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Facts
The Revenue filed an appeal against an order of the NFAC, Delhi, concerning AY 2016-17. The assessment was initiated under Section 147 read with Section 144 of the Income Tax Act, 1961, based on information regarding the sale of immovable property. The assessee contended that the notice for reassessment was time-barred.
Held
The Tribunal held that the approval for reassessment proceedings was granted by the wrong authority, which is fatal to the proceedings. Therefore, the reassessment proceedings were rightly quashed by the CIT(A).
Key Issues
Whether the reassessment proceedings initiated were valid when the approval for such proceedings was obtained from an incorrect authority, and if the notices issued were within the prescribed time limits.
Sections Cited
147, 144, 148, 148A, 149, 151, 133A, 132, 132A, 144B
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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH
O R D E R
PER M. BALAGANESH, AM
The appeal in AY2 2016-17, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024- 25/1067986402(1) dated 26.08.2024 against the order of assessment passed u/s 147 r.w.s. 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.05.2023 by the Assessing Officer, NaFAC, Delhi (hereinafter referred to as ‘ld. AO’).
The Revenue has raised the following grounds of appeal:-
(i). Law and on facts of the case by holding that initiation of the proceeding itself is not valid as the specified authority to give the sanction beyond three years is Pr. CCIT or CCIT and the approval was obtained from Pr. CIT in this case. (ii). Law and on facts of the case by ignoring the fact that the specified authority under section 151 of the new law in this case shall be the authority prescribed under clause [1] of that section since A.Υ 2016-17 & 2017-18 are within the period of three years from the end of the relevant assessment year as per CBDT's Instruction no 01/2022 dated 11.05.2022 issued for Implementation of the judgement of the Hon'ble Supreme Court dated 04.05.2022 (2022 SCC Online SC 543) (Union of India Vs Ashish Agarwall vide Para 6.2(ii) of the sald instruction. (iii). Law and on facts of the case by deciding the case of the assessee while the Revenue was in appeal before the Supreme Court of India on the same issue which was decided in favor of the Revenue vide Civil Appeal No. 8629 of 2024 in the case of Union of India & Ors Vs Rajeev Bansal where the Hon'ble Supreme Court of India held that "TOLA will 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(1) has extended time till 30 June 2021 to grant approval".
None appeared on behalf of the assessee. Since, this is covered matter, we proceed to dispose of this appeal on hearing the ld DR and based on the materials available on record. The assessee is an individual and return of income was not filed for AY 2016-17. The ld AO obtained information through INSIGHT Portal under ‘Non-PAN High Risk Category’ uploaded by ITO (I&CI), Lucknow that the assessee had sold immovable property for Rs. 5,35,92,000/-. Based on this information, the assessment of the assessee was sought to be reopened vide issuance of notice u/s 148 of the Act on 23.04.2021. As per the directions of the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Aggarwal, notice u/s 148A(b) of the Act dated 25.05.2022 was issued to the assessee. The assessee filed adjournment application on 13.06.2022 and later did not file any Page 2 of 8 reply. Hence, the ld AO passed an order u/s 148A(d) of the Act and issued fresh notice u/s 148 of the Act on 26.07.2022. In response to the said notice, the assessee filed a return of income on 24.01.2023 admitting the income of Rs. 3,35,890/-. All the details that were called for by the ld AO were duly furnished by the assessee by giving point wise reply. After examining the details, the ld AO treated the entire sale consideration sum of Rs. 5,35,92,000/- as short term capital gains as the assessee failed to furnish the details of cost of acquisition. The ld AO also mentioned in his order that the property has been referred for Valuation to the Learned Departmental Valuation Officer (ld DVO). Finally, the ld AO completed the assessment u/s 147 read with Section 144B of the Act on 28.05.2023 by assessing the total income of Rs. 5,39,27,890/- . The ld AO also had stated that the sale consideration is treated as short term capital gains and that once the ld. DVO submits the valuation report, the capital gain shall be recomputed. The assessee submitted that the notice u/s 148 of the Act dated 23.04.2021 is time barred and it was issued with the prior approval of the ld JCIT instead of ld PCCIT. It was also submitted that reassessment proceedings were initiated merely on the basis of suspicion without having any tangible material having live link to form a belief that the income of the assessee had escaped assessment. The assessee submitted that notice u/s 148 of the Act dated 23.04.2021 and notice dated 26.07.2022 are time barred as per new Section 149 of the Act applicable w.e.f. 01.04.2021 as the provisions of Section 149(1)(b) of the Act cannot be invoked in the instant case and thus the reassessment proceedings are liable to be dropped. Further, it was submitted that the new provisions relating to reassessment proceedings from Section 147 to Section 151 and new Section 148A of the Act were introduced vide Finance Act, 2021 which provides for making enquiry and to provide opportunity of being heard to the Page 3 of 8 assessee before issuance of notice u/s 148 of the Act. The assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Aggarwal in Civil appeal No. 3005/2022 dated 04.05.2022 in respect of his proposition. It was submitted that CBDT has issued Instruction No. 1/2022 dated 11.05.2022 whereby in para 6.2 of the instruction, it has been mentioned by CBDT that for AYs. 2013-14, 2014-15 and 2015-16, fresh notice u/s 148 of the Act could be issued with the approval of the ld Pr CCIT only u/s 151 if the case fall u/s 149(1)(b) as amended by Finance Act, 2021. The ld CIT(A) took due cognizance of the entire written submission and the argument advanced by the assessee along with additional evidence and sought a remand report from the ld AO. The ld AO submitted the report on 24.06.2024 giving point wise comments of the submission by the assessee. This remand report is reproduced in pages 15 to 21 of the order of the ld CIT(A). This remand report was forwarded to the assessee seeking rejoinder which was duly filed by the assessee. The ld CIT(A) observed in his order as under:-
“8. I have perused the order passed by the AO, the written submissions filed by the appellant, Remand Report submitted by the AO and the Rejoinder. In this case, the assessment year involved was AY 2016-17. The AO issued the notice u/s 148 of the IT Act on 23.04.2021 by obtaining the approval from JCIT. The approval was given on 23.04.2021 by the JCIT as per the erstwhile provisions of section 147 of the IT Act. The appellant contended that at the time of issuing approval and the notice u/s 148 of the IT act, already four years have elapsed. As per the appellant, it was the fifth year from the end of relevant AY 2016-17 and hence the AO ought to have obtained the sanction from PCIT. This approval was given by the JCIT during the period of TOLA, i.e. during the period of extended time limit. Later, this was relaxed by Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal vide its order dated 04.05.2022. Hence, the proceedings u/s 148A of the IT Act has been commenced in this case. The AO issued notice u/s 148A(b) of the IT Act to the appellant and later passed the order u/s 148A(d) of the IT Act on 26.07.2022.
The main challenge of the appellant in this case is that the notice issued by the AO on 26.07.2022 was invalid on account of multiple reasons. The copy of the notice is as under:
From the above, it could be seen that approval u/s 151 of the Act in the instant case has been granted by the wrong authority. Hence, getting an approval from a wrong authority becomes fatal to the reassessment proceedings. Accordingly, we hold that the reassessment were rightly quashed by the ld CIT(A). Grounds of the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 15/04/2025.