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Facts
The assessee challenged the validity of a notice issued u/s.148 of the Income Tax Act for AY 2016-17. The primary contention was that the approval for issuing the notice was obtained from the Principal Commissioner of Income Tax, which was not the competent authority as per the amended Section 151 of the Act, especially since more than three years had passed from the end of the assessment year.
Held
The Tribunal held that the notice issued u/s.148 on 30.06.2022 was bad in law. Since this date was after 30.06.2021, sanction should have been obtained from the authorities empowered under clause (ii) of Section 151 of the new regime (Principal Chief Commissioner or Director General), not from the Principal Commissioner as was done.
Key Issues
Whether the re-opening notice u/s.148 was issued with valid sanction from the competent authority as per Section 151 of the Income Tax Act, considering the period elapsed from the assessment year and the applicable regime (old vs. new).
Sections Cited
148, 151, 143(3), 148A(b), 148A(d), 3(1)
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI MANOJ KUMAR AGGARWAL
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 19.04.2024 for the Assessment Year (hereinafter referred to as "AY”) 2016-17.
The assessee, inter alia, has raised several grounds of appeal
2. including legal issue challenging validity of the notice issued u/s.148 of (AY 2016-17) Mr. Krishnankutty Ramesh the Income Tax Act, 1961 (hereinafter referred to as "the Act”) being bad in law for not obtaining approval of the competent authority. According to the Ld.AR, when the notice u/s.148 of the Act was issued on 30.06.2022 which was undisputedly beyond period of three year, therefore, approval was required to be taken as per provisions of the amended section 151 of the Act from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General of Income tax and not from the Principal Commissioner of Income Tax as held by the Hon’ble Supreme Court in the case of UoI v. Rajeev Bansal reported in [2024] 167 taxmann.com
70. (SC). The Ld.AR has invited our attention at Page No.27 of the Paper Book, wherein, copy of the decision of the Hon’ble Supreme Court in the case of Rajeev Bansal (supra) is found placed and he took us especially to Para No.73 onwards and to a chart reproduced therein; and submitted that assessee’s case would fall in the last column of the chart, since more than three (3) years have lapsed from the relevant assessment year.
The Ld.AR further submitted that in the present case pursuant to search on 10.01.2018 in the case of M/s.Joyalukas India Pvt. Ltd., at Ernakulam/Kochi, a ledger showing payment of cash was found, which was assumed by the AO to be showing on-money payment to the assessee as well as to other three (3) co-owners for sale of immovable property at Coimbatore. On the strength of the ibid ledger, the AO issued (AY 2016-17) Mr. Krishnankutty Ramesh notice for re-opening of assessment for AY 2016-17 u/s.148 of the Act as
per old regime. However, since the new regime for re-opening of assessment had come into operation from 01.04.2021, there was a dispute about the legal validity of the AO still issuing notice after 01.04.2021 as per the old regime; and the Hon’ble Supreme Court in the case of UOI v. Ashsih Agarwal reported in (2022) 444 ITR 1 (SC) settled the issue by exercising its inherent jurisdiction under Article 142(1) of the Constitution of India and directed the re-assessment notice issued under old regime (i.e. after 01.04.2021) to be deemed to have been issued u/s.148A(b) of the new regime.
Pursuant to the Hon’ble Supreme Court decision/direction in the case of Ashish Agarwal (supra), the AO issued fresh notice u/s.148A(b) of the Act on 24.05.2022 which was responded by the assessee on 25.05.2022; and pursuant thereto, on 30.06.2022 the AO passed order u/s.148A(d) of the Act and issued notice u/s.148 of the Act on the same day i.e.30.06.2022. The Ld.AR invited our attention to Page No.9 wherein copy of the notice u/s.148 of the Act dated 30.06.2022 is found placed, wherein, the DCIT/AO has noted that he had issued ibid notice after obtaining prior approval of the PCIT-1, Coimbatore [Principal Commissioner of Income Tax] which was accorded on 28.06.2022 with C.No.122/PCIT-1/CBE/2022-23. The Ld.AR also drew our attention to Page Nos.6-8 of the Paper Book wherein the copy of the order dated (AY 2016-17) Mr. Krishnankutty Ramesh :: 4 ::
30.06.2022 passed u/s.148A(d) of the Act is found placed therein. The Ld.AR again drew our attention to Para No.6 wherein the AO has reiterated that he is passing the order u/s.148A(d) of the Act with prior approval of the PCIT-1, Coimbatore. Thus, according to the Ld.AR it is evident that the AO has passed order u/s.148A(b) of the Act as well as issued notice u/s.148 of the Act on the same day after getting the prior approval of the PCIT-1, Coimbatore [Principal Commissioner of Income Tax] accorded on 28.06.2022 with C.No.122/PCIT-1/CBE/2022-23. In the aforesaid, undisputed factual background, according to the Ld.AR, prior approval taken from the PCIT is bad in law, since three (3) years have lapsed from the end of the relevant assessment year, when the notice u/s 148 was issued by AO on 30.06.2022. For buttressing such a contention, he drew our attention to sub-section 151, which prescribes the specified- authority who has to accord sanction for issuance of reopening notice.
According to Ld AR, without sanction/approval u/s 151 from the Income Tax Authority as specified therein, the AO can’t issue reopening notice u/s.148 of the Act. Accordingly, in the present case, since more than three (3) years have lapsed from the end of the relevant assessment year, the specified authority as per sub clause (ii) of section 151, to sanction issue of notice u/s 148, was the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, then, Chief Commissioner or (AY 2016-17) Mr. Krishnankutty Ramesh :: 5 ::
Director General. Since grant of sanction by the appropriate/specified authority u/s 151 is a pre-condition for the AO to assume jurisdiction u/s.148 of the Act to issue re-opening of assessment notice, according to Ld AR, valid sanction by the appropriate/specified authority u/s 151 of the Act, is sine qua non for AO to usurp reopening jurisdiction. Therefore, the Ld.AR asserted that the notices issued by the AO dated 30.06.2022 u/s.148A(d) of the Act as well as u/s.148 of the Act are bad in law.
Per contra, the Ld.DR submitted that after the Hon’ble Supreme Court decision in the case of Ashish Agarwal (supra), the CBDT had issued instruction, based on which, the AO has issued notice u/s.148 of the Act after taking permission from the authorities under clause (i) of section 151 i.e. the Principal Commissioner of Income Tax. A copy of the relevant portion of the instruction [6.2 of the CBDT instruction has been reproduced by the Hon’ble Supreme Court at Para No.15 of the order in the case of Rajeev Bansal (supra)]. Therefore, the Ld.DR doesn’t want us to interfere with the action of the AO taking approval from the PCIT for re-opening the case of the assessee.
Heard both the parties, and perused the records, and carefully gone through the orders of the Hon’ble Supreme Court in both Shri Ashish Aggarwal (supra) & Rajeev Bansal (supra), and note that in the present case, three (3) years time limit for AY 2016-17 falls for completion on (AY 2016-17) Mr. Krishnankutty Ramesh :: 6 ::
31.03.2020. And hence, it falls during the time between 20.03.2020 and 31.03.2021 contemplated u/s.3(1) in Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [herein after in short TOLA]. Resultantly, the authorities vis-à-vis u/s.151(i) of the new regime or u/s 151(1) of the old regime, can grant sanction till 30.06.2021 [as per the directions of the Hon’ble Supreme Court in the case of Ashish Agarwal (supra)]. In other words, since three (3) years from the relevant assessment year would have lapsed only 30.03.2020 for AY 2016-17, and since, it falls during the period contemplated u/s.3(1) of TOLA i.e. between 20.03.2020 and 31.03.2021, the authorities empowered u/s.151(1) of the old regime i.e. the Principal Commissioner of Income Tax could have granted sanction to re-open the assessment till the extended period up to 30.06.2021. However, in case, where sanction need to be given after 30.06.2021, then approval/sanction should be given by the authorities empowered under clause (ii) of section 151 of the new regime i.e. Principal Chief Commissioner of Income Tax, and in his absence, the Chief Commissioner of Income Tax.
Reverting back to the present case, the AO is noted to have issued notice u/s.148A(b) of the Act on 24.05.2022, and after the assessee had filed his response to it, the AO is noted to have passed the order u/s.148A(d) of the Act on 30.06.2022 and then, issued notice u/s.148 of the Act with the prior approval of the Principal Commissioner. Since, the (AY 2016-17) Mr. Krishnankutty Ramesh :: 7 ::
AO issued notice u/s 148 on 30.06.2022, [i.e. after 30.06.2021], the AO ought to have taken sanction from the specified authority as given in clause (ii) of section 151 of the Act i.e. the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, then, Chief Commissioner or Director General. Admittedly, in this case, since the AO has taken sanction for issue of notice u/s 148 from authority specified under clause (i) of section 151 i.e. Principal Commissioner, Coimbatore and not of the specified authority under clause (ii) of section 151, we find that the AO didn’t get valid sanction for issuing reopening notice u/s 148 of the Act on 30.06.2022. And since AO didn’t obtain the sanction from the specified authority as specified under clause (ii) of section 151, we are of the view, the assumption of jurisdiction by AO to issue the re-assessment notice u/s.148 of the Act is bad in law.
It is further noted that this legal issue is no longer res integra and note that the aforesaid view of ours have been upheld in the case of ACIT V Manish Financial in and 5050/Mum/2024 & CO.No.231 and 230/Mum/2024, Keshri Rice Industries v DCIT [TS-941-ITAT- 2024(RAI) & ACIT v Surya Ferrous Alloys Pvt. Ltd [TS-960-ITAT-2024 (Mum).
(AY 2016-17) Mr. Krishnankutty Ramesh 9. Respectfully following the decision of coordinate bench of this Tribunal, we allow the legal issue raised by the assessee and quash the notice issue u/s.148 of the Act dated 30.06.2022 being bad in law for not obtaining the prior approval of the authorities empowered under sub- clause (ii) of section 151 of the new regime. Since the legal issue is held in favour of the assessee, which strikes at the root of the jurisdiction of the AO to have issued notice u/s.148 of the Act, we are not inclined to discuss the merit of the addition made in the re-assessment order dated 24.05.2023, which is academic and not adjudicated and left open.
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 19th day of March, 2025, in Chennai.