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Facts
The assessee filed a return for AY 2014-15, which was processed and later subjected to scrutiny. The AO reopened the assessment under Section 147, believing income had escaped assessment due to undisclosed savings bank account balance. A notice under Section 148 was issued, and the AO made an addition of Rs. 2,03,20,293/-. The primary issue revolved around the date of issuance of the notice under Section 148 and its validity, particularly concerning the applicability of new provisions under Section 148A.
Held
The Tribunal held that the notice under Section 148 of the Act was effectively issued on 01-04-2021, as per the ITBA Portal, which means the new regime of Section 148A of the Act was applicable. Since the revenue did not follow the requirements of the new regime and the Supreme Court's decision in 'Union of India vs Ashish Agarwal', the reassessment proceedings were quashed for invalid assumption of jurisdiction. The Tribunal also noted that the income escaping assessment was less than Rs 50,00,000/-, making the reopening invalid under CBDT Instruction No. 1/2022.
Key Issues
Whether the notice under Section 148 of the Act was issued before or after 01.04.2021, and consequently, whether the provisions of Section 148A were applicable, thereby invalidating the reassessment proceedings for non-compliance.
Sections Cited
147, 148, 143(1), 143(3), 69, 69A, 115BBE, 148A, 276C(1), 245H, 271(1)(C)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI M. BALAGANESH & SHRI S.S. VISWANETHRA RAVI
This appeal by the assessee is filed against the order of the learned Commissioner of Income Tax (Appeal), NFAC, Delhi, (in short Ld.CIT(A) for the assessment year 2014-15, vide order dated 12.07.2024.
:-2-: ITA. No:1943/Chny/2024 2. The assessee had filed concise grounds of appeal before us. The Ground Nos. 1,8,9 & 10 raised by the assessee are general in nature and does not require any specific adjudication.
3. The Ground Nos. 2,3,4 & 5 raised by the assessee are challenging the validity of assumption of jurisdiction under section 147 of the Act on various facets. Since this is a preliminary issue and goes to the root of the matter, we deem it fit and appropriate to address the same first.
We have heard the rival submissions and perused the materials available on record. The assessee is an individual and managing partner of M/s. Antony Muthu Udayar & Co. The return of income for the assessment year 2014-15 on 13.11.2014 determining declaring total income of Rs 4,97,210/-. This return was duly processed under section 143(1) of the Act on 24.02.2015. The case was selected for complete scrutiny and accordingly assessment under section 143(3) of the Act was completed on 13.06.2016 determining total income at Rs.5,97,210/-. Subsequently, the AO noticed that the assessee had failed to disclose the savings bank account maintained at Syndicate Bank and the closing balance of Rs.32,47,512/- was not admitted in the balance sheet as on 31.03.2014. Hence, the entire amount of Rs.32,47,512/- being the closing balance in the savings bank account to be treated as undisclosed :-3-: ITA. No:1943/Chny/2024 investment u/s.69 of the Act. As the assessee had not admitted the investment in the return of income filed for assessment year 2014-15, the Learned AO had reason to believe that income of the assessee had escaped assessment within the meaning of section 147 of the Act and issued notice under section 148 of the Act dated 31.03.2021. In response to the notice under section 148 of the Act issued to the assessee, the assessee filed a return of income on 16.04.2021 declaring total income of Rs.4,97,020/-. However, the assessee has not made any request for providing the reason for reopening. Therefore, the Learned AO issued statutory notices sought for furnishing the details called for. In response to the above, the assessee did not file the required details on or before 25.01.2022, but filed the objection for reopening on 25.01.2022. Thereafter, the assessee had filed additional objections on 01.02.2022. During the assessment proceedings, the Learned AO asked to furnish the copy of Savings bank maintained at Syndicate Bank (now Canara Bank), but the assessee failed to furnish the details called for. The Learned AO completed the assessment by making an addition of Rs 2,03,20,293/- treated as unexplained money u/s.69A r.w.s 115BBE of the Act and concluded the assessment on 04.07.2022 u/s. 147 of the Act on the basis of material available on the record.
The short point that arises for our consideration is as to whether the notice under section 148 of the Act dated 31-3-2021 was issued to the :-4-: ITA. No:1943/Chny/2024 assessee on 31-3-2021 or on 1-4-2021 and accordingly whether the new provisions of section 148A of the Act would get kicked in or not in the facts and circumstances of the instant case. In the instant case the notice under section 148 of the Act was dated 31-3-2021. The claim of the assessee is that the same was issued by the Learned AO on 1-4-2021 as per the screenshot reflected in the ITBA Portal. On the contrary, the revenue’s case is that the said notice was issued to the assessee and dispatched to the assessee by electronic mode on 31-3-2021 at 22:53:56 hours. In support of this, the Learned DR placed on record the log details maintained by the revenue showing the out time stamp of the notices and correspondences generated from the records. Drawing support from the said document, it was pleaded by the Learned DR that the notice issued under section 148 of the Act dated 31-3-2021 was duly served on the assessee on 31-3-2021 itself which is well within the period of limitation. Per Contra, the Learned AR placed reliance on Page 16 of the Paper Book 1 comprising of the screenshot of the ITBA Portal which clearly stated that the notice under section 148 of the Act was issued on 1-4-2021. The Learned DR vehemently argued that the assessee himself in Page 4 of the assessment order had acknowledged the receipt of notice under section 148 of the Act on 31-3-2021 itself. But on perusal of the Page 4 of the Assessment Order and the subsequent paragraphs therein, it is very clear that the assessee had only mentioned the receipt of notice under section :-5-: ITA. No:1943/Chny/2024 148 of the Act dated 31-3-2021 and not receiving the said notice on 31-3- 2021. This fact is very much evident from Para 8 of the Assessment Order. For the sake of convenience, the objection raised by the assessee before the Learned AO as reproduced in para 8 of the assessment order is as below:- “In addition to the objection already raised, it is respectfully submitted that the notice under section 148 was not served to assessee before the Last date of limitation (31/03/2021). As the notice itself was generated on 31/03/2021, how the same could have been served on assessee on the same date. This is not correct. On this count also the proceedings already initiated may kindly be dropped”.
Further we find that the assessee had also raised a specific Ground No. 3 on limitation issue of notice under section 148 of the Act before the Learned CITA, which was also disposed of by the Learned CITA against the assessee by simply stating as under:- 8.3. The appellant has also contested that the re-opening of the assessment was barred by the limitation as the notice was issued after 6 year on 01.04.2021. However as verified from the facts of the case, the notice u/s 148 of the IT Act was issued on 31.03.2021. Therefore, the appellant’s contention is not correct and accordingly not acceptable.
Hence the objection raised by the Learned DR that the assessee had not raised this issue at all before the Learned CITA is devoid of merit and rejected. We are convinced that the date of issuance of notice under section 148 of the Act as displayed in the ITBA Portal is 01-04-2021. We find that the Learned AR rightly placed reliance on the decision of the Hon’ble Delhi High Court in the case of Suman Jeet Agarwal vs ITO reported in 449 ITR 517 (Del). In that case, the notice under section 148 of :-6-: ITA. No:1943/Chny/2024 the Act though generated and signed on 31-3-2021 was issued through e- mail by the ITBA servers on 6-4-2021. In the said case, the revenue had filed an affidavit dated 30-5-2022 before the Hon’ble Delhi High Court clarifying the circumstances relating to the dispatch of the notices through e-mail on 1st April 2022 and thereafter. It was specifically affirmed by the revenue in its affidavit as under:- 7.7 The e-mail will be sent by the ITBA e-mail system to the assessee only if the assessee's valid e-mail ID is present in the ITBA system. 7.8. On 31st March, 2021, the average time taken for triggering the e-mail process by the ITBA software system was approximately 6 hours. The said delay was due to the high number of documents being generated on the said date. Therefore, a substantial time was taken by the ITBA servers for triggering the e-mails and consequent receipt of e-mails by the assessee. 7.9 The ITBA software's e-mail triggering system is programmed in such a manner that e-mails are triggered in a batch mode, in a controlled manner i.e., at the rate of 400 documents per 2 minutes so as to avoid getting the ITBA system's IPs blacklisted by e-mail service providers like Yahoo or Google. 7.10 The ITBA software's process of triggering of e-mail and sending of Notices to the E-filing portal's data base is an automated function. 7.11 The e-mails are triggered by the ITBA software using the Simple Mail Transfer Protocol ('SMTP') from back end, which reach the messaging gateway of the ITBA system. Upon reaching the messaging gateway, message ID is created by the messaging gateway and the same gets updated in the 'e-mail table'. Thereafter, depending on the availability of the destination domain server i.e. assessee's server and the user account, e-mails are either immediately delivered to the assessee or re- attempted in cases of failure. 7.12 The JAO of his/her own has no control over the Notice document generated on the ITBA portal, once it has been so generated. After the notice document is generated on the ITBA portal, the JAO cannot alter, amend, or delete the said Notice document through the ITBA system. 7.13 The ITBA portal allows the JAO to cancel a draft of the notice under section 148 of the Act of 1961, which is a step prior to its generation. Once a notice has been generated on the ITBA software portal, the JAO cannot cancel the same. (emphasis supplied by us) 7.1. Ultimately, the Hon’ble Delhi High Court held as under:-
:-7-: ITA. No:1943/Chny/2024 30. Additionally, it is a settled position of law that the notice under section 148 of the Act of 1961 must be served in accordance with the procedure established by law, to the correct addressee, otherwise the reassessment proceedings would be invalid in law. Chetan Gupta (supra). The issuance of e-mail attaching electronic notice to an unrelated e-mail address does not constitute as due despatch and therefore, the Notices cannot be said to have been issued on 31st March, 2021. However, in each of these matters, since an authenticated copy of the notice was placed on the registered account of the assessee on the E-filing portal, as that is how the petitioners learnt about the notices, these notices will be held to have been issued on the date on which the Notices were first viewed by the assessees on their E-filing portal.
31. For the reasons and principles that we have laid down, we dispose of these Writ Petitions with the following directions: 31.1 Category 'A': The Notices falling under category 'A', which were digitally signed on or after 1st of April, 2021, are held to bear the date on which the said Notices were digitally signed and not 31st March 2021. The said petitions are disposed of with the direction that the said Notices are to be considered as show-cause-notices under section 148A (b) of the Act as per the directions of the apex Court in the Ashish Agarwal ( supra) judgment. 31.2 Category 'B': The Notices falling under category 'B' which were sent through the registered e-mail ID of the respective JAOs, though not digitally signed are held to be valid. The said petitions are disposed of with the direction to the JAOs to verify and determine the date and time of its despatch as recorded in the ITBA portal in accordance with the law laid down in this judgment as the date of issuance. If the date and time of despatch recorded is on or after 1st of April, 2021, the Notices are to be considered as show-cause-notices under section 148A (b) as per the directions of the apex Court in the Ashish Agarwal (supra) judgment. 31.3 Category 'C': The petitions challenging Notices falling under category 'C' which were digitally signed on 31st of March 2021, are disposed of with the direction to the JAOs to verify and determine the date and time of despatch as recorded in the ITBA portal in accordance with the law laid down in this judgment as the date of issuance. If the date and time of despatch recorded is on or after 1st of April, 2021, the Notices are to be considered as show-cause-notices under section 148A (b) as per the directions of the apex Court in the Ashish Agarwal (supra) judgment. 31.4 Category 'D': The petitions challenging Notices falling under category 'D' which were only uploaded in the E-filing portal of the assessees without any real time alert, are disposed of with the direction to the JAOs to determine the date and time when the assessees viewed the Notices in the E-filing portal, as recorded in the ITBA portal and conclude such date as the date of issuance in accordance with the law laid down in this judgment. If such date of issuance is determined to be on or after 1st of April 2021, the Notices will be construed as issued under section 148A (b) of the Act of 1961 as per the Ashish Agarwal (supra) judgment. 31.5 Category 'E': The petitions challenging Notices falling under category 'E' which were manually despatched, are disposed of with the direction to the JAOs to determine in accordance with the law laid down in this judgment, the date and time when the Notices were delivered to the post office for despatch and consider the same :-8-: ITA. No:1943/Chny/2024 as date of issuance. If the date and time of despatch recorded is on or after 1st of April, 2021, the Notices are to be construed as show-cause-notices under section 148A (b) as per the directions of the apex Court in the Ashish Agarwal (supra) judgment. (emphasis supplied by us) 8. The case of the assessee herein also squarely falls in Category C discussed by the Hon’ble Delhi High Court supra. Hence the date mentioned in the ITBA portal shall have to be construed as the date of issuance of notice under section 148 of the Act dated 31-3-2021. As per the ITBA Portal, the notice under section 148 of the Act dated 31-3-2021 was issued only on 1-4-2021. Hence the new regime of provisions of section 148A of the Act kicks in. Since the revenue in the instant case had not followed any of the requirements of the new regime and the decision of the Hon’ble Supreme Court in the case of Union of India vs Ashish Agarwal reported in 444 ITR 1(SC), the reassessment proceedings need to be quashed for invalid assumption of jurisdiction of the Learned AO. Further we find that the CBDT had issued Instruction No. 1/2022 dated 11-5-2022 post the decision of the Hon’ble Supreme Court in the case of Ashish Agarwal supra, wherein it was categorically stated in para 7.1. as under:- 7.1 Hon'ble Supreme Court has directed that information and material is required to be provided in all cases within 30 days. However, it has also been noticed that notices cannot be issued in a case for AY 2013-14, AY 2014-15 and AY 2015-16. if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Hence, in order to reduce the compliance burden of assessees, it is clarified that information and material may not be provided in a case for AY 2013-14. AY 2014-15 and AY 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Separate instruction shall be issued regarding procedure for disposing these cases.
:-9-: ITA. No:1943/Chny/2024 9. Admittedly, in the reasons recorded for reopening the assessment, the Learned AO had formed a belief that income of the assessee to the tune of Rs 32,47,512/- had escaped assessment. Since the income escaping assessment is less than Rs 50,00,000/-, the CBDT Instruction No. 1/2022 dated 11-5-2022 referred supra kicks in and hence no reopening could be validly made for Assessment Year 2014-15. It is trite law that the Instructions given by the CBDT are also binding on the revenue authorities and any action of the revenue in violation of the CBDT Circulars / Notifications / Instructions / Procedural Manuals, would become fatal to the very assumption of jurisdiction itself. Reliance in this regard is placed on the recent decision of the Hon’ble Supreme Court in the case of Vijay Krishnaswami vs DDIT (Inv.) reported in 479 ITR 467 (SC) wherein it was held as under:- 20. Perusing the backdrop, from the recommendations of Wanchoo Committee till the date amendment was brought introducing Section 245H in the IT Act granting power of immunity to Settlement Commission, the Revenue was facing the challenge of minimal prosecution and also for effectively proving the prosecution, what recourse ought to be taken was an issue before them. Simultaneously, the assessee who in bona-fide manner had disclosed the excess earning specifying the source without any suppression, were facing unnecessary prosecution. Therefore, to streamline the said situation the revenue has issued guidelines time and again. In the guidelines, it was specified that when an assessee is making an attempt to evade tax or its payment or penalty, if established, it is incumbent on the officers of the revenue to lodge the prosecution. In this regard, circular dated 24.04.2008 was published. Clause 3.3.1(iii) of the said circular deals with the offences under Section 276C(1) of IT Act. The relevant clause of the said circular is reproduced as under: - "(iii) Offences u/s 276C(1): Wilful attempt to evade taxes All cases where penalty u/s 271(1)(C) exceeding Rs.50,000/- is imposed and confirmed by the ITAT (if any second appeal has been filed) shall be processed for filing prosecution complaint.
:-10-: ITA. No:1943/Chny/2024 The case for prosecution under this section shall be processed by the A.O. preferably within 60 days of receipt of the ITAT's order, if any." The intent of the above scheme is indicative of the fact that the Department shall proceed to file prosecution/complaint only in those cases wherein penalty exceeding Rs. 50,000/- has been imposed by ITAT, within 60 days from the date of order of ITAT.
The Directorate of Income Tax, (PR PP & OL) has also published the Prosecution Manual, 2009, prescribing the 'procedure for launching prosecution'. In Clause 1.4 of Chapter III, specifying when the prosecution can be initiated. The said clause is relevant hence reproduced as under: "1.4 When can prosecution be initiated? A case should be processed for launching prosecution immediately after the commission of offence comes to the notice of the authority concerned. However, if some more evidences can be gathered during any proceedings, it would be advisable to complete such proceedings to gather all relevant evidences before initiating the prosecution. The Apex Court has laid down that if penalty for concealment fails then the prosecution initiated on same material/basis must also fail (M/s K.C. Builders Ltd v. CIT [265 ITR 344]). Therefore, it is advisable to initiate prosecution under section 276C(1) only after confirmation of concealment penalty by the ITAT. xx xx xx xx"
The said guideline was based on a judgment of K.C. Builders v. Assistant Commissioner of Income-tax [2004] 186 CTR 721/265 ITR 562/135 Taxman 461 (SC)/(2004) 2 SCC 731, wherein this Court laid down that if penalty for concealment fails, the initiation of the prosecution on the basis of the same material also fails, therefore, it was advised that after confirmation of concealment of penalty by ITAT, the prosecution may be lodged in terms as specified in the above circular dated 24.04.2008.
Similarly, on 09.09.2019, the Central Board of Direct Taxes (in short "CBDT") in exercise of power under Section 119 of IT Act issued clarification qua the criteria to be followed for launching prosecution in respect of certain categories of offence under the IT Act, including Section 276C(1). The relevant portion is referred as under - "iii. Offences u/s 276C(1): Wilful attempt to evade tax, etc. Cases where the amount sought to be evaded or tax on under-reported income is Rs. 25 Lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3. Further, prosecution under this Section shall be launched only after the confirmation of the order imposing penalty by the Income Tax Appellate Tribunal."
:-11-: ITA. No:1943/Chny/2024 24. As such, the departmental circular dated 24.04.2008, Prosecution Manual, 2009, and CBDT's circular dated 09.09.2019, provide when the prosecution ought to be lodged by Revenue. The said Circulars have been issued to regulate the lodging of prosecution in genuine cases and to weed out the problems of the tax payers, and also to understand when can the prosecution for Section 276 ought to be lodged and continued. The said circular and clarification have been brought after the statutory scheme of Section 245H(1) and the appended proviso. In this situation, it is imperative for us to understand the binding nature of the departmental circular, Prosecution Manual, 2009, and CBDT's clarification.
Reflecting on the said issue, in Ranadey Micronutrients v. Collector of Central Excise 1996 taxmann.com 360/[1996] 87 ELT 19 (SC)/(1996) 10 SCC 387, while dealing with a case concerning interpretation of circulars providing for classification of micronutrients for the purpose of imposition of excise duty, this Court held - "15. There can be no doubt whatsoever, in the circumstances, that the earlier and later circulars were issued by the Board under the provisions of Section 37-B, and the fact that they do not so recite does not mean that they do not bind Central Excise officers or become advisory in character. There can be no doubt whatsoever that after 21-11-1994, excise duty could be levied upon micronutrients only under the provisions of Heading 31.05 as "other fertilisers". If the later circular is contrary to the terms of the statute, it must be withdrawn. While the later circular remains in operation the Revenue is bound by it and cannot be allowed to plead that it is not valid.
We reject the submission to the contrary made by the learned counsel for the Revenue and in the affidavit by M.K. Gupta, working as Director in the Department of Revenue, Ministry of Finance. One should have thought that an officer of the Ministry of Finance would have greater respect for circulars such as these issued by the Board, which also operates under the aegis of the Ministry of Finance, for it is the Board which is, by statute, entrusted with the task of classifying excisable goods uniformly. The whole objective of such circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. It does not lie in the mouth of the Revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are of far greater importance than the winning or losing of court proceedings."
Further, in Paper Products Ltd. v. Commissioner of Central Excise [2001] 165 CTR 693/247 ITR 128/115 Taxman 147 (SC)/(1999) 7 SCC 84, where the dispute related to classification of products for the purpose of tax, in the context of circulars issued and in that regard, this Court observed as thus - "4. The question for our consideration in these appeals is : what is the true nature and effect of the circulars issued by the Board in exercise of its power under Section 37-B of the Central Excise Act, 1944? This question is no more res integra in view :-12-: ITA. No:1943/Chny/2024 of the various judgments of this Court. This Court in a catena of decisions has held that the circulars issued under Section 37-B of the said Act are binding on the Department and the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. These judgments have also held that the position may be different with regard to an assessee who can contest the validity or legality of such instructions but so far as the Department is concerned, such right is not available." …………… 28. The Constitution Bench in the case of Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries [2008] 12 STR 416/17 STT 103 (SC)/(2008) 13 SCC 1 on a reference made by three Judge Bench, addressing the conflict of difference of interpretation of a circular by the Central Board of Excise and Customs, and by this Court coupled with binding nature of the same, observed as follows - "7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." ……………….
In the recent pronouncement of this Court in Commissioner of Central Excise and Service Tax v. Merino Panel Product Ltd. (2023) 2 SCC 597, in an appeal against order passed by CESTAT which had set-aside the show-cause notice issued by the Revenue, placing reliance on the judgements in Ranadey (supra) and Paper Products Ltd. (supra) and considering the binding nature of circulars, in paragraph 22 observed as follows: "22. Thus, the starting point of our analysis on this question is that the CBEC Circular of 1-7-2002 is binding on the Revenue. If the show-cause notice issued by the Revenue is found to be contrary to the Circular, it would prima facie result in abrogation of the uniformity and consistency which is strongly emphasised upon in Ranadey Micronutrients [(1996) 10 SCC 387]. It goes without saying that the Revenue's stance against its own circular can potentially lead to a chaotic situation where, with one hand, the Revenue would lay down instructions on how to interpret the relevant statutes and rules, and with the other hand, it would promptly disobey those very directions. Maintaining predictability in taxation law is of utmost importance and, for this reason, the Court should not accept an :-13-: ITA. No:1943/Chny/2024 argument by the Revenue that waters down its own Circular as this would fall squarely within the contours of the prohibition outlined in Paper Products [Paper Products Ltd. v. CCE, (1999) 7 SCC 84]."
From the above precedents, this Court unambiguously held that that the circulars issued by the Revenue are binding on the authorities, and can tone down the rigour of the statutory provision. Therefore, it can be concluded that the circulars as discussed above are binding on the authorities who are administering the provisions of the IT Act.
After perusal of the provisions of the IT Act, various circulars issued by the department and also the judgments referred hereinabove, it can be safely culled out that if an assessee has made suppression of income without disclosing the manner in which the excess amount was earned and concealed the account making wilful attempt to evade the tax which may be imposable and chargeable or payable, he/she is required to be prosecuted. Therefore, the recourse to lodge prosecution was made permissible subject to the department's circular dated 24.04.2008 which provided for confirmation by ITAT in case the penalty imposed under Section 276C(1) is exceeding Rs. 50,000/-. It is relevant here to note that the said circular was in vogue on the date of the grant of sanction by PDIT to DDIT for lodging the prosecution against the appellant. The said circular has been reaffirmed by the Prosecution Manual, 2009 and the clarification issued by the CBDT in 2019. As such, the circulars discussed above, were binding on the authorities and required to be adhered to while lodging the prosecution by the Revenue.
Admittedly, in the present case, the complaint was filed by DDIT after sanction of PDIT before the Additional Chief Metropolitan Magistrate (E.O.II), Egmore, Chennai, on 11.08.2018. Application under Section 245(C) was filed by the appellant before the Settlement Commission later. On the date of lodging the prosecution, the finding of concealment of income or imposition of the penalty of more than Rs. 50,000/- has not been recorded by the ITAT. Nothing has been brought on record to show that any wilful attempt to evade the payment of tax by assessee was made. No explanation has been put forth by Revenue to demonstrate as to why PDIT or DDIT did not comply the procedure while lodging prosecution in this case. Therefore, in our view, the act of the authority in continuing prosecution is in blatant disregard to their own binding circular dated 24.04.2008 and in defiance to the guidelines of the Department.
In view of the foregoing discussions in conclusion we can safely hold that the prosecution lodged with the help of proviso to sub-section (1) to Section 245H was in defiance to the circular dated 24.04.2008, which was in vogue. It was the duty of the PDIT and DDIT to look into the facts that in absence of any findings of imposition of penalty due to concealment of fact, the said prosecution cannot be proved against the assessee. It seems, even after passing the order by the Settlement Commission on 26.11.2019, it was brought to the notice of the High Court, but the authorities were persistent to pursue the prosecution without looking into the procedural lapses on their part. Such an act cannot be construed in right perspective and the Revenue have acted :-14-: ITA. No:1943/Chny/2024 in blatant disregard to binding statutory instructions. Such willful non-compliance of their own directives reflects a serious lapse, and undermines the principles of fairness, consistency, and accountability, which in any manner cannot be treated to be justified or lawful.
It must also be noted that, in terms of Section 245-I, the findings of the Settlement Commission are conclusive with respect to the matters stated therein. Once such an order was passed, it was incumbent upon the authorities to inform the High Court that continuation of the prosecution would amount to an abuse of the process of law, in particular when the Settlement Commission did not record any finding of wilful evasion of tax by the appellant. Even otherwise, it was the duty of the High Court to examine the facts of the case in their right context and assess whether, in light of the above circumstances, the continuation of the prosecution would serve any meaningful purpose in establishing the alleged guilt. Upon a holistic consideration of the matter, we are of the view that the conduct of the authorities lacks fairness and reasonableness, and the High Court's approach appears to be entirely misdirected, having failed to appreciate the factual and legal position in right earnest.
In view of the foregoing discussions, we are constrained to allow these appeals setting aside the order impugned passed by the High Court. It is directed that prosecution lodged by the Revenue against the appellant shall stand quashed. In the facts and circumstances of the case as discussed hereinabove, we are inclined to impose costs against the Revenue which is quantified at Rs. 2,00,000/- payable to the appellant. Pending application(s), if any, shall stand disposed of. (emphasis supplied by us) 9.1. Hence the reopening of assessment is to be quashed on this count also.
In view of the aforesaid observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that the Learned AO’s assumption of jurisdiction to reopen the case of the assessee is flawed for more than one reason and hence to be declared as void abinitio. Consequentially the reassessment proceedings are hereby quashed. The Concise Ground Nos. 2,3,4 & 5 are hereby allowed.
:-15-: ITA. No:1943/Chny/2024 11. Since the entire reopening proceedings are quashed, the adjudication of Concise Grounds 6 & 7 would become academic in nature and they are left open. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the court on 14th , October, 2025 at Chennai.