MOTIWALA AUTO PVT. LTD.,AURANGABAD vs. ITO, WARD1(1), AURANABAD, AURANGABAD

आदेश / ORDER

PER ASTHA CHANDRA, JM :

3. Aggrieved, the assessee filed an appeal before the Ld. CIT(A)/NFAC against the above additions made by the Ld. AO and also raised an additional ground challenging the validity of reassessment proceedings on the ground that the notice issued under section 148 is barred by limitation. After considering the submissions and documentation furnished by the assessee and in the unique facts and circumstances of the case, the Ld. CIT(A)/NFAC opined that the order passed by the Ld. AO under section 147 read with section 144 of the Act appears to be not appropriate / just and the impugned issues needs further examination and investigation by the Ld. AO. He therefore set aside the assessment order passed by the Ld. AO for making denovo assessment under the newly inserted proviso to section 251(1)(a) of the Act by observing as under: “5. DECISION :I have carefully considered all the material available on records, the facts of the case, grounds of appeal by the appellant. The decision on the appeal preferred by the appellant is discussed in subsequent paras. 5.1 It is apparent from the assessment order that no fewer than six additions, aggregating to a sum of 73,71,067/-, have been made to the total income of the appellant. These additions appear to have been primarily derived from information accessible via the Income Tax Department's database. To ascertain the nature of the transactions in question, numerous notices were issued to the appellant, calling upon them to provide requisite explanations. However, the appellant, for reasons unknown, failed to comply with these notices or furnish the necessary clarifications. Consequently, the assessments were effectuated on the basis of gross receipts alone, without the allowance of benefits, deductions, or exemptions as might have been applicable under the various provisions of the Income Tax Act, 1961. 5.1.1 The appellant, in Form 35, Paragraph 11.1, has declared their intention to submit the requisite documentary evidence, including any additional evidence that may be necessary, at the time of the hearing. Such an averment signifies the appellant's willingness to adhere to procedural mandates and substantiate their claims with appropriate documentation. 5.1.2 During the appellate proceedings, the appellant has vehemently contended that the additions to their income have been made in contravention of the principles of natural justice, as they were not afforded a fair opportunity to explain the transactions or substantiate their position. The invocation of these principles, which form the cornerstone of any judicial or quasi-judicial process, is most pertinent to this case. It is an established precept that every individual must

be afforded an equitable opportunity to be heard and to present their case in a manner free from prejudice or bias. 5.1.3 The procedural lapses under such circumstances necessitate a reconsideration of the matter, ensuring adherence to the dictates of natural justice. It is, therefore, just and equitable that the appellant be granted an additional opportunity to rectify any procedural deficiencies and to present their case in its entirety. 5.1.4 To this end, it is resolved that the matter shall be reconsidered, and the appellant shall be permitted to submit the requisite evidence in support of their claims. This course of action is imperative, not only to uphold the principles of natural justice but also to ensure that the adjudication of the appellant's case is conducted in a fair and impartial manner, free from any semblance of prejudice. 5.1.5 In conclusion, considering the peculiar facts and circumstances attendant to this case, it is both judicious and equitable to grant the appellant another opportunity to comply with procedural requisites and to present their case in full. This approach aligns with the tenets of justice and equity, ensuring that the appellant's grievances are addressed in a manner befitting the high standards of fairness that our system of law seeks to uphold. 5.2 Upon a careful review of the submissions and documentation provided by the appellant, it is my considered opinion that, in light of the unique facts and circumstances of this case, along with the evidence furnished, the best judgment assessment order framed by the Assessing Officer under Section 147 rws144 of the Income Tax Act does not, prima facie, appear to be appropriate or just. To arrive at a fair and accurate determination of the appellant's income, the additions made and the issues raised herein require a more detailed and exhaustive examination. 5.3 As per the newly inserted proviso to section 251(1)(a) of the Act, Commissioner (Appeals) in case of order of assessment made u/s. 144 of the Act, may set aside such assessment and refer the case back to the AO for making a fresh assessment. This proviso has been inserted in the Act w.e.f. 1.10.2024. The said proviso to section 251(1)(a) of the Act is reproduced as under: "251. (1) In disposing of an appeal, the Commissioner (Appeals)] shall have the following powers- 1. in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; [Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;)

5.4 In the instant case the assessment order has been issued u/s 147 rws 144 by the AO and there are issues which need to be further examined and investigated by the AO. In view of the above facts and changes in the Act, as enumerated above, in my considered opinion the submissions filed by the appellant in the appellate proceedings, are germane to the correct appreciation of the issues under deliberation. It is a fit case for set-aside of assessment made by the AO. 5.5 Therefore, the assessment order passed by the AO u/s. 147 rws144 of the Income Tax Act dated 21.03.2023 is hereby set aside for making fresh assessment, denovo, after taking into account the above submissions filed by the appellant. The Assessing Officer is directed to make a fresh assessment after giving adequate opportunities to the appellant and complying with all extant rules and provisions and following principles of natural justice and take into account any further submissions which it has to file during the course of the said proceedings. The AO should also conduct all necessary enquiries to verify the submissions filed by the appellant. 5.6 The appellant is also directed to comply with all the notices/correspondences issued by the AO. The appellant may note that all necessary compliance should be made at the earliest and within the time limit prescribed in the notices issued by Ld. AO. It should be the endeavour of the Appellant to promptly submit necessary evidences in support of its claim/Income tax return, suomotu or as required by the Assessing Officer without causing undue delays leading to submissions towards the fag end of the limitation period.

7. For statistical purposes, the appeal is allowed. In the result, the appeal filed by the appellant is disposed off.”

“1. THE CHALLENGE TO REASSESSMENT 1.1 The Learned Commissioner of Income Tax (Appeals) ['the Ld. CIT(A)'] has erred in confirming validity of the initiation of reassessment proceedings u/s 148 of the Income-tax Act, 1961 ['the Act']. 1.2 On the facts and in the circumstances of the case, the Ld. JAO has initiated the reassessment proceedings without fulfilling the preconditions required to initiate the reassessment proceedings U/s 148-151 of the Act. Further, the Ld. JAO failed to follow the directions as provided by the Hon'ble Apex Court in case of UOI v. Ashish Agrawal-[(2022) 138 taxmann.com 64 (SC)] 1.3 The Ld. CIT(A) has erred in not considering the judgement of the Hon'ble Apex Court in case of UOI v. Rajeev Bansal [(2024) 469 ITR 46] while passing the order. 1.4 On the facts and in circumstances of the case, it is humbly submitted that the notice u/s 148 dated 25.07.2022 is barred by limitation. 1.5 In the above circumstances, facts and in law, the Appellants submits that this case is not fit for initiation of the reassessment proceedings. Therefore, notice issued u/s 148 and the consequential assessment order passed is illegal and deserves to be quashed.

2. THE NOTICE U/S 148 IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 151A 2.1 The Ld. JAO has erred in assuming the jurisdiction to issue the notice u/s 148 which is in non-compliance to the provisions of section 151A of the Act. 2.2 It is submitted that in the facts and in the circumstances of the case and in law, the notice issued u/s 148 of the Act in the present case is bad in law and therefore deserves to be quashed.

6. The Ld. DR, on the other hand, submitted that since the assessee failed to file any compliance before the Ld. AO and the Ld. CIT(A)/NFAC has also not considered the impugned issues on merits and not adjudicated the legal ground as well, the matter may be set aside to the file Ld. CIT(A)/NFAC for fresh adjudication.

a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID-19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income Tax Act; b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re- assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re- assessment for previous assessment years; c. The relaxations provided under Section 3(1) of TOLA apply “notwithstanding anything contained in the specified Act.” Section 3(1), therefore, overrides the time limits for issuing a notice under Section 148 read with Section 149 of the Income Tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income Tax Act, PART C including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015- 2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: Assessment Within 3 Expiry of Within six Expiry of Year Years Limitation Years Limitation read read with with TOLA for TOLA (or (2) (4) (1) (2) (3) (4) (5) 2013-2014 31-3-2017 TOLA not 31-3-2020 30-6-2021 applicable 2014-2015 31-3-2018 TOLA not 31-3-2021 30-6-2021 applicable 2015-2016 31-3-2019 TOLA not 31-3-2022 TOLA not applicable applicable 2016-2017 31-3-2020 30-6-2021 31-3-2023 TOLA not applicable 2017-2018 31-3-2021 30-6-2021 31-3-2024 TOLA not applicable f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; g. Section 2 of TOLA defines “specified Act” to mean and include the Income Tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income Tax Act. Therefore, TOLA continues to apply to the Income Tax Act even after 1 April 2021; and h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under Section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income Tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra).

“46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the “time limits specified under the provisions of” 149(1)(b) of the old regime. Thus, a notice could be issued under Section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under Section 149(1)(b) of the old regime.”

“G. Conclusions 114. In view of the above discussion, we conclude that: a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions; b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021; c. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148; d. 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(i) has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside;”

Order pronounced in the open court on 09th December, 2025.