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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI B R BASKARAN & SHRI RAJ KUMAR CHAUHAN
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 29.07.2024 of Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the “CIT(A)”], wherein the Ld. CIT(A) has dismissed the appeal of the assessee. Page | 1 Ramesh Dandumal Chachlani 2. The brief facts of the case are that, the assessee has not filed his ITR for the year under consideration i.e. AY 2015-16, accordingly, the assessee was listed non-filer for AY 2015-16 on the insight portal under the case type ‘Risk Management Strategy (RMS)’. Accordingly, notice u/s 148 was issued on 04.04.22 and proceedings were initiated u/s 147 of the Act and assessment was completed u/s 144B of the Act which resulted into addition of Rs. 20,30,870/- (10% of Rs. 2,03,08,700/-) treated as income from business and profession.
Aggrieved by the assessment order, assessee preferred the appeal before the Ld. CIT (A) who dismissed the appeal of the assessee and upheld the order of AO.
Therefore, aggrieved by the order of Ld. CIT(A), assessee preferred the present appeal before us and has raised the following grounds of appeal:-
1.The assessment order u/s 147 read with section 144B of the Act dated 19.02.2024 is bad in law.
2.The notice issued u/s 148 of the Act dated 04.04.2022 is bad in law. The Ld. AO has not fulfilled the jurisdictional requirements of section 147 to 151 of the Act.
4.The Ld. CIT(A), NFAC, erred in upholding the action of the Ld. AO in adding a sum of Rs. 20,30,870/- as estimated business income at 10% of the cash deposit.
5.The Ld. CIT(A), NFAC erred in not admitting the additional evidences filed by the Appellant which were necessary in dispensing with the justice.
6.The Ld. AO, NeAC, has erred in the levying interest under section 234A and 234B of the Act.
8.The Ld. AO, has erred in initiating penalty proceeding u/s 274 r.w.s.270A of the Act.
9.The Appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.
5. As is evident from the grounds that ground no. 4 is legal grounds which states “the notice u/s 148 of the Act is barred by limitation”. Therefore we proceed to decide the legal ground first and in case, the matter survives, only then we will proceed to decide on merit.
We have heard Ld. AR and Ld. DR on the point if the reopening assessment notice u/s 148 of the Act being barred by limitation. The Ld. AR argued that the case of the assessee is covered under first proviso to Ramesh Dandumal Chachlani section 149(1) of the Act. It is submitted that the notice u/s 148 of the Act is dated 04.04.22 and the said notice is admittedly beyond the erstwhile period of limitation of 6 years prescribed by the Act prior to its amendment of Finance Act 2021. It is further submitted for the AY 2015- 16, the erstwhile time limit of 6 years expired on 31.03.2023 and the impugned notice u/s 148 of the Act has been issued on 04.04.2022, is therefore barred by the restriction of the first proviso to section 149 of the Act. The Ld. AR has relied upon the case of the Hon’ble Jurisdictional Bombay High Court reported as Hexaware Technologies Ltd. Vs. ACIT (2024) 162 taxmann.com 225 (B0m).
The Ld. DR on the other hand relied on the judgment of Ld. AO and Ld. CIT(A) and submitted the appeal is liable to be dismissed.
We have considered the rival submissions of both parties and examined the referred case law i.e. Hexaware Technologies ltd. (supra). The relevant part of the judgment containing ratio of the judgment are extracted below:-
Section 149(1)(b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under Section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, Ramesh Dandumal Chachlani 6th year expired on 31st March 2022. The notice under Section 148 of the Act, in the present case, is issued on 27th August 2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said section. This is squarely covered by paragraphs 36 and 37 of New India Assurance (Supra) which has been reproduced above in paragraph 23.
The purpose of the first proviso to Section 149 of the Act is consistent with the stated object of the government to make prospective amendments in the Act. Accordingly, the proviso provides that up to Assessment Year 2021-2022 (period before the amendment), the period of limitation as prescribed in the erstwhile provisions of Section 149(1)(b) of the Act would be applicable and only from Assessment Year 2022-2023, the period of ten years as provided in Section 149(1)(b) of the Act, would be applicable. The submission of the Revenue to interpret the first proviso to Section 149 of the Act to be applicable only for Assessment Years 20132014 and 2014-2015, i.e., for assessment years where the period of limitation had already expired on 1st April 2021 is not sustainable. The interpretation canvassed by the Revenue is clearly contrary to the plain language of the proviso. When the language in the statute is clear, it has to be so interpreted and there is no scope for interpreting the provision on any other basis. The taxing statue should be strictly construed. [Godrej & Boyce Manufacturing Company Ltd. vs. DCIT]
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It was submitted on behalf of Revenue that the period of limitation for the purposes of Section 149 of the Act has to be seen with respect to the original notice under Section 148 of the Act, which was issued to petitioner on 8th April 2021 and as the said notice was issued within the period of six years from the end of the relevant assessment year, which was expiring on 31st March 2022, the Ramesh Dandumal Chachlani reassessment proceedings are within the period of limitation prescribed in Section 149 of the Act. It is not acceptable. Section 149 of the Act sets out, inter alia, the time limit for issuing notice under Section 148 of the Act. Apart from the period of limitation set out in the said Section, the first proviso lays down a further restriction on the issue of a notice under section 148 of the Act. The period of limitation as well as the said further restriction is framed/provided in respect of a notice under 148 of the Act, and not for a notice under section 148A of the Act. The notice dated 8th April 2021, which though originally issued as a notice under section 148 of the Act, (under the provisions of the Act prior to the amendments made by the Finance Act, 2021), has now been treated as a notice issued under section 148A(b) of the Act in accordance with the decision of the Hon'ble Apex Court in Ashish Agarwal (Supra). Once the notice dated 8th April 2021 has been treated as having been issued under Section 148A(b) of the Act, the said notice is no longer relevant for the purpose of determining the period of limitation prescribed under Section 149 or the restriction as per the first proviso below Section 149 of the Act. Therefore, for considering the restriction on issue of a notice under section 148 of the Act prescribed in the first proviso to Section 149 of the Act, the fresh/presently impugned notice dated 27th August 2022 issued under Section 148 of the Act is required to be considered. The said notice is admittedly beyond the erstwhile period of limitation of six years prescribed by the Act prior to its amendment by the Finance Act, 2021. For the Assessment Year 2015-2016, the erstwhile time limit of six years expired on 31st March 2022 and, the impugned notice under Section 148 of the Act has been issued on 27th August 2022 and, therefore, the impugned notice dated 27th August 2022 is barred by the restriction of the first proviso to Section 149 of the Act.
30 With respect to applicability of the fifth proviso and the sixth proviso to Section 149(1)(b) of the Act for extension of limitation for issuing the notice under Section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed in Section 149(1) of the Act, i.e., three years or Ramesh Dandumal Chachlani ten years, as the case may be. Fifth proviso or sixth proviso extend limitation for issuing notice under Section 149 of the Act, however, the first proviso is an exception to the period of limitation and provides for a restriction on the notices under Section 148 being issued for Assessment Years upto 2021-22 beyond a certain date. Therefore, the way the Section would operate, is first to decide whether a notice issued under Section 148 of the Act is within the period of limitation in terms of Section 149(1)(a) or (b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the extension of time as per the fifth and/or sixth proviso would be considered. Once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said time limit is within the restriction provided in the first proviso or not. If the notice is beyond the restriction period, the notice is invalid. The fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per the first proviso. Hence, if a notice is not within the time prescribed under the first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth proviso and sixth proviso. In Godrej Industries Ltd. (Supra) paragraph 15 reads as under :
Based on petitioner’s facts, the show cause notice under Section 148A(b) of the Act was issued on 24th May 2022 asking petitioner to furnish a reply by 8th June 2022. Petitioner filed a detailed reply in response to the show cause notice on 8th June 2022 and, therefore, only the period from 24th May 2022 to 8th June 2022 could be excluded by virtue of the first limb of the fifth proviso to Section 149 of the Act. Subsequently, petitioner received another letter dated 28th June 2022 which annexed certain details and provided further time for making detailed submissions upto 8th July 2022. Petitioner replied to the letter and made detailed submissions on 2nd July 2022. Therefore, even assuming this period is to be excluded, the period which could be excluded is only from 24th May 2022 to 8th June 2022. Even after considering the letter dated 28th June 2022 and the reply dated 2nd Ramesh Dandumal Chachlani July 2022, at the highest a further period from 28th June 2022 to 8th July 2022 could be excluded but the period of time from 8th June 2022 to 28th June 2022 cannot be excluded as per the fifth proviso. This is because petitioner on 8th June 2022 did not request for any further time and furnished its response to the show cause notice under Section 148A(b) of the Act. It is the Assessing Officer who has suo moto issued another letter on 28th June 2022 asking petitioner to furnish further details by 8th July 2022. Therefore, even assuming a period of 27 days (i.e., 16 days from 24th May to 8th June and 11 days from 28th June to 8th July) are excluded from the date of the impugned notice under Section 148 of the Act issued on 31st July 2022, the impugned notice would yet be barred by limitation and could not have been issued by virtue of the first proviso to Section 149 of the Act.
Even if the fifth and sixth provisos are held to be applicable, the impugned notice would still be beyond the period of limitation. The fifth proviso extends limitation with respect to the time or extended time allowed to an assessee as per the show cause notice issued under Section 148A(b) of the Act or the period, during which the proceeding under Section 148A of the Act are stayed by an order of injunction by any Court. Hence, in the present case, in view of the fifth proviso, the period to be excluded would be counted from 25th May 2022, i.e., the date on which the show cause notice was issued under Section 148A(b) of the Act by respondent no.1 subsequent to the decision of the Hon’ble Apex Court in the case of Ashish Agarwal (Supra) and upto 10th June 2022, which is a period of 16 days. Further, the time period from 29th June 2022 upto 4th July 2022 cannot be excluded as the same was not based on any extension sought by petitioner, but at the behest of respondent no.1. Even if the same was to be excluded, still it will mean further exclusion of 5 days. Considering the said excluded period as well, the impugned notice dated 27th August 2022 is still beyond limitation. The fact that the original notice dated 8th April, 2021 issued under Section 148 of the Act, was stayed by this Court on 3rd August 2021, and its stay came to an end on 29th March 2022 Ramesh Dandumal Chachlani on account of the decision of this Court, will not be relevant for providing extension as per the fifth proviso. The fifth proviso provides for extension for the period during which the proceeding under Section 148A of the Act is stayed. The original stay granted by this Court was not with respect to the proceeding under Section 148A of the Act, but with respect to the proceeding initiated as per the erstwhile provision of Section 148 of the Act and, hence, such stay would not extend the period of limitation as per the fifth proviso to Section 149 of the Act. The question of applicability of the sixth proviso does not arise on the facts of the present case. We find support for this in Godrej Industries Ltd. (Supra).
In view of the aforesaid, the impugned notice dated 27th August 2022 is clearly barred by the law of limitation.
It is thus evident from the law laid down by the Hon’ble Jurisdictional High Court as extracted above, a notice u/s 148 of the Act dated 04.04.2022 for the relevant assessment year in this case i.e 2015-16 is completely barred by limitation as the same has been issued beyond the prescribed period of 6 years applicable to the case in hand.
In these facts and circumstances as discussed above, the legal ground no. 4 raised by the assessee is accordingly decided in favour of the assessee. Reopening of the assessment u/s 147 r.w.s. 144B of the Act vide order dated 19.02.2024 is bad in law. The consequential proceedings carried out by the AO are accordingly held to be not legally sustainable. We accordingly direct the AO to delete the addition made in this case
In the result, the appeal filed by the assessee is allowed in above terms.
Order pronounced in the open court on 03.04.2025.