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Facts
The assessee, a non-filer, received a notice u/s. 148A(b) of the Income Tax Act, 1961, for AY 2018-19. The notice was issued more than three years after the end of the assessment year. The Assessing Officer (AO) passed an order u/s. 148A(d) and issued a notice u/s. 148, but the approval for issuing this notice was obtained from a Principal Commissioner, whereas the law required approval from a Principal Chief Commissioner or equivalent authority for cases beyond three years.
Held
The Tribunal held that the approval for issuing the notice u/s. 148 was not obtained from the specified authority as per Section 151(ii) of the amended Act, as the notice was issued beyond three years from the end of the assessment year. Therefore, the notice and subsequent reassessment proceedings were invalid.
Key Issues
Whether the reassessment notice u/s. 148 was issued after obtaining valid approval from the specified authority under Section 151 of the Income Tax Act, 1961, considering the time limits for reopening.
Sections Cited
147, 144, 250, 69, 115BBE, 194C, 234A, 234B, 270A, 271AAC, 271A, 271B, 272A(1)(d), 148, 151, 148A, 149(1)(b)
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Income Tax Appellate Tribunal, “D” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2024-25/1071193738(1), dated 13.12.2024, passed against the assessment order by Assessing Unit, Income-tax Department, u/s. 147 r.w.s 144 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 26.02.2024, for Assessment Year 2018-19.
Grounds taken by assessee are reproduced as under:
Ground 1: The order passed u/s 250 of Income tax Act, 1961 by the honourable CIT (A) is against law and facts on in as much he was not justified to uphold the action of learned Assessing officer in determining total income of Rs.3,59,48,123/-. Ground 2: The CIT (A) erred in not considering the fact that during the assessment proceedings appellant has not been provided enough opportunity as A.O. passed the order ignoring the Adjournment request filed by the Appellant and same is against the principal of natural justice. Ground 3: The CIT (A) erred in upholding the order of Assessing Officer considering the bank credits as unexplained investment under the provisions of section 69 of the I.T Act, 1961. Ground 4: The CIT (A) has erred in overlooking the fact that assessment made by learned Assessing officer is high-pitched and leads to an inflated determination of income of Rs.3,59,48,123/- as unexplained deposits & business income which is not in accordance with the actual facts and circumstances of the case. And thus, erred in both the interpretation and application of the relevant provisions of the Income Tax Act, by charging tax u/s 115BBE resulting in an unjust demand of Rs. 6,09,74,551/- Ground 5: The CIT (A) erred in not considering the fact that there was no non- compliance on the part of the Appellant, as the response had been submitted but the impugned order was passed without considering the response submitted or without providing sufficient opportunity of being heard, thereby violating the principle of natural justice. Ground 6: The CIT (A) overlooked the actual facts and circumstances of the case and dismissed the Appeal without conducting an independent inquiry or remanding or set aside the matter for further investigation, which amounts to a clear denial of justice to the Appellant. Ground 7: The CIT (A) erred in blindly adhering to the order passed by the Assessing Officer, who, without due consideration, treated the bank credits and 26AS receipts as separate sources of income and summing them for taxation. This effectively resulted in double taxation of the same income, as the 26AS receipts were already included in the bank account. Such an approach is clearly not tenable in the eyes of the law and therefore addition of Rs.3,34,40,111/- made by the AO as an unexplained deposit under section 69 should be deleted. Ground 8: The CIT (A) erred in upholding the addition of Rs.25,08,012/- as income from business made by the Assessing officer assuming the net profits @8% of the contract receipts for AY 2018-19 instead as the actual profit margin for the AY 2017-18 and AY 2019-20 are 3.79% and 4.55% respectively as per Audited Financial Statements and so the addition made on account of income from contract business, being bad in law should be deleted or substantially be reduced. Ground 9: The CIT(A) erred in neglecting the fact that the TDS of Rs.3,13,515/- deducted under section 194C on Contract Receipt has not been considered by the Assessing officer while computing tax liabilities although same is clearly reflected in 26AS of the Income Tax Portal. Ground 10: The CIT (A) erred in not acknowledging the fact that the Appellant was unable to respond to and submit explanations for the notices received during the assessment proceedings due to circumstances beyond his control. Further, the Appellant had an unintentional and reasonable cause for the delay in responding, and this should have been taken into account during the proceedings. Ground 11: The L.d. CIT (A) erred in not considering the fact and circumstances of the case and levying interest under u/s 234A and u/s 234B of the Income Tax Act, 1961. Ground 12: The L.d. CIT (A) erred in not considering the fact and circumstances of the case and initiating penalty proceedings u/s 270A, 271AAC, 271A, 271B, and 272A(1)(d) of the Income Tax Act, 1961. "
For the year under consideration, assessee contended on the legal issue that approval obtained by the ld. Assessing Officer for the purpose of issuing notice u/s 148 is not in accordance with the provisions of section 151 under the new regime of reassessment introduced by the Finance Act, 2021. Brief facts relevant to the issue are that assessee is a non-filer of return for the year under consideration but has made transactions of-
(i) Cash deposit in current account of Rs.20,000/- (ii) Cash withdrawals in current account of Rs. 1,11,78,000/- (iii) TDS of Rs. 3,13,515/- on contract receipts of Rs. 3,13,50,154/- during the year under consideration.
3.1. On the basis of information available with the Department, ld. Jurisdictional Assessing Officer (JAO) issued notice u/s 148A(b) of Act dated 22.03.2022, under the new regime introduced by Finance Act, 2021 pursuant to the directions of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agrawal [2022] 444 ITR 1 (SC). Assessee did not file any response to the show cause notice served on his registered email address through ITBA. Thereafter, provisions of section 148A(d) were complied with by passing an order, dated 06.04.2022 and issuing a notice u/s.148 on 07.04.2022, under the new regime.
According to the ld. Counsel, in the provisions for re-opening of assessment upon amendment by Finance Act, 2021, the first proviso to section 148 refers to approval by specified authority which is to be obtained before issuing notice u/s. 148. Section 151 describes specified authority for the purpose of section 148 and 148A, based upon the time limits within which the reopening proceedings are to be initiated i.e., i. By Principal Commissioner of Income Tax or Principal Director or Commissioner or Director, if three years or less than three years have lapsed from the end of the Assessment Year. ii. By Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have been lapsed from the end of the relevant Assessment Year.
Admitted position of fact in this case is that income chargeable to tax which escaped assessment is more than Rs.50,00,000/-, since ld. Assessing Officer has alleged that the income chargeable to tax of Rs.3,59,48,123/- has escaped assessment. Also, it is undisputed that notice u/s.148 has been issued after the expiry of three years from the end of the relevant Assessment Year. Three years from the end of the Assessment Year 2018-19 lapsed on 31.03.2022. As per section 149(1)(b) of the Act (new regime), re-assessment proceedings could have been initiated after the expiry of three years from the end of the relevant Assessment Year only if the income chargeable to tax which escaped assessment is more than Rs.50,00,000/-. These admitted facts are relevant on the legal aspect relating to obtaining prior approval from the specified authority which are undisputed and nothing has been brought on record by the Revenue to controvert the same.
5.1 We find that in the decision by the Hon'ble Supreme Court in the case of Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC), Hon'ble Court after the fall out of its own decision in the case of Ashish Agarwal (supra) had dealt with the issue in respect of sanction of the specified authority and concluded that TOLA will extend the time limit for the grant of sanction by the authority specified u/s.151. According to the Hon'ble Court, the test to determine whether TOLA will apply to section 151 of the new regime is that if the time limit of three years from the end of the Assessment Year falls between 20.03.2020 and 31.03.2021 then, the specified authority u/s.151(i) has extended time till 30.06.2021 to grant the approval. According to the Hon'ble Court, Assessing Officers were required to issue the re-assessment notice u/s.148 of the new regime within the time limit surviving under the Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside. Hon'ble Court had elaborately dealt with this issue in Part E of its decision in para 73 to 78 which are extracted below: 73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments. 128 A table representing the prescription under the old and new regime is set out below:
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; 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, 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.
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, 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 years 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….. 81. This quote in Ashish Agrawal (supra) directed the Assessing Officers to “pass orders in terms of Section 148-A(d) in respect of each of the assessee concerned.” Further, it directed the Assessing Officers to issue a notice u/s.148 of the new regime “after following the procedure as required u/s.148-A.” Although this quote waived off the requirement of obtaining prior approval u/s.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 u/s. 148A(d) or issuing a notice u/s.148. These notices ought to have been issued following the time limits specified u/s.151 of the new regime r.w. TOLA, where applicable…. 114. ……d. TOLA will extend the time limit for the grant of sanction by the authority specified u/s.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 u/s.151(i) has extended time till 30 June 2021 to grant approval; …”
5.2. From the above, we note that in para 73, in the table last two rows relate to provisions of Section 151(i) and (ii) of the new regime prescribing the time limit as well as the specified authority. In para 75, it is very categorically mentioned by the Hon’ble Court that after 01.04.2021, in terms of Ashish Agrawal (supra) the prior approval must be obtained from the appropriate authorities specified u/s.151 of the new regime. This abundantly brings clarity on the aspect of obtaining approval for issue of notice u/s.148 which are fall out of the decision in Ashish Agrawal (supra). In para 77, objective of section 3(1) of TOLA is mentioned which is to relax the time limit for compliance with actions that fall for completion from 20.03.2020 to 31.03.2021. Thus, the objective is specific for providing temporal flexibility. In para 78, the same has been explained by an example taking Assessment Year 2017- 18 which also in specific terms mentions that the authority specified u/s.151(i) of the new regime can grant sanction till 30.06.2021. Thus, while concluding in para 81 on the issue obtaining approval, Hon’ble Court has specifically stated that the Assessing Officer is required to obtain prior approval of the specified authority according to section 151 of the new regime before passing an order u/s.148A(d) or issuing a notice u/s.148. According to the Hon’ble Court, though it had waived off the requirement obtaining prior approval u/s.148A(a) and Section 148Ab, it did not waive the requirement for section 148A(d) and Section 148.
5.3. Taking into consideration the submissions made by both the sides and findings of the Hon’ble Court, we note that the issue we are presently addressing raised before us is not on the aspect of “when” for the procedural compliance for issuance of notice u/s.148 but on the aspect of “by whom” it ought to have been issued. Ld. Sr. DR has contended that there is hierarchical escalation vis-à-vis obtaining approval for issuing notice u/s.148. In this respect, Hon’ble Court has very categorically held in para 75 that the prior approval must be obtained from the appropriate authorities specified u/s.151 of the new regime for the notices issued in terms of Ashish Agrawal (supra) after 01.04.2021. Reference by ld. Sr. DR to Section 149(1)(a) deals with time limit for issuing notice u/s.148. Contention of the ld. Sr. DR that there is no hierarchical escalation for obtaining prior approval for issuing notice u/s.148 is not in coherence with the guidelines mandated by the Hon’ble Apex Court as enunciated above. Repeatedly, Hon’ble Court has stated including by way of illustration that TOLA extends time line from the old regime which survives making the notice validly issued subject to the approval requirements of Section 151 under the new regime. Accordingly, the prior approval requirement is mandated under the section 151 of new regime.
5.4. Thus, on the above stated facts and law, in the present case, three years had lapsed from the end of the Assessment Year when the order u/s.148A(d) and notice u/s.148 was issued on 06.04.2022 and 07.04.2022, respectively. In the present case, since the notice u/s. 148 and order u/s. 148A(d) have been issued beyond the period of three years from the end of the relevant Assessment Year, case of the assessee falls within the provisions of section 151(ii) of the amended law whereby the specified authority for grant of approval is specified as Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Contrary to this requirement, the approval obtained is by Principal Commissioner of Income Tax, Thane-1. Accordingly, since a proper sanction by the specified authority had not been obtained for issue of notice u/s.148 under the applicable provisions of law, said notice is invalid and bad in law.
5.5. Keeping in juxtaposition the undisputed and the uncontroverted facts as stated above and the judicial precedent of the Hon'ble Supreme Court in the case of Ashish Agarwal and Rajiv Bansal (supra), we hold that sanction by specified authority has not been obtained by the ld. Assessing Officer in accordance with the provisions contained in section 151 of the Act under the new regime, since notice u/s.148 has been issued beyond three years from the end of the relevant Assessment Year. Accordingly, the said notice issued is invalid and thus quashed. Resultantly, the impugned re-opening proceedings so initiated and the impugned re-assessment order passed thereafter are also quashed.
5.6. Since legal issue raised by the assessee is held in favour of the assessee, grounds raised on the merits of the case needs no separate adjudication.
In the result, appeal filed by assessee is allowed.