law and new law u/s 148, has created a legal fiction and balancing act on the existing legal framework of procedure of re-assessment. Wherever the notice u/s.148 were issued under the old regime for which time limit was extended up to 30/06/2021, the Hon’ble Apex Court held that it would be deemed that re-assessment notice issued under the old regime shall be treated as show-cause notice issued u/s. NTT Docomo, Inc. 148A(b) of the new regime. Further the Court directed the Revenue to provide all the relevant material / information to the assessee and thereafter, allowed the assessee to respond to the show-cause notice and raised its objection or availing any kind of defenses including available u/s.149. Thus, the Hon’ble Supreme Court balanced the equities between the Revenue and the assessee by giving effect to the legislative scheme of re- assessment as contained under the new regime. The Court thus supplemented the existing legal framework of the procedure of re-assessment under the Income Tax Act with the principles grounded in equitable standards.

The Hon’ble Supreme Court has elaborated the fact of the legal direction for different period (i) under the old regime and other (ii) under the new regime. For the sake of ready reference para 94 & 96 are reproduced as under:- “94. Before we proceed, we need to bear in mind three important periods: i. The period up to 30 June 2021-this period is covered by the provisions of the Income Tax Act read with TOLA; ii. The period from 1 July 2021 to 3 May 2022-the period before the decision of this Court in Ashish Agarwal (supra); and iii. The period after 4 May 2022-the period after the decision of this Court in Ashish Agarwal (supra). This period is covered by the directions issued by this Court in Ashish Agarwal (supra) and the provisions of the Income Tax Act read with TOLA. a. Third proviso to Section 149 95. The third proviso to Section 149 reads thus: "Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time NTT Docomo, Inc. allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded."

The third proviso excludes the following periods to calculate the period of limitation: (i) the time allowed to the assessee under Section 148A(b); and (ii) the period during which the proceedings under Section 148A are "stayed by an order or injunction of any court."”

Thereafter, considering the judgment of Ashish Aggrawal and the relevant provisions of the new and old Act the Hon’ble Court laid down following principles after observing and holding as under:- 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 NTT Docomo, Inc. 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 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 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 NTT Docomo, Inc. 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 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

9. 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 (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. NTT Docomo, Inc. 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 29/06/2021 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)…………………………………………………………………………..

Thus, the ld. AO was required to issue notice u/s.148 within the surviving time under the new regime which here in this case had expired on 24/06/2022 as per the chart given above. Accordingly, the impugned notice u/s.148 dated 30/07/2022 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 30/07/2022 is barred by limitation and therefore, the entire notice is quashed, consequently, the entire re-assessment proceedings as well as re- assessment order is non-est and on this ground, the entire re- NTT Docomo, Inc. assessment order is quashed. Accordingly, appeal of the assessee is allowed on legal grounds.

In the result, appeal of the assessee is allowed on legal grounds.