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Facts
The assessee filed its return of income for AY 2018-19. The AO issued a notice u/s 148 after alleging accommodation entries. The assessment was completed by adding accommodation entries and interest expenditure. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the notice issued u/s 148 of the Act was barred by limitation, as the three-year period for issuing such notice had expired on 31.03.2022, and the income chargeable to tax was below Rs 50 lakhs. Consequently, the assessment proceedings were void ab-initio.
Key Issues
Whether the notice issued under Section 148 of the Income Tax Act, 1961, was barred by limitation as per the provisions of Section 149(1)(a) and the law laid down by the Hon'ble Supreme Court.
Sections Cited
148, 147, 143(2), 149(1)(a), 149(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
This is the appeal preferred by the assessee against the order of Commissioner of Income Tax (Appeals), -NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 03.01.2025 for AY 2018-19.
Assessment Year: 2018-19 ETC Electric Pvt. Ltd.
Brief facts of the case of the assessee are that the assessee filed its return of income for AY 2018-19 on 31.10.2018 at an income of Rs. 23,49,490/-. As per the information available with the Department, the assessee had taken accommodation entries to the extent of Rs. 21,50,000/- during the FY (hereinafter referred to as FY) 2017-18 relevant to AY 2018-19. After following the procedure as laid down by the Hon’ble Supreme Court in the case of Union of India vs. Ashish Agrawal (civil Appeal No. 3005/2022) notice u/s 148 dated 27.07.2022 was issued. The AO after considering the submissions of the assessee completed the assessment by adding (i) accommodation entries of Rs. 29,00,000/- and (ii) interest expenditure of Rs. 2,84,164/-. The assessment was completed at an income of Rs. 55,33,654/-.
Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been dismissed.
Being aggrieved and dissatisfied the assessee preferred an appeal before us.
The Ld. A.R challenges the very impugned order by taking legal grounds that the assessment proceedings is void ab-initio as the notices issued u/s 148 dated 27.07.2022 under new regime is invalid in view of Hon’ble Supreme Court judgment passed in Rajib Bansal case being time barred, time limitation of three years in terms of section 149(1) (a) has already expired on 31.03.2022 as alleged escaped income below Rs. 50 lakhs.
Contrary to that the Ld. D.R supports the impugned order.
Upon hearing the submission of the counsel of the respective parties, we have perused the order as well as facts of the case, the following facts have been emerged are as under: i) Original notice u/s 148 dated 29.06.2021 demands show cause notice as per Ashish Agrawal judgment. ii) The AO supplied material on 02.06.2022 u/s 147 (a)(b) as per direction of the Hon’ble Supreme Court alleging escaped income of Rs. 21,50,000/- iv) 148 notice issued on 27.07.2022 . v) Notice u/s 143(2) issued on 04.01.2023,
The submission of Ld. A.R is that as per section 149(1)(a) three years which was ended on 31.03.2022. In the present case, the notice issued u/s 148 i.e. on 27.07.2022. He placed reliance on the Hon’ble Supreme Court judgment on the Rajib Bansal case. The relevant portion of the order on this issue has been settled is thus:
“48. 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 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 Assessment Year: 2018-19 ETC Electric Pvt. Ltd. more than six years more New regime Three years but not Rupees fifty lakhs or more than ten years more 51. 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.” It is pertinent to mention here that TOLA to extend up to June, 21 between 20th 8. March, 2020 to 30th June, 2021 only if fell, for compliance. In the present case, the assessee replied on 03.06.2022. Income chargeable to tax is below Rs 50 lakhs. Going over the Hon’ble Supreme Court decision as discussed above and considering the facts of the case, we are inclined to hold that issuance of notice u/s 148 of the Act is barred by limitation. Accordingly, the assessment proceedings is void ab-initio. Since We have passed order on legal issue not on merit, hence there is no discussion in other grounds In the result, the appeal filed by the assessee is allowed.
Order is pronounced in the open court on 15th July, 2025