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Facts
The assessee filed an appeal against an order of the CIT(A) for AY 2016-17. The AO had reopened assessment and made additions based on information regarding cash payments for jewellery. The assessee contended that the notice issued under Section 148 was beyond the limitation period.
Held
The Tribunal held that the notice issued under Section 148 of the Income Tax Act on 31/07/2022 was barred by the limitation period specified under Section 149 of the Act. Consequently, the notice was quashed, and the entire reassessment proceedings and assessment order were also quashed.
Key Issues
Whether the notice issued under Section 148 of the Income Tax Act for reassessment was within the prescribed limitation period, considering the provisions of TOLA and relevant Supreme Court judgments.
Sections Cited
250, 148, 147, 144, 148A, 151, 69, 234B, 234C, 271(1)(c), 149, 144B
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAILSHRI GIRISH AGRAWAL
Date of Hearing – 24/02/2025 Date of Order - 22/04/2025
O R D E R PER SANDEEP SINGH KARHAIL, J.M.
The assessee has filed the present appeal against the impugned order dated 28/12/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2016-17.
In the appeal, the assessee has raised the following grounds: - “1. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in dismissing the appeal by stating that the assessee has not filed the return in response to notice u/s 148 of the I. T. Act, 1961 without the understanding the fact that amendment u/s 148 was made effective from 01/04/2023 whereas the reassessment proceedings were initiated during FY 2022-23 vide notice dated 31/07/2022.
2. On the facts and circumstances of the case and in law, the Ld. A.O. has erred by passing the order u/s 147 r.w.s 144 r.w.s 144B of the I. T. Act, 1961 which is arbitrary, unjustified and bad-in-law.
3. On the facts and circumstances of the case and in law, the Ld. J.A.O. has erred by initiating the Inquiry Proceedings u/s 148A of the I. T. Act, 1961 since the same was to be conducted in faceless manner without considering the facts of the case. The appellant relies on the decision of Hon'ble Bombay High Court in case of M/s Hexaware Technologies Ltd vs. AGIT, Circle 15(1)(2).
4. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in taking approval from Pr. CIT-17 vide order sheet entry dated 31/07/2022 for initiation of the reassessment proceedings in mechanical manner without understanding the facts of the case that approval was required to be taken from Pr. CCIT u/s 151(ii) of the I.T. Act, 1961 as against the approval taken by the Ld. A.O. from Pr. CIT-17, Mumbai u/s 151(i) of the I. T. Act, 1961. The appellant relies on the decision of Hon'ble Bombay High Court in case of M/s Siemens Financial Services (P.) Ltd. vs. DCIT and M/s Vodafone India Ltd. vs. DCIT.
5. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in making assessment at an income of Rs. 1,26,88,634/- as against the returned income of Rs. 20,60,760/- which is arbitrary in nature and liable to be deleted.
6. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in making addition of Rs. 75,000/- u/s 69 being unexplained investment without considering the facts and circumstances of the case that the purchase of jewellery were made from cash withdrawals from savings bank account.
7. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in making addition of Rs. 90,30,020/- under the head short term capital gain, in respect cost of acquisition of property without considering the facts and circumstances of the case.
8. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in making addition of Rs. 15,22,854/- claimed as long-term capital gain without considering the facts and circumstances of the case.
9. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in levying interest u/s 234B and 234C of the I.T. Act, 1961 without considering the facts and circumstances of the case.
10. On the facts and circumstances of the case and in law, the Ld. A.O. has erred in initiating penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 without considering the facts and circumstances of the case.”
Vide application dated 20/02/2025, the assessee has raised the following additional grounds of appeal: - “
1. On the facts and circumstances of the case and in law, the notice issued u/s. 148 of the 1. T. Act, 1961 by the Ld. A.O. and the reassessment order passed thereafter is grossly incorrect, invalid and bad-in-law.
2. On the facts and circumstances of the case and in law, the Ld. A.O. has erred by issuing the notice w/s 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 follows: Sr. Particulars Date Surviving Time No. Limit 1 Notice issued u/s 148 23.06.2021 2 Due date for issuance under old regime 30.06.2021 7 days 3 Notice issued u/s 148A(b) 20.05.2022 4 Last date to file reply as per notice u/s 148A(b) 05.06.2022 5 Reply filed by assessee on 14.06.2022 6 Due date for issuance under new regime 21.06.2022 7 days 7 Order passed u/s 148A(d) 31.07.2022 8 Notice issued u/s 148 31.07.2022
4. Since the issues raised by way of additional grounds are legal issues, which can be decided on the basis of material available on record, therefore, the same are admitted in view of the ratio laid down by the Hon’ble Supreme Court in NTPC vs CIT, reported in (1998) 229 ITR 383 (SC).
5. In his appeal, the assessee has challenged the validity of the reopening of the assessment under section 147 of the Act and has also raised the grounds on merits, challenging the addition made by the Assessing Officer (“AO”). Since the ground challenging the reopening of assessment under section 147 of the Act has raised a jurisdictional issue, therefore, the same is considered at the outset.
During the hearing, the learned Authorized Representative (“learned AR”) submitted that the notice issued under section 148 of the Act in the present case is beyond the limitation period specified under section 149(1) of the Act, and thus, the re-assessment order passed under section 147 r.w. section 144B of the Act is void ab initio.
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual. For the year under consideration, the assessee filed his return of income on 03/05/2017, declaring a total income of Rs.20,60,760. Subsequently, on the basis of the information received from the Investigation Wing regarding a search action conducted in the case of Group which was accepting cash against the sale of diamond/gold jewellery and the assessee being one such person who has made payment for purchase of jewellery during the year, the AO issued notice under section 148 of the Act on 23/06/2021.
Subsequently, in view of the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agarwal, reported in [2022] 444 ITR 1 (SC), the original notice issued under section 148 on 23/06/2021 was deemed to be issued under section 148A(b) of the Act. Vide show cause notice dated 20/05/2022, the information and material relied upon by the Revenue was provided to the assessee and time was granted to the assessee to respond on or before 05/06/2022 in terms of the provisions of section 148A(b) of the Act.
After rejecting the objections filed by the assessee, an order under section 148A(d) of the Act was passed on 31/07/2022 declaring that it is a fit case for issuance of notice under section 148 of the Act. Thereafter, on 31/07/2022, notice under section 148 of the Act was issued by the Jurisdictional Assessing Officer. As the assessee did not respond to any statutory notice issued during the re-assessment proceedings, the AO proceeded to pass the order on a best judgment basis and assessed the total income of the assessee at Rs.1,26,88,634 vide order dated 17/05/2023 passed under section 147 read with section 144 of the Act. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned AR submitted that for the year under consideration, the limitation period available with the AO under section 149 for issuance of notice under section 148 of the Act was till 31/03/2021, and even if the extension granted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“the TOLA”), in light of the decision of the Hon’ble Supreme Court in Union of India v/s Rajeev Bansal, reported in (2024) 469 ITR 46 (SC), is considered, the AO had time only till 21/06/2022 to issue notice under section 148 of the Act. Therefore, the learned AR submitted that the notice issued under section 148 of the Act on 31/07/2022 for the assessment year 2016-17 is barred by limitation. Hence, it was submitted that the entire re-assessment proceedings culminating in the order passed under section 147 r.w. section 144B of the Act is void ab initio. The learned AR placed reliance upon various judicial pronouncements.
On the contrary, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities.
We have considered the submissions of both sides and perused the material available on record. In the present case, it cannot be disputed that the time limit of 4 years from the end of the relevant assessment year, i.e., assessment year 2016-17, expired on 31/03/2021, which also falls within the period from 20/03/2020 to 31/03/2021 covered under the TOLA. Therefore, the notice issued on 23/06/2021, which was deemed to be a notice under section 148A(b) of the Act, is covered under the extended time limit till 30/06/2021 provided under the TOLA. In this regard, we find support from the findings of the Hon’ble Supreme Court in Rajeev Bansal (supra) in paragraph 114(b), wherein it was held that the TOLA will continue to apply to the Act after 01/04/2021, if any action or proceedings specified under the substituted provision of the Act falls for completion between 20/03/2020 and 31/03/2021.
We further find that while examining the validity of notices issued from 01/04/2021 to 30/06/2021 under the old regime, the Hon’ble Supreme Court in Rajeev Bansal (supra), analysing the interplay of Ashish Agarwal (supra) with the TOLA, in paragraph 108 of its judgment, observed as follows: -
“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. 163 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.”
Thus, the Hon’ble Supreme Court held that the surviving time under the Act read with the TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notice, including issuance of re-assessment notice under section 148 of the Act under the new regime. While explaining the methodology for computation of the surviving or balance time limit, the Hon’ble Supreme Court in paragraph 112 of Rajeev Bansal (supra) observed as follows: -
“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 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.”
Therefore, the surviving/balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30/06/2021. Since, in the present case, the period of 4 years from the end of the relevant assessment year expired on 31/03/2021, which falls within the time period from 20/03/2020 to 31/03/2021, in order to compute the surviving/balance time as per the decision of the Hon’ble Supreme Court in paragraph 108, it is relevant to note the following dates: -
S. No. Particulars Page No. a) 1st Notice u/s.148 23/06/2021 b) Notice u/s.148A(b) 20/05/2022 c) Reply of the assessee 14/06/2022 d) Order passed u/s.148A(d) 31/07/2022 e) Notice u/s.148 31/07/2022
Therefore, computing the surviving/balance time limit, as per the decision of the Hon’ble Supreme Court in Rajeev Bansal (supra), we find that the Revenue had only 7 days (i.e., between 23/06/2021 to 30/06/2021) to issue notice under section 148 of the Act of the new regime in the present case, i.e. till 21/06/2022, after receipt of the response from the assessee on 14/06/2022 to the show cause notice issued under section 148A(b) of the Act. However, undisputedly, in the present case, the notice under section 148 of the Act was issued on 31/07/2022, i.e., 40 days after the surviving/balance time period as per the decision of the Hon’ble Supreme Court in Rajeev Bansal (supra).
Therefore, having considered the provisions of the Act and the TOLA, in the light of the decision of the Hon’ble Supreme Court in Ashish Agarwal (supra) and Rajeev Bansal (supra), we are of the considered view that the notice issued under section 148 of the Act on 31/07/2022 is barred by limitation period specified under section 149 of the Act. Accordingly, we are of the considered view that the notice issued under section 148 of the Act on 31/07/2022 is void ab initio and bad in law. Therefore, the same is quashed. Consequently, the entire re-assessment proceedings and assessment order passed under section 147 read with section 144 of the Act are also quashed.
Since the relief has been granted to the assessee on the aforenoted jurisdictional aspect, the other grounds raised by the assessee in the appeal are rendered academic, and therefore, are left open.
In the result, the appeal by the assessee is allowed.
Order pronounced in the open Court on 22/04/2025