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Facts
The assessee, Aptivaa Middle East FZE, challenged assessment orders for AY 2015-16 to 2017-18. The assessments were based on a survey conducted on the appellant's parent entity, alleging non-genuine expenditures and control from India. Notices under Section 148 were issued, which the assessee argued were time-barred and issued without proper approval.
Held
The Tribunal held that the notices issued under Section 148 for AY 2015-16 were invalid and time-barred as they were not issued within the prescribed time limits, considering TOLA and Supreme Court judgments. Similarly, for AY 2016-17 and 2017-18, the notices were held invalid due to non-compliance with Section 151 regarding prior approval from the appropriate authority.
Key Issues
Whether reassessment notices issued under Section 148 were valid considering the time limitations prescribed under Section 149 and the applicability of TOLA, and whether prior approval under Section 151 was correctly obtained from the appropriate authority.
Sections Cited
143(3), 147, 148, 149, 143(2), 6(3)(ii), 5(1), 274, 271F, 271(1)(c), 133A, 148A, 151, 144B
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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & MS. PADMAVATHY S.
The Present appeals filed by the assessee arises out of Final Assessment orders passed by Ld.DCIT Int. Tax Circle 1(1)(2) Mumbai, vide order dated 21/03/2024, 23/03/2024 and 26/03/2024 for assessment years 2015-16, 2016-17 and 2017- 18 respectively. “1. On the facts and circumstances of the case and in law, the final assessment order passed by the Ld. Deputy Commissioner of Income Tax, Circle 1(1)(2), International Taxation, Mumbai (Ld AO) under section 143(3) read with section 147 of the Income tax Act, 1961 ("the Act"), in pursuance to the directions of the Learned Dispute Resolution Panel - 1, Mumbai ("Ld. DRP"). assessing the Income of the Appellant at INR 3,98,31,781/- instead of nil returned income is contrary to provisions of the Act and therefore, void-ab-initio.
That on the facts and in the circumstances of the case and in law, the notice issued under section 148 on July 29, 2022, is barred by time limitation as the Ld. AO while issuing the notice has not considered the time limit specified under first proviso to Section 149(1) of the Act. The benefit and relaxations conferred under The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA') will not extend the limitation provided under the first proviso to section 149(1) of the Act. 2.1 That on facts and in the circumstances of the case and in law, the Ld. AO has erred in issuing notice under section 148 as the same cannot be issued as per the provisions of section 149(1)(b) in the absence of any income escaped assessment represented in the form of "asset"
On the facts and circumstances of the case and in law, the notice dated March 17, 2023 issued under section 143(2) of the Act by the Ld. AO is invalid, bad in law and liable to be quashed as the Ld. AO has not considered the return of income filed in response to notice under 148 of the Act.
4. On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating the re-assessment proceedings under section 148 on the basis of borrowed satisfaction of another person/department and without independent application of mind.
3 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE 4.1. On the facts and circumstances of the case and in law, the Ld. AO/DRP has erred in making the addition by placing reliance on the statements recorded during the course of survey conducted on Appellant's parent entity (ie. Aptivaa Consulting Solutions Private Limited or "Aptivaa India") without considering that such statements were subsequently retracted post the completion of the survey.
5. On the facts and circumstances of the case and in law, the Ld. AO/DRP has grossly erred in making an addition of INR 3,98,31,781/- in the assessment order by holding that the Appellant is a resident of India during the year under consideration in terms of section 6(3)(ii) of the Act.
6. On the facts and circumstances of the case and in law, the Ld. AO/DRP has grossly erred in holding that the Appellant has a Permanent Establishment ('PE') in the nature of fixed place PE in India in terms of Article 5(1) of the India - UAE tax treaty while doing so:- 6.1 The Ld. AO/DRP has erred on facts & in law, in attributing a sum of INR 3,98,31,781/- (being 75% of its total profits) as Income of the alleged PE of the Appellant in India on conjectures and surmises.
On the facts and circumstances of the case and in law, the Ld. AO/DRP has grossly erred in alleging that bogus expenses of AED 20,55.747-34/- have been claimed by the Appellant and the cash generated from such bogus expenses were repatriated to India by placing incorrect reliance on the statements recorded in the course of survey which were subsequently retracted.
On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 274 read with 271F of the Act and section 271(1)(c) of the Act for the subject year as the same is bad in law.” Brief facts of the case are as under: 2. M/s. Aptivaa Middle East FZE Dubai, UAE (hereinafter referred to the assessee) is a 100% subsidiary of M/s. Aptivaa Consulting Solutions Pvt. Ltd (hereinafter referred to as Aptivaa India). The principal activities of the assessee is providing services in management consultancy, cost control and risk
4 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE management, IT consultancy, internet consultancy and computer software house. 2.1 A Survey action u/s 133A of the IT Act 1961 was conducted on 29.08.2019 in the case of Aptivaa India by DGIT(Inv), Mumbai. Subsequently, information was shared with Ld.AO vide letter dated 22.03.2021 regarding the survey findings. As per the survey findings, the Ld.AO noted that the control and management of the affairs of Aptivaa Dubai is wholly situated in India. It was also established during survey proceedings that Aptivaa Dubai booked various non-genuine expenditure to inflate its expenses. Further, it was also noted by the Ld.AO that, the assessee did not file its return of income for the all years under consideration. Subsequently, notice under section 147 was issued under the erstwhile reassessment regime for the years under consideration on 15/04/2021. 2.2 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 reported in (2022) 138 taxmann.com 64. The Ld.AO subsequently, passed order under section 148A(d) on 29/07/2022 by rejecting the objections raised by the assessee. Accordingly, notice under section 148 was issued on 29/07/2022 for all years under consideration. 2.3 A draft assessment order was subsequently passed on 29/05/2023 for all the years under consideration by holding that, the assessee is fully managed and controlled from India and arrangement created by the assessee is to evade taxes in India. The Ld.AR thus disallowed certain expenses amounting to 5 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE ₹5,31,09,042/- as bogus and was held to be taxable in India at 40%. It was also held by the Ld.AR that assessee is a non- resident and has a fixed place of business in India. Accordingly, 75% of its income was held to be attributable to the PE in India. On receipt of the draft assessment order, assessee preferred objections before the DRP.
3. The DRP upheld the proposed adjustments and rejected the legal issues raised by the assessee. 3.1 On receipt of the DRP directions, the Ld.AR passed the impugned orders confirming additions in the hands of the assessee. The assessee is thus in appeal before this Tribunal challenging the legal issues as well as the addition on merits to be bad in law.
At the outset, the Ld.AR submitted that, assessee wish to argue on Grounds 2 & 2.1 as it goes to the root cause of assessment. 4.1 On perusal the legal issue contested by assessee in these ground, we are of the opinion that, it would be better to consider legal issue alleged before adverting to merits of the addition. Admittedly, the facts are identical for all the years under consideration and therefore the common issue is dealt with by way of a common order as under.
Brief facts leading to the legal issue are as under: The Ld.AR submitted that, the assessee challenged validity of draft assessment orders passed by the Ld.AO under section 148A(d) of the Act for year under consideration is without jurisdiction and void ab initio for following prepositions:
6 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE a) That, the case of the Assessee does not fall within the scope of directions of the order of UOI vs Ashish Agarwal in Civil Appeal No.3005/2022. b) That, the notices issued under section 148, is barred by time limitation as the Ld.AO while issuing the notice failed to comply with the conditions provided under section 149(1)(b) of the Act. c) That, the draft assesament orders passed by the Ld.AO is barred by time limitation as the same has not been passed within the time limit prescribed under the provisions of section 153(2) of the Act. d) That, the notices were issued without obtaining prior approval from the specified authority as per section 148A read with section 151 of the Act. 5.1 The details of the notices issued u/s. 148 for year under consideration are as under: S.No. Assessment Notice u/s.148 Notice u/s.148 Year issued under issued under old regime new regime 1. 2015-16 15/04/2021 29/07/2022 2. 2016-17 15/04/2021 29/07/2022 3. 2017-18 15/04/2021 29/07/2022
For assessment year 2015-16, the Ld.AR submitted that, time limit to issue of notice under the un-amended provisions of section 149 expired on 31/03/2022.
7 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE He submitted that, relaxation under the TOLA is not applicable in assessee's case as TOLA provisions are applicable only to cases where the time limit for issuing notices expired on or before 20/03/2020 to 31/03/2021 and till 31/06/2021, has been held by the Hon'ble Supreme Court in the case of UOI vs. Rajeev Bansal reported in (2024) 167 taxmann.com 70. 6.1 The Ld.AR thus contended that the notice issued on 29/07/2022 is bad in law as held by Hon’ble Supreme Court in case of UOI vs. Rajeev Bansal(supra) in do far as assessment year 2015-16 is concerned. The Ld.CIT(A).AR placed reliance on the decisions of coordinate bench of this Tribunal in case of in the case of ACIT Vs.Manish Finanvial & 5055/Mum/2024 for assessment year 2015-16 and 2016-17 vide order dated 02/12/2024 and ITO Vs. Pushpak Realities Pvt. Ltd., in 4814, 4816/Mum/2024 for assessment year 2011-12 vide order dated 07.11.2024. 6.2 On the other hand the Ld.DR relied on orders passed by authorities below. We have perused the submissions advanced by both sides in the light of the records placed before this Tribunal. 6.3 For the purpose of adjudication, we will first consider legal contention preposition raised by the Ld.AR with regard to the notice under section 148 being time barred, as per the provisions of section 149 as confirmed by the Hon'ble Supreme Court in the case of UOI vs. Rajeev Bansal(supra).For sake of convenience section 149 is reproduced as under : Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,--
8 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:
6.4 The contention of the Ld.AR is that the first proviso to section 149 clearly stipulates that notices under section 148 of the Act cannot be issued, if the time limit prescribed under the un-amended provisions of section 149, as applicable prior to 01/04/2021, already expired. The Ld.AR submitted that for assessment year 2015-16, time limit for issue of notice under unamended section section 149 expired on 31.03.2022 i.e. six years from the end of the relevant assessment year where the escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.
6.5 The relevant submission on behalf of Revenue before Hon’ble Supreme Court in case of Rajeeve Bansal (supra) are as under: 19. Mr. N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID- 19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income-tax Act;
9 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re assessment for previous assessment years; c. The relaxations provided under section 3(1) of TOLA apply "notwithstanding anything contained in the specified Act." Section 3(1), therefore, overrides the time limits for issuing a notice under section 148 read with Section 149 of the Income-tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income-tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: Assessment Within 3 Expiry of Within six Expiry of Year Years Limitation read Years Limitation with TOLA for read with (2) TOLA for (4) (1) (2) (3) (4) (5) 2013-2014 31-3-2017 TOLA not 31-3-2020 30-6-2021 applicable 2014-2015 31-3-2018 TOLA not 31-3-2021 30-6-2021 applicable 2015-2016 31-3-2019 TOLA not 31-3-2022 TOLA not applicable applicable 2016-2017 31-3-2020 30-6-2021 31-3-2023 TOLA not applicable 2017-2018 31-3-2021 30-6-2021 31-3-2024 TOLA not applicable 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 10 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE they will not fall for completion during the period prescribed under TOLA; g. Section 2 of TOLA defines "specified Act" to mean and include the Income-tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income-tax Act. Therefore, TOLA continues to apply to the Income T a x Act even after 1 April 2021; and h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income-tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra).
Notices have to be judged according to the law existing on the date the notice is issued. Section 149 of the old regime primarily provided two time limits: (i) four years for all situations and (ii) beyond four years and within six years if the income chargeable to tax which escaped assessment amounted to Rupees one lakh or more. After 1 April 2021, the time limits prescribed under the new regime came into force. The ordinary time limit of four years was reduced to three years. Therefore, in all situations, reassessment notices could be issued under the new regime if not more than three years have elapsed from the end of the relevant assessment year. For example, for assessment year 2018-2019, the four year period would have expired on 31 March 2023 under the old regime. However, if the notice is issued after 1 April 2021, the three year time limit prescribed under the new regime will be applicable. The three year time limit will expire on 31 March 2022.
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
11 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.
Another important change under section 149(1)(b) of the new regime is the increase in the monetary threshold from Rupees one lakh to Rupees fifty lakhs. The old regime prescribed a time limit of six years from the end of the relevant assessment year if the income chargeable to tax which escaped assessment was more than Rupees one lakh. In comparison, the new regime increases the time limit to ten years if the escaped assessment amounts to more than Rupees fifty lakhs. This change could be summarized thus: Regime Time limit Income chargeable to tax which has escaped assessment Old regime Four years but not Rupees one lakh or more more than six years New regime Three years but not Rupees fifty lakhs or more than ten years more
Given Section 149(1)(b) of the new regime, reassessment notices could be issued after three years only if the income chargeable to tax which escaped assessment is more than Rupees fifty lakhs. The proviso to Section 149(1)(b) limits the retrospectivity of that provision with respect to the time limits specified under section 149(1)(b) of the old regime.
In Ashish Agarwal (supra), this Court held that the benefit of the new regime must be provided for the reassessment conducted for the past periods. The increase of the monetary threshold from Rupees one lakh to Rupees fifty lakh is beneficial for the assesses. Mr Venkataraman has also conceded on behalf of the Revenue that all notices issued under the new regime by invoking the six year time limit prescribed under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.
The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b)
12 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs. ii. TOLA can extend the time limit till 31 June 2021 54. The proviso to Section 149(1)(b) of the new regime uses the expression "beyond the time limit specified under the provisions of clause (b) of sub section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021." Thus, the proviso specifically refers to the time limits specified under section 149(1)(b) of the old regime. The Revenue accepts that without application of TOLA, the time limit for issuance of reassessment notices after 1 April 2021 expires for assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017- 2018 in the following manner: (i) for the assessment years 2013-2014 and 2014-2015, the six year period expires on 31 March 2020 and 31 March 2021 respectively; and (ii) for the assessment years 2016-2017 and 2017-2018, the three year period expires on 31 March 2020 and 31 March 2021 respectively. 6.6 It is noted that notice under section 148 was issued on 29/07/2022 for assessment year 2015-16. As per the above reproduced submissions of the revenue before Hon’ble Supreme Court, the notice 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. Similar is the view taken by coordinate bench of this Tribunal in case of ACIT Vs.Manish Finanvial and ITO Vs. Pushpak Realities Pvt. Ltd.(supra). We therefore do not find any reason not to uphold the argument advanced by the Ld.AR. Accordingly the notice issued under section 148 for assessment year 2015-16 is held to be invalid and the consequent assessment order passed under section 147 read with section 144B of the is liable to be quashed.
13 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE 7. For assessment Years 2016-17 and 2017-18, the Ld.AR submitted that, the assessee is challenging validity of the notice issued under section 148 as the approval was obtained from the Principal Commissioner of Income Tax, instead of Principle Chief Commissioner of Income Tax or Chief Commissioner of Income Tax in terms of section 151 of the Act. 7.1 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 emphasised about the competent authority who has to approve such notices are 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) of Before expiry of four Joint Commissioner the old regime years from the end of the relevant assessment year Section 151(1) of After expiry of four Principal Chief Commissioner the old regime years from the end of or Chief Commissioner or the relevant assessment Principal Commissioner or year Commissioner Section 151(i) of Three years or less than Principal Commissioner or 14 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE the new regime three years from the Principal Director or 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
15 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE 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 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 16 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE 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. 7.2 The Ld.AR argued that, in present facts of the case, approval was granted by Principal Chief Commissioner Income Tax Mumbai, to pass orders on section 148A(d) as well as issuance of subsequent notice under section 148 under the new regime. He submitted that the said information has been categorically recorded in the order passed under section 148A(d) as well as the notice issued under section 148 of the act, both detailed 29/07/2022.
The Ld.AR the submitted that as prior approval has not been sought some the prescribed under section 151 of the new regime, the assessment proceedings and the consequential assessment order passed this bad in law.
7.3 On the contrary, the Ld.DR submitted that the usual notice issued by the Ld.AO was with prior approval of the appropriate
17 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE authority as per the erstwhile section 151 of the act, and therefore 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 perused submissions advanced by both sides in the light of the records placed before the Tribunal.
7.4 We have carefully perused the observations of the Hon’ble Supreme Court increase of Rajiv Bansal (supra) as well as the decision of Hon’ble Supreme Court in case of Ashish Agarwal(supra).
7.5 The Ld.AO passed order are section 148A(d) as well as issued notice under section 148 under the new regime on 29/07/2022. Hon’ble Supreme Court in both decisions referred to herein above has observed that, the appropriate authority for issuance of such notices would be as per section 151 of the new regime.
7.6 The impugned documents placed before the Tribunal reveal that the order under section 148A(d) of the notice issued under section 148, both dated 29/07/2022 vide Reference No. CIT (IT)- 1/Mumbai/148A/2022-23 placed at page 99-115 of paper book.
7.7 In the present facts of the case the notice has been issued beyond 3 years from end of the assessment year under consideration. As per the decisions of Hon’ble Supreme Court, approval should be obtained as per the amended provisions of section 151 (ii) of the act from the Principal Chief Commissioner.
18 ITA 2791, 2357 & 2355/Mum/2024; A.Y. 2015-16 to 2017-18 Aptivaa Middle Ease FZE 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.
7.8 We therefore do not find any reason not to uphold the argument advanced by the Ld.AR. Accordingly the notices issued under section 148 for A.Y.: 2016-17 & 2017-18 is held to be invalid and as a consequence assessment orders passed under section 147 read with section 144B for assessment years 2016- 17 & 2017-18 is liable to be quashed.
As the assessment orders under section 147 stands 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.
Order pronounced in the open court on 28/02/2025.