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Facts
The assessee did not file an Income Tax return for AY 2016-17. A search action in "Ahuja Group" revealed the group obtained unaccounted cash loans, and the assessee provided a cash loan of Rs. 50,00,000/- to the group. The AO initiated reassessment proceedings under section 148A and subsequently section 147.
Held
The Tribunal held that the notice issued under section 148 was invalid because the prior approval was not obtained from the Principal Chief Commissioner as required by the amended provisions of section 151(ii) of the Act, given the notice was issued beyond three years from the end of the assessment year.
Key Issues
Whether the reassessment proceedings and the notice issued under section 148 are invalid due to non-compliance with the prior approval requirements under section 151 of the Act.
Sections Cited
148A, 148, 151, 147, 144B, 132, 142(1), 69A, 151(ii)
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Income Tax Appellate Tribunal, “H(SMC
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated passed by NFAC, Delhi for assessment year 2016-17 on following grounds of appeal :
1. The order dated 12.07.2022 passed under section 148A(d) of the Act and the notice dated 16.07.2022 issued under section 148 of the Act are without jurisdiction and bad in law as the same are in A.Y. 2016-17 Nilesh Satish Shingte violation of the provisions of section 151(ii) of the Act. Thus, the order under section 148A(d) of the Act and the subsequent notice issued under section 148 of the Act are bad in law. The same may be quashed and set aside.
2. The Ld. A.O. is not justified in issuing the notice dated 16.07.2022 under section 148 of the Act beyond the period of three years from the end of the relevant assessment year without seeking approval in accordance with the provisions of section 151(ii) of the Act. Hence, the notice issued under section 148 of the Act is bad in law and void ab initio.
3. The Appellant craves leave to add, alter or amend any of the above grounds of appeal
.” Brief facts of the case are as under:
2. The assessee has not filed his Income Tax return for the AY. 2016-17. Subsequently, based on a search & Seizure action u/s.132 of the Act, 1961 carried out in case of 'Ahuja Group' on 25.06.2015 it came to light that the group was engaged in obtaining unaccounted cash loans. Further, Jagdish Ahuja, director of M/s. Ahuja Properties accepted in his statement recorded that the group accepted the cash loans. It was also found that, in case of direct investment by the investors, the group paid them interest rate @ 12% to 18%PA. 2.1. As per the document seized, it was found that the assessee, Nilesh Satish Shingte, gave cash loan of Rs.50,00,000/- to the Ahuja Group. The source of loan as well as interest on the same had escaped assessment. In view of the above, the Ld.AO thus had reason to believe that, income otherwise chargeable to tax escaped assessment. Accordingly, with the sanction of competent authority u/s 151 of the Act, a notice u/s.148 was issued on 21.06.2021 to the assessee. As per direction of the Hon'ble Supreme Court in case of UOI V. Ashish Agarwal, reported in A.Y. 2016-17 Nilesh Satish Shingte (2022) 138 taxmann.com 64, the case was treated to be reopened as per new provisions under section 148A of the Act, and again notice u/s.148 was issued to the assessee on 16.07.2022. As the assessee was not registered on e-filing Portal, the case was transferred to the JAO. In response, the assessee had not filed his Income Tax Return for the AY. 2016-17. Thereafter, notice u/s 142(1) dated 28.04.2023 was issued and served on the assessee. In response, the assessee had not responded. In the interest of justice, a show cause notice was issued on 18.05.2023. On account of the failure of the assessee to respond to various notices issued from time to time, the assessing officer was left with no option but to complete the case under section 147 r.w.s.144 of the Act, to the best of his judgment. The Ld.AO made addition in the hands of the assessee of Rs.50,00,000/- as unexplained money under section 69A of the Act. Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A).
3. The Ld.CIT(A), after considering the submissions of the assessee upheld the addition made by the Ld.AO. Aggrieved by the order of the Ld.CIT(A), the assessee preferred appeal before this Tribunal.
The Ld.AR at the outset submitted that, assessee has raised additional Grounds challenging the reopening to the bad in law as under: “1. The order dated 12.07.2022 passed under section 148A(d) of the Act and the notice dated 16.07.2022 issued under section 148 of the Act are without jurisdiction and bad in law as the same are in violation of the provisions of section 151(ii) of the Act. Thus, the order under section A.Y. 2016-17 Nilesh Satish Shingte 148A(d) of the Act and the subsequent notice issued under section 148 of the Act are bad in law. The same may be quashed and set aside.
The Ld. A.O. is not justified in issuing the notice dated 16.07.2022 under section 148 of the Act beyond the period of three years from the end of the relevant assessment year without seeking approval in accordance with the provisions of section 151(ii) of the Act. Hence, the notice issued under section 148 of the Act is bad in law and void ab initio.
The Appellant craves leave to add, alter or amend any of the above grounds of appeal
.” The Ld.AR submitted that the above grounds are commonly / identically raised for both the years under consideration. He submitted that this issue goes to the root cause of the case and no new records needs to be looked into for disposing off the issue raised herein. The Ld.DR though could not object to the submissions of the assessee did not support the admission of additional ground. 4.1. It has been submitted that no new facts needs to be considered in order to dispose of the additional grounds raised by the assessee. It is submitted that, the additional grounds raised do not require verification of any new facts. The Ld.AR, thus prayed for the admission of additional grounds so raised by assessee. 4.2. On the contrary, the Ld.DR though opposed admission of the additional grounds, could not bring anything on record which would challenge such a right available to assessee under the Act. We have perused the submissions advanced by both sides in the light of records placed before us. 4.3. We note that the issue raised by assessee in the additional grounds is legal issue challenging the validity of notice u/s. 148 of under the newly inserted provisions to be bad in law as it suffers from jurisdictional errors. It is also noted that, these are A.Y. 2016
17. Nilesh Satish Shingte directly connected with validity of reassessment proceedings and no new facts needs to be investigated for adjudicating the same. Issues alleged by the assessee being legal issue does not require investigation of any facts. 4.4. Considering the submissions and respectfully following the decisions of Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional grounds raised by the assessee. Respectfully following the above, we admit the additional grounds raised by assessee in both the years under consideration. Accordingly, the additional grounds filed by assessee stand admitted.
5. The Ld.AR submitted that, the case of the assessee was reopened by issuing notice u/s.148 of the old regime on 21/06/2021 along with reasons recorded after obtaining necessary approval from the competent authoritas per the old law. It is submitted that, the said notice was treated to be the deemed notice issued under section 148A(b) of the act, as per the directions of Hon’ble Supreme Court in case of UOI vs Ashish Agarwal (supra). 5.1 The Ld.AO subsequently, passed order under section 148A(d) on 12/07/2022 rejecting the objections raised by the assessee. Accordingly notice under section 148 in the new regime was issued under the new regime on 16/07/2022. The assessee was subsequently called upon to furnish details on merits of the addition. Ld.AO after considering assessee’s submission passed A.Y. 2016-17 Nilesh Satish Shingte assessment order making addition in the hands of asseessee amounting to Rs.26,46,000/-. 5.2. The Ld.AR submitted that, assessee challenges validity of the notice issued under the amended section 148A dated 16/07/2022 is viod ab initio, as it was not issued by obtaining approval as per new provisions under section 151 of the Act. He submitted that, as held by Hon’ble Supreme Court in case of UOI vs. Rajeev Bansal reported in (2024) 167 taxmann.com 70 the competent authority to issue grant approval under the present facts is Principal Chief Commissioner of Income Tax instead of Principal Commissioner of Income tax. The Ld.AR relied on the relevant observations by Hon’ble Supreme Court in case of UOI vs. Rajeev Bansal(supra). 5.3. The Ld.AR submitted that, Hon’ble Supreme Court in case of Rajeeve Bansal (supra) considered the issue of obtaining approval from the appropriate authority under section 151 before issuance of notice under section 148 of the act. It is submitted that as per the new provisions of section 148A, the directions of the Hon’ble Supreme Court clearly emphasis about the competent authority who has to approve such notices as under: 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 Sri krishna (P.) Ltd. v. ITO [1996] 87 Taxman 315/221 ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:
Regime Time limits Specified authority Section 151(2) Before expiry of four Joint Commissioner of the old regime years from the end of the relevant assessment year Section 151(1) After expiry of four Principal Chief of the old regime years from the end of Commissioner or Chief the relevant Commissioner or Principal assessment year Commissioner or Commissioner Section 151(i) of Three years or less Principal Commissioner or the new regime than three years from Principal Director or the end of the relevant Commissioner or Director assessment year
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 year 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.
Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages: a. Section 148A(a) - to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b.Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022; c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and d. Section 148 - to issue a reassessment notice.
In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts "shall be deemed to have been issued under section 148-A of the Income-tax Act A.Y. 2016-17 Nilesh Satish Shingte as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b)." Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of U P [2024] 160 taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267.
This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned." Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under section 148-A." Although this Court waived off the requirement of obtaining prior approval under section 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 under section 148A(d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.
5.4. He referred to the order dated 12/07/2022 passes by the Ld.AO under section 148A(d) of the Act, wherein it is categorically noted in para 8 that the approval is taken from Ld.PCIT -17 Mumbai vide order sheet entry dated 05/07/2022. The said 5.5. The Ld.AR the submitted that as prior approval was not sought from the prescribed authority under section 151 of the new regime, the assessment proceedings and consequential assessment order passed bad in law.
5.6. On the contrary, the Ld.DR submitted that the original notice issued by the Ld.AO was with prior approval of the appropriate authority as per the erstwhile section 151 of the act. He thus submitted that, the proceedings cannot be invalidated on such arguments that the approval was not obtained from the appropriate authority as envisaged under section151 of the new regime.
We have carefully perused the observations of the Hon’ble Supreme Court in case of Rajiv Bansal (supra) as well as the decision of Hon’ble Supreme Court in case of Ashish Agarwal (supra).
The Ld.AO passed order are section 148A(d) on 12/07/2022 and issued notice under section 148 under the new regime on 16/07/2022. Hon’ble Supreme Court in both decisions referred to herein above observed that, the appropriate authority for issuance of such notices would be as per section 151 of the new regime. The impugned documents placed before the Tribunal reveals that, the appropriate authority who granted approval is the Principal Commissioner of Income tax-17 Mumbai, as recorded in Para 8 of the order under section 148A(d) 12/07/2022.
A.Y. 2016-17 Nilesh Satish Shingte 6.1 In the present facts of the case, the notice was issued beyond 3 years from end of the assessment year under consideration. As per the decisions of Hon’ble Supreme Court, in above referred decisions the approval should be obtained as per the amended provisions of section 151 (ii) of the act from the Principal Chief Commissioner. However it is noted that the approval is obtained from the Principal Commissioner of Income tax as stated in the notice, as well as the order passed under section 148A (d) of the act. The Ld.AR relied on decision of coordinate Bench of this Tribunal:- • Rekha Chandrakant Padalkar vs. ITO 42(3)(2) in for Assessment Year 2017-18 6.2 We therefore do not find any reason to reject the argument advanced by the Ld.AR. Accordingly the notice issued under section 148 is held to be invalid and as a consequence assessment order passed under section 147 read with section 144B is liable to be quashed. Accordingly the additional Ground raised by the assessee stands allowed.
7. As the order under section 147, is quashed, the addition challenged by the assessee on merits becomes academic at this stage. In the result of the file by the assessee stands partly allowed as indicated hereinabove.