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Facts
The Revenue preferred an appeal against the order of the CIT(A) which had allowed the assessee's appeal against the assessment order. The assessee had filed a cross-objection challenging the validity of the reassessment proceedings.
Held
The Tribunal held that the notice issued under Section 148 of the Act (new regime) was issued beyond the surviving time limit and was therefore time-barred and bad in law. Consequently, the reassessment proceedings and the assessment order were quashed.
Key Issues
Whether the notice issued under Section 148 of the Act (new regime) was issued within the prescribed time limit, considering the provisions of the Income Tax Act read with TOLA and Supreme Court judgments.
Sections Cited
147, 148, 148A, 149, 151, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, D BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SMT RENU JAUHRI, ACCOUNTANT MEMBER Additional Commissioner of Income Tax 19(3) 513, 5th Floor, Piramal Chambers, Parel, Mumbai - 400020 …………. Appellant Ramchand Thakurdas Jhamtani Gala No. 120, Rajlaxmi Complex, Q Vs Building, Backside Kalher, Bhiwandi, Thane – 400203. …………. [PAN: AAEPJ8492K] Respondent C. O. No. 227/MUM/2024 (Assessment Year: 2014-15) Ramchand Thakurdas Jhamtani Gala No. 120, Rajlaxmi Complex, Q Building, Backside Kalher, Bhiwandi, Thane – 400203. [PAN: AAEPJ8492K] …………. Appellant Additional Commissioner of Income Tax 19(3) Vs 513, 5th Floor, Piramal Chambers, Parel, Mumbai - 400020 …………. Respondent Appearance For the Appellant/Assessee : Shri Dharan Gandhi For the Respondent/Department : Shri R. R. Makwana Date Conclusion of hearing : 12.02.2025 Pronouncement of order : 28.02.2025 O R D E R Per Bench: 1. The present appeal and cross objection pertain to Assessment Year 2014-2015. The Revenue has preferred appeal against the C.O. No. 227/Mum/2024 Assessment Year 2014-15 order, dated 16/05/2024, passed by the Commissioner of Income Tax, Appeal, Delhi, National Faceless Appeal Centre (NFAC), [hereinafter referred to as the ‘CIT(A)’], under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], whereby the Ld. CIT(A) had disposed off the appeal of the Assessee against the Assessment Order, dated 26/05/2023, passed under Section 147 read with Section 144B of the Act, for the Assessment Year 2014-2015. The Assessee has filed cross objection.
The relevant facts in brief are that notice under Section 148 of the Act (old regime) was issued to the Assessee for the Assessment Year 2014-2015 on 07/06/2021 (i.e., after the expiry of 4 years but before the expiry of 6 years from the end of Assessment Year 2014-2015). Subsequently, in compliance with the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal 444 ITR 1 (SC) [04/05/2022], communication, dated 25/05/2022, was sent to the Assessee intimating that the aforesaid notice issued under Section 148 of the Act (under old regime) would be treated as the show-cause notice issued in terms of Section 148A(b) of the Act (under new regime introduced by the Finance Act, 2021 w.e.f. 01/04/2021). The Assessing Officer also shared with the Assessee material/information on the basis of which the Assessing Officer had formed a belief that income had escaped assessment. The Assessee filed reply on 09/06/2022. Thereafter, order under Section 148A(d) of the Act was passed on 24/07/2022 after taking approval from the Principal Commissioner of Income Tax, Mumbai. This was followed by issuance of notice on 24/07/2022 under Section 148 of the Act (new regime). The reassessment proceedings culminated into passing of the Assessment Order, dated 26/05/2023, passed under section 147 read with Section C.O. No. 227/Mum/2024 Assessment Year 2014-15 144B of the Act. The appeal preferred by the Assessee against the aforesaid Assessment Order was allowed by the CIT(A) vide Order, dated 16/05/2024. Being aggrieved, the Revenue has preferred the present appeal before the Tribunal challenging the relief granted by the CIT(A), while the Revenue has filed cross- objection challenging the validity of the re-assessment proceedings.
We would first take up cross-objection filed by the Assessee raising jurisdictional issue. The cross objection raised by the Assessee read as under:
1. The notice issued u/s 148 of the Act dated 24.07.2022 is bad in law. The Ld. AO has not fulfilled the jurisdictional requirements of section 147 to 151 of the Act.
We have heard both the sides and have perused the material on record in relation to this issue. We have also taken into consideration the judicial precedents cited during the course of hearing.
There is no dispute as to facts. It is admitted position that the notice issued under Section 148 of the Act (old regime) on 24/07/2022, was treated as notice issued under Section 148A(b) of the Act by the Assessing Officer. Thereafter, order under Section 148A(d) of the Act, was passed on 24/07/2022, and the same was followed by issuance of notice dated 24/07/2022, under Section 148 of the Act (new regime). Thus, the notice under Section 148 of the Act (new regime) was issued after the expiry of 6 years from the end of the relevant assessment year.
The contention raised on behalf of the Assessee is that the Assessing Officer has passed order under Section 148A(d) of the Act and has issued notice under Section 148 of the Act (new C.O. No. 227/Mum/2024 Assessment Year 2014-15 regime) after the expiry of surviving period as computed according the judgment of the judgment of the Hon’ble Supreme Court in the case Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC)[03/10/2024]. Therefore, both, the order under Section 148A(d) of the Act and the notice under Section 148 of the Act (new regime) are barred by limitation. Per Contra, the stand taken by the Revenue is that there is no infirmity in the order passed by the CIT(A).
In the facts of the present case the issue that arises for consideration is whether the order, dated 24/07/2022, passed under Section 148A(d) of the Act and notice, dated 24/07/2022, issued under Section 148 of the Act (new regime) were passed/issued within the prescribed time.
At this juncture it would be pertinent to refer to the judgment of the Hon’ble Supreme Court in the case Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC)[03/10/2024]. The Hon’ble Supreme Court had made the following observations in relation to the interpret between the judgment of Hon’ble Supreme Court in the case of Ashish Agarwal (supra) and TOLA1:
b. Interplay of Ashish Agarwal with TOLA 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. East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. [Lord Asquith, in his concurring opinion, observed:
If you are 1 The Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020 C.O. No. 227/Mum/2024 Assessment Year 2014-15 bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] 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.
If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. A P Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom."] 110.The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices].As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation.Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149. 111.The clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the C.O. No. 227/Mum/2024 Assessment Year 2014-15 assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime. 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.
In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013- 2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred. (Emphasis Supplied)
On perusal of the above it becomes clear, that the Hon’ble Supreme Court has clarified that the assessing officer was required to complete these procedures within the ‘surviving time limit’ which can be calculated by computing the number of days between the date of issuance of the deemed notice under Section 148A(d) of the Act and 30th June 2021 (i.e. the extended the time limit provided by TOLA for issuing reassessment notices C.O. No. 227/Mum/2024 Assessment Year 2014-15 under section 148, which fell for completion from 20 March 2020 to 31 March 2021,). The clock of limitation which has stopped with effect from the date of issuance of Section 148 notices under the old regime (which is also the date of issuance of the deemed notices), would start running again when final reply to the notice deemed to have been issued under Section 148A(b) of the Act is received by the Assessing Officer. It was clarified that a reassessment notice issued beyond the surviving time limit would be time-barred.
We find in the present case notice under Section 148 of the Act (old regime) was issued on 07/06/2021 and was deemed to be notice issued under Section 148A(b) of the Act (new regime). Thus, the surviving time limit can be calculated by computing the number of days between the date of issuance of the deemed notice (i.e., 07/06/2021) and 30/06/2021, which comes to 23 days. The clock started ticking only after Revenue received the response of the Assesses to the show causes notices on 09/06/2022. Once the clock started ticking, the Assessing officer was required to complete these procedures within the surviving time limit of 23 days which expired on 02/07/2022. Since notice under Section 148 of the Act was issued on 24/07/2022 which fell beyond the surviving time limit that expired on 02/07/2022, the said notice issued under Section 148 of the Act is time- barred and therefore, bad in law. Therefore, notice, dated 24/07/2022, issued under Section 148 of the Act (new regime), the consequential reassessment proceedings and the Assessment Order, dated 26/05/2023, passed under Section 147 read with Section 144B of the Act are quashed. Thus, Cross-Objection raised by the Assessee is allowed and accordingly, all the grounds raised by the Revenue in the departmental appeal in relation to the relief granted by the CIT(A) on merits are C.O. No. 227/Mum/2024 Assessment Year 2014-15 dismissed as having been rendered infructuous.
In terms of the paragraph 10 above, the Cross-Objection raised by the Assessee is allowed and the appeal preferred by the Revenue is dismissed.