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Facts
The assessee filed appeals against the order of the CIT(A) for AY 2015-16 and 2016-17, challenging the notices of reopening issued by the AO. The primary contention was that the notices were barred by limitation and/or issued without proper sanction.
Held
The Tribunal held that for AY 2015-16, the notice of reopening was issued beyond the period of limitation as per the decision in Rajeev Bansal's case. For AY 2016-17, the notice was held invalid due to lack of proper sanction from the appropriate authority as per Section 151 of the Act.
Key Issues
Whether the reopening notices issued for AY 2015-16 and 2016-17 were barred by limitation and/or issued with valid sanction from the appropriate authority.
Sections Cited
147, 148, 148A, 149(1), 151(i), 151(ii)
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Income Tax Appellate Tribunal, “B” BENCH MUMBAI
Before: SHRI SANDEEP GOSAIN & SMT. RENU JAUHRI
Date of Hearing 26.03.2025 Date of Pronouncement 16.04.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeals have been filed by the assessee challenging the impugned order dt. 20.12.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A) for the A.Y 2015-16 & 2016-17. First of all we take up in A.Y: 2015-16.
ITA No. 81/Mum/2024, A.Y 2015-16
At the very outset, we would like to deal with the legal ground raised by the assessee with regard to challenging the reopening of assessment. In this regard Ld. AR submitted that impugned notice of reopening (second round) was issued by the AO dt. 29.07.2022 for the year under consideration and the same is without jurisdiction being barred by limitation. It was submitted that the issue in question is squarely covered by the decision of Hon’ble Supreme Court in the case of Rajeev Bansal 167 taxman 70, wherein the revenue itself conceded before Hon’ble Supreme Court that notices for A.Y 2015-16 issued after 01.04.2021 would be time barred. This view has also been taken by the Coordinate Bench of this Tribunal in series of cases including that of Pushpak Realities Pvt Ltd in dated 07.11.2024, Manish Financials in CO No. 231/Mum/2024 in dt. 02.12.2024
On the other hand Ld. DR relied upon the orders passed by the revenue authorities.
We have heard the counsels for both the parties on this legal ground and also perused the material placed on record, judgments cited before us and the order passed by the revenue authorities. From the records, we noticed that the original reopening notice u/s 148 of the Act was issued by the AO on 25.06.2021 and subsequent thereof the proceedings were initiated by the AO consequent to the decision of Hon’ble Supreme Court in Ashish Aggarwal case. The objections were filed by the assessee before AO vide dt. 03.06.2022 and 29.06.2022. However, the said objections were rejected by the AO while passing order u/s 148A(d) of the Act on 29.07.2022. In this regard we have perused the orders of the Coordinate Bench in the case titled Manish Financial (supra), the operative portion is reproduced herein below:
We heard the parties and perused the material on record. In assessee's case, the AO issued the original notice under section 148 dated 29.06.2021 for AY 2015- 16 and consequent to the directions given by the Hon'ble Supreme Court in the case of Ashish Agrawal (supra), the said notice was deemed as notice issued under section 148A(b). The AO after passing the order under section 148A(d) issued the notice under section 148 dated 29.07.2022. The contention of the assessee is that the said notice is barred by limitation as per the first proviso to the un-amended provisions of section 149(1) as has been confirmed by the decision of the Hon'ble Supreme Court in the case of Rajeev Bansal (Supra). The relevant observations of the Hon'ble Supreme Court reads as under -
Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue.
(a) to (e)** (f). The Revenue concedes that for the assessment year 2015- 16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA;
The ingredients of the proviso could be broken down for analysis as follows:
(i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of" 149(1)(b) of the old regime.
Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime.
The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012- 2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.
7. This issue of notice under section 148 issued for 2015-16 being time barred is considered by the coordinate bench in the case of Pushpak Realities Pvt. Ltd.(supra) and it is held that ** For the A.Y.2015-16, the Revenue itself has contended before the Hon'ble Supreme Court as noted above, all the notices issued on or after 01/04/2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA. Here notice u/s. 148 for the A.Y. 2015-16 has been issued on 28/07/2022 which is admittedly barred by limitation under the new provision of Section 149(1) and it is not covered under TOLA Accordingly, all the notices are quashed being barred by limitation on the reasons given above and we are not going on the reasons given by the ld. CIT (A) for quashing the notice.
8. A combined reading of the above observations of the Hon'ble Supreme Court and the findings of coordinate bench makes it clear that the test for checking the validity of notices issued under section 148 under new regime for AYs 2021-22 or prior years is whether the period of six years has expired at the time of issue of such notice and in that case the notice under section 148 becomes invalid. These observations also makes it clear that the time limit of ten years as per the amended provisions of section 149(1)(b) can be applied only prospectively. In assessee's case when we apply this test for AY 2015-16, the period of six years has expired on 31.03.2022 and therefore the notice dated 29.07.2022 under section 148 of the Act for AY 2015-16 is invalid since it is barred by limitation. Accordingly the assessment completed under section 147 of the Act is liable to be quashed.
The year under consideration in this case is A.Y 2015- 16 which is identical in the case of Manish Financial (supra), wherein after detailed discussions it has been held that for the year under consideration, period of limitation expires on 31.03.2022, therefore the notice dt. 29.07.2022 u/s 148 of the Act is invalid. Since the same has barred by limitation and therefore while ad-hearing to the principles of judicial consistency and following the decision of Coordinate Bench in the case of Manish Financial (supra), we also held that the notice under present case dt. 29.02.2022 u/s 148 of the for A.Y2015-16 is invalid and is barred by limitation and accordingly the assessment computed u/s 147 of the Act also stands quashed.
6. Since we have already quashed the order u/s 147 of the Act passed on the legal contention of the notice being time barred therefore other contentions raised by the assessee have become academic and do not warrant any adjudication.
Accordingly the appeal filed by the assessee is partly allowed.
ITA 82/Mum/2025, A.Y 2016-17
The assessee raised the legal ground and has challenged the impugned notice of reopening of assessment issued by AO being without jurisdiction. In this regard, Ld. AR submitted that the impugned notice of reopening (second round) issued by the AO on 29.07.2022 is without jurisdiction as the sanction for issuing notice has been obtained from the PCIT-8, Mumbai instead of PCCIT, Mumbai. It was submitted that the year under consideration in the present case is A.Y 2016-17 and more than three years have elapsed as on the date of issuance of notice. Therefore sanction was required to be obtained u/s 151(ii) and not u/s 151(i) of the Act and in this regard relied upon the decision of Manish Financials (supra).
On the other hand Ld.DR relied upon the orders passed by the revenue authorities.
We have heard the counsels for both the parties and perused the material placed on record and judgments cited before us and the orders passed by the revenue authorities. From the records we noticed that the impugned notice for reopening u/s 148 of the Act has been issued by the AO on 29.07.2022. However, the year under consideration is A.Y 2016-17 and more than three years have elapsed as on the date of issuance of notice, therefore sanction ought to have been obtained u/s 151(ii) and not u/s 151(i) of the Act, this issue is queerly covered by the Coordinate Bench decision in the case of Manish Financials (supra), the operative portion of the said order is reproduced herein below:
We heard the parties and perused the material on record. In assessee's case for AY 2016-17 pursuant to the directions of the Hon'ble Supreme Court in the case of Ashish Agrawal, the AO passed an order under section 148(d) of the Act and issued a notice under section 148 on 30.07.2022. From the above observations of the Hon'ble Supreme Court it is clear that the though the prior approval under section 148A(b) and 148(d) were waived in terms of the decision of Ashish Agarwal (supra), for issue of notice under section 148A(a) and under section 148 on or after 1 April 2021, the prior approval should be obtained from the appropriate authorities specified under Section 151 of the new regime. The provisions of section 151 of the Act under the new regime read as under:
Sanction for issue of notice.
Specified authority for the purposes of section 148 and section 148A shall be,- (1) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; Manish Financial (11) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.
In assessee's case from the perusal of para 3 of the notice issued under section 148 for AY 2016-17 we notice that the same is issued with the prior approval of Pr.CIT-19 Mumbai accorded on 29.07.2022 vide reference No.Pr.Cit- 19/148/2022-23 and this fact is not contravened by the Id DR. For AY 2016-17, the period of three years have elapsed as of 31.03.2020 and the notice is issued beyond three years on 30.07 2022. Therefore as per the decision of the Hon'ble Supreme Court, the approval should have been obtained under the amended provisions of section 151(ii) of the Act i.e. the approval should have been obtained from the Principal Chief Commissioner whereas the approval has been obtained from Pr.CIT as stated in the notice under section 148 itself. Therefore we see merit in the contention of the assessee that the notice under section 148 for AY 2016-17 is issued without obtaining the prior approval from the appropriate authority. Accordingly we hold that the notice under section 148 is invalid and the consequent assessment under section 147 is liable to be quashed.
Since we have already quashed the order under section 147 based on the legal contention of notice being issued without obtaining proper approval, the other legal contentions have become academic not warranting any adjudication.
After having gone through the decision cited above, we found that the issue in question is squarely covered in favour of the assessee because as per the decision of Hon’ble Supreme Court the approval for issuing notice should have been obtained from PCCIT, whereas in the present case the approval has been obtained from PCIT as cited in the notice u/s 148 of the Act itself. Therefore while ad-hearing to the principles of judicial consistency and while following the decision of Coordinate Bench which is based on the decision of Hon’ble Supreme Court, we find merit in the contention of the assessee that the notice u/s 148 of the Act for the year under consideration is issued without obtaining the prior approval of the ‘appropriate authority’. Thus accordingly we hold that the notice u/s 148 of the Act is invalid and consequently the assessment u/s 147 of the Act is liable to be quashed.
Since, we have already quashed the order u/s 147 of the Act based on the legal contentions of notice being issued without obtaining proper approval therefore the other contentions have become academic and do not warrant any adjudication, accordingly the grounds raised by the assessee are partly allowed.
In the result, both the appeals filed by the assessee are partly allowed.
Order pronounced in the open court on 16.04.2025.