UNITED INFRA MINERALS PRIVATE LIMITED,HYDERABAD vs. DCIT., CENTRAL CIRCLE 1(1), HYDERABAD

Succinctly stated, the assessee company, which is engaged in the business of manufacturing, had filed its return of income for A.Y. 2015-16 on 08.02.2015 declaring a loss of Rs. (-)80,19,280/-.

Survey operations under Section 133A of the Act were conducted at the business premises of the assessee company on 29.06.2017. Thereafter, the case of the assessee company, based on the material impounded in the course of the survey proceedings, was reopened under Section 147 of the Act. Notice under Section 148 of the Act dated 23.06.2021 was issued by the A.O. In compliance, the assessee company filed its return of income on 06.08.2021, declaring a loss of Rs. (-) 80,19,280/- i.e., as was originally returned.

Thereafter, the A.O. issued notices under Section 143(2)/142(1) of the Act. The A.O., after examining the material available on record and the submissions filed by the assessee company, framed the assessment, vide his order passed under Section 143(3) r.w.s. 147 of the Act on 31.03.2022, after making an addition of unexplained expenditure under Section 69C of Rs. 14,99,890/-.

Aggrieved, the assessee company carried the matter in appeal before the CIT(A). The assessee company, before the CIT(A) assailed the validity of the order passed by the A.O. under Section 143(3)

The assessee company, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial 14 United Infra Minerals Private Limited pronouncements that have been pressed into service by them to drive home their respective contentions.

Shri Deepak Chopra, C.A., learned Authorized Representative (for short “Ld. AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that both the lower authorities have grossly erred in law and on facts of the case in not quashing the assessment framed by the A.O. vide his order passed under Section 143(3) r.w.s. 147 of the Act, dated 31.03.2022. Elaborating on his contention, the Ld. AR submitted that, as the A.O. had issued notice under Section 148 of the Act, dated 23.06.2021, therefore, he was statutorily obligated to have adhered to the procedure laid down under Section 148A of the Act, which, however, was not done by him. The Ld. AR submitted that the assessee company, vide its letter dated 21.07.2021, had objected to the issuance of notice under Section 148 of the Act without following the due procedure contemplated under Section 148A of the Act. The Ld. AR submitted that non-adherence of the procedure under Section 148A by the A.O. before issuing notice under Section 148 of the Act, dated 23.06.2021, was clearly in 15 United Infra Minerals Private Limited violation of the judgment of the Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal (2022) 442 ITR 1 (SC). Carrying his contention further, the Ld. AR submitted that the Hon’ble Supreme Court, in the case of Ashish Agarwal (supra), had categorically held that the reassessment proceedings on or after 01.04.2021 have to follow the new reassessment provisions as were made available on the statute by the Finance Act, 2021. The Ld. AR submitted that the Hon’ble Supreme Court, vide its aforesaid order passed in the case of Ashish Agarwal (supra), had, as a one-time relief to the Department, held that the notices issued under Section 148 of the Act, between 01.04.2021 and 30.06.2021, shall be deemed to have been issued under Section 148A, as substituted by the Finance Act, 2021, and were to be treated to be Show-Cause Notices in terms of Section 148A(b) of the Act. The Ld. AR submitted that the Hon’ble Supreme Court, in unequivocal terms, had directed that the respective A.Os. shall, within 30 days from the date of its order, i.e., 04.05.2022, provide to the assessee the information and the material that was relied upon by the Revenue so that the assessee can reply to the notices within two weeks thereafter. The Ld. AR submitted that the A.O. in 16 United Infra Minerals Private Limited the present case had, however, proceeded with and issued the notice under Section 148 of the Act, dated 23.06.2021, without following the procedure contemplated under Section 148A of the Act, and in complete disregard of the judgment of the Hon’ble Supreme Court in the case of Ashish Agarwal (supra).

Apart from that, the Ld. AR submitted that as the proceedings in the case of the assessee were initiated based on the contents of the impugned incriminating document impounded in the course of the survey proceedings, (Pages 9–11 of the folder marked as A/UGCL/01) which, inter alia, revealed incurring of an unexplained expenditure of Rs. 14,99,840/- by the assessee company during the year under consideration, i.e., A.Y. 2015-16, therefore, the A.O. in the absence of any material which revealed that the income chargeable to tax, represented in the form of asset which had escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for the year under consideration, was, as per the mandate of Section 149(1), as was applicable during the year under consideration, divested of his jurisdiction to have initiated the impugned proceedings and issued notice under 17 United Infra Minerals Private Limited Section 148 of the Act in the case of the assessee company, beyond the period of three years from the end of the relevant assessment year, i.e. A.Y. 2015-16.

Per contra, Shri Posu Babu Alli, the learned Senior Departmental Representative (for short, “Ld. DR”), relied upon the orders of lower authorities.

We have given our thoughtful consideration to the contentions advanced by the learned Authorized Representatives of both parties in the backdrop of the orders of the lower authorities.

Admittedly, as per the substituted provisions of the Act, as had been made available on the statute by the Finance Act, 2021, no notice under Section 148 can be issued without following the procedure prescribed under Section 148A of the Act. As per Section 148A of the Act, the procedure has now been streamlined and simplified. It provides that before issuing notice u/s 148 of the Act, the A.O. shall (i). conduct any inquiry, if required with the approval of the specified authority with respect to the information, 18 United Infra Minerals Private Limited which suggested that the income chargeable to tax has escaped assessment; (ii). provide an opportunity of being heard to the assessee with the prior approval of the specified authority; (iii). consider the reply of the assessee, furnished, if any, in response to the Show-Cause Notice referred to in Section 148A(b); and (iv). decide on the basis of material available on record, including the reply of the assessee, as to whether or not it is a fit case under Section 148 of the Act. However, the Hon’ble Apex Court in the case of Ashish Agarwal (supra), taking cognizance of the fact that the Revenue may not be rendered remediless, as the A.Os had issued the impugned notices under Section 148 after the amendment was enforced w.e.f. 01.04.2021 under the unamended Section 148 of the Act, therefore, considering the bonafide mistake on their part, had held that instead of quashing the assessment and setting aside the reassessment notices issued under the unamended provisions of the Act, the notices so issued shall be deemed to have been issued under Section 148A as per the new provisions of Section 148A, and the Revenue be permitted to proceed further with the reassessment proceedings as per the substituted provisions of Sections 147 to 151 of the Act, as had 19 United Infra Minerals Private Limited been made available by the statute, vide the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences which may be available to the assessee under the substituted provisions of Sections 147 to 151, and which may be available under the Finance Act, 2021 and in law. Accordingly, the Hon’ble Apex Court, vide its aforesaid order in the case of Ashish Agarwal (supra), had held that the impugned notices issued under Section 148 to the respective assessees shall be deemed to have been issued under Section 148A as substituted by the Finance Act, 2021, and treated as Show-Cause Notices in terms of Section 148A(b) of the Act. The Hon’ble Apex Court had further observed that the A.O. shall, within 30 days from the date of its order, i.e., 04.05.2022, provide to the assessee the information and the material relied upon by the Revenue so that he can reply to the notice within two weeks thereafter. Although the conducting of enquiry with the prior approval of the specified authority, as contemplated under Section 148A(a) was dispensed with as a one- time waiver vis-à-vis those notices which had been issued under Section 148 of the unamended Act from 01.04.2021 till 04.05.2022 (the date of the order of the Hon’ble Apex Court), but 20 United Infra Minerals Private Limited the A.Os. were obligated to follow and comply with the procedure provided in clauses (b), (c), and (d) of Section 148A of the Act.

We find substance in the contention of the Ld. AR that as in the case of the present assessee company, the A.O. had issued notice under Section 148 of the Act, dated 23.06.2021, without following the due procedure contemplated under Section 148A of the Act, as was statutorily required, therefore, the same being in contradiction of the directions of the Hon’ble Apex Court in the case of Ashish Agarwal (supra) cannot be sustained, and the same, along with the consequential order thereafter passed by him under Section 143(3) r.w.s. 147, dated 31.03.2022, is liable to be quashed.

At this stage, we may herein observe that the CIT(A), while rejecting the claim of the assessee company that the A.O. had failed to comply with the procedure contemplated under Section 148A, had relied upon the judgment of the Hon’ble High Court of Delhi in the case of Satish Chand Jain Vs. ACIT (2024) 166 taxman.com 447 (Del). It was observed by him that the Hon’ble High Court in the case before them had held that in a case where 21 United Infra Minerals Private Limited the assessment had been completed before the judgment of the Hon’ble Apex Court in the case of Ashish Agarwal (supra) was received, then there was no justification for the A.O. to issue notices seeking to reopen the proceedings which had been concluded before the said judgment of the Hon’ble Apex Court. The CIT(A), based on his aforesaid observations, had concluded that, as in the case of the present assessee company before him, the assessment was framed by the A.O. vide his order under Section 143(3) r.w.s. 147 of the Act, dated 31.03.2022, i.e., before the judgment of the Hon’ble Apex Court in the case of Ashish Agarwal (supra) that was delivered on 04.05.2022, therefore, the A.O. was not obligated to issue notice again seeking to reopen the proceedings that had concluded prior to the said judgment.

We have thoughtfully considered the aforesaid observations of the CIT(A) and are unable to persuade ourselves to concur with the same. We say so, for the reason that the facts involved in the case before the Hon’ble High Court of Delhi in the case of Satish Chand Jain Vs. ACIT (supra) are distinguishable, as against those involved in the case of the present assessee company before us.

Now, in the case of the present assessee company before us, unlike the issue involved in the case before the Hon’ble High Court in the case of Satish Chand Jain Vs. ACIT (supra), the case of the present assessee company was reopened by the A.O vide Notice 24 United Infra Minerals Private Limited u/s 148 of the Act, dated 23.06.2021, i.e., without following the mandatory provisions contemplated in Section 148A of the Act as per the post-amended provisions that were made available on the statute vide the Finance Act, 2021 w.e.f 01.04.2021 read along with the concession provided by the Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal (2022) 442 ITR 1 (SC), which, thus, rendered the very assumption of jurisdiction for issuing the Notice u/s 148 of the Act, dated 23.06.2021, and the consequential assessment framed by him vide his order passed u/s 143(3) r.w.s 147 of the Act, dated 31.03.2022, as invalid. As the issue involved in the present appeal before us, i.e., the validity of the jurisdiction assumed by the A.O. for framing the reassessment based on a Notice issued u/s 148 of the Act on or after 01.04.2021 without following the mandatory provisions of Section 148A of the Act, as had been made available on the statute read in the backdrop of the judgment of the Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal (supra) was not the issue before the Hon’ble High Court in the case of Satish Chand Jain Vs. ACIT (supra), therefore, we are of 25 United Infra Minerals Private Limited the view that the CIT(A) had misdirected himself and wrongly drawn support from the said judgment.

We thus, in terms of our aforesaid deliberations, are of the considered view that, as the A.O. in the case of the present assessee company before us had, before issuing the notice under Section 148, dated 23.06.2021 failed to follow the procedure contemplated under Section 148A of the Act, therefore, both the initiation of the impugned proceedings vide Notice u/s 148 of the Act, dated 23.06.2021, and the consequential order passed by him under Section 143(3) r.w.s. 147 of the Act, dated 31.03.2022, cannot be sustained and are herein quashed.

Although we have, in terms of our aforesaid observations, quashed the assessment for want of a valid assumption of jurisdiction on the part of the A.O., but for the sake of completeness, we shall deal with the Ld. AR’s claim that, as the A.O. was not in the possession of books of accounts and other documents or evidence, which revealed that the income of the assessee chargeable to tax, represented in the form of asset, which has escaped assessment, amounts to or is likely to amount to fifty 26 United Infra Minerals Private Limited lakh rupees or more for that year, therefore, he had clearly traversed beyond the scope of his jurisdiction and initiated the impugned reassessment proceedings in the case of the assessee company for the subject year i.e. A.Y. 2015-16, beyond the period of three years from the end of the relevant assessment year i.e. in contradiction of the clear mandate of Section 149(1) of the Act, as was available on the statute at the relevant point of time.

Admittedly, it is a matter of fact discernible from the record that the A.O. had initiated the impugned proceedings based on the contents of the incriminating documents that were impounded in the course of survey proceedings conducted on the assessee company u/s 133A of the Act on 29.06.2017 (Pages 9–11 of the folder marked as A/UGCL/01). Ostensibly, the A.O., in the assessment order, had observed that a perusal of Pages 9–11 of the folder marked as A/UGCL/01, revealed that the assessee company was found to have incurred unexplained expenditure (in cash) of Rs. 14,99,840/- up to March 2015, i.e., during the subject year. We are of the considered view that as the A.O. had initiated the impugned proceedings based on the aforesaid 27 United Infra Minerals Private Limited document/evidence which revealed that the income of the assessee company chargeable to tax, represented in the form of expenditure in respect of a transaction amounting to Rs.14,99,840/- had escaped assessment, therefore, as per the clear mandate of Section 149(1) of the Act, he could not have issued notice under Section 148 of the Act, dated 23.06.2021, i.e., beyond a period of three years from the end of the relevant assessment year under consideration. We thus, in terms of our aforesaid deliberations, are of the firm conviction that the A.O. had exceeded his jurisdiction in issuing notice under Section 148, dated 23.06.2021. Accordingly, the assessment order passed by the A.O. under Section 143(3) r.w.s. 147 of the Act, dated 31.03.2022, also on this count, cannot be sustained and is liable to be quashed.

We thus, in terms of our aforesaid observations, quash the assessment order passed by the A.O. under Section 143(3) r.w.s. 147 of the Act, dated 31.03.2022, for want of a valid assumption of jurisdiction on his part.

As we have quashed the assessment order for want of a valid assumption of jurisdiction by the A.O., therefore, we refrain from adverting to the other issues based on which the impugned addition made by the A.O. has been assailed before us, which, thus, are left open.

Resultantly, the appeal filed by the assessee company is allowed in terms of our aforesaid deliberations.