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Facts
The assessee, a farmer, purchased a car for Rs. 11,70,300/-. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 r.w.s 144 r.w.s 144B of the Income Tax Act, 1961, for AY 2017-18, alleging non-disclosure of income. The AO's order u/s 148A(d) noted that the assessee had not filed a return of income, which was factually incorrect as per the assessee's submission and acknowledgment.
Held
The Tribunal held that the order u/s 148A(d) was bad in law because it was passed beyond the three-year limit from the end of the assessment year, and the alleged escaped income was less than Rs. 50 lakhs. Furthermore, the approval for the order was obtained from the Principal Commissioner (Pr.CIT-4) instead of the Principal Chief Commissioner (Pr.CCIT) as required under Section 151 for reopening beyond three years. Consequently, the reassessment proceedings were quashed.
Key Issues
Whether the reassessment proceedings initiated beyond three years were valid when the alleged escaped income was below Rs. 50 lakhs and whether the approval for reopening was obtained from the competent authority as per Section 151.
Sections Cited
147, 144, 144B, 250, 148A, 148, 151, 149
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
Assessment Year: 2017-18 Atul Bhanudas Shinde, V The Income Tax Officer, Shetphal Haveli, Dhenu Nagar, s Ward-14(5), Pune. Bawada S.O, Shetphal Haveli, Pune – 413103. Maharashtra. PAN: ECTPS5299N Appellant/ Assessee Respondent / Revenue Assessee by Shri Sarang Gudhate –AR Revenue by Shri Ajay D. Kulkarni – Addl.CIT(DR) Date of hearing 04/08/2025 Date of pronouncement 26/08/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Assessee in Form No.36 against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Income Tax Act, 1961 for the A.Y.2017-18 dated 14.02.2025 emanating from Assessment Order under section 147 r.w.s 144 r.w.s 144B of the Act, for A.Y.2017-18 dated 20.05.2023. The Assessee has raised the following grounds of appeal :
[A] ―1. Under the facts and circumstances of the case and in law, Notice issued u/s 148 is without DIN and hence same is invalid. Accordingly, Assessment Proceeding based on such notice is also bad in law.
2. Under the facts and circumstances of the case and in law, addition u/s 68 cannot be made.
3. Under the facts and circumstances of the case and in law, in the given case, pursuant to Ashish Agrawal Notice u/s 148A (b) not issued. Which make entire assessment proceedings bad in law.
4. Under the facts and circumstances of the case and in law, Ld CIT (A) erred in initiating entire Assessment Proceeding based on source of investment in Purchase of car of Rs.11,70,300/- which is below pecuniary Jurisdiction for reopening of Rs. 50 lakhs. Accordingly, proceedings u/s 148A is without jurisdiction.
5. Under the facts and circumstances of the case and in law, Ld CIT (A)/ Assessing Officer erred in not accepting assessee's Agricultural Income as source for purchase of Car.
Under the facts and circumstances of the case and in law, proceedings u/s 148A is initiated and concluded by Jurisdictional Assessing Officer (JAO) instead of Faceless Assessing Officer (FAO) hence proceedings u/s 148A is violating Section 151A hence same is bad in law and accordingly subsequent Assessment Proceedings based on such illegal proceedings is also bad in law.
7. Under the facts and circumstances of the case and in law, the reopening of the assessment is beyond three years and after obtaining the approval of the Principal Commissioner of Income Tax-4 instead of Principal Chief Commissioner and same is contrary to the provisions of section 151 and therefore the Assessment Proceeding is bad in law, not sustainable, needs to be quashed.
The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal
if deemed necessary at the time of hearing of the appeal.‖ Submission of ld.AR :
2. The ld.AR for the Assessee Mr.Sarang S. Gudhate-CA filed a paper book. Ld.AR submitted that Assessee is a farmer. Assessee received notice u/s.148A(b) of the Act, on 27.05.2022 for A.Y.2017- 2 18. Assessee filed a reply in response to the noticed dated 27.05.2022 electronically, wherein assessee explained that Assessee has purchased a car on 23.11.2016 for Rs.11,70,300/-. Assessee explained that he is a farmer. Assessee filed details of bank statement and details of agricultural income. Assessee also filed copy of ITR for A.Y.2017-18 which was filed on 29.09.2021. Ld.AR submitted that however, the ITO, Ward-14(5), Pune passed an order u/s.148A(d) of the Act, on 26.07.2022.
2.1 Ld.AR submitted that the order u/s.148A(d) is bad in law, as it has been approved by Ld.Pr.CIT-4, Pune whereas, as per provisions of Section 151, it should have been approved by Principal Chief Commissioner of Income Tax. Ld.AR submitted that the quantum involved is less than Rs.50 lakhs. Hence, no notice could have been issued after the lapse of three years from the end of the Assessment Year. Ld.AR submitted that though assessee filed Return of Income for A.Y.2017-18, the ITO in the order u/s.148A(d) has stated that “no return of income has been filed”, which is factually incorrect. Ld.AR submitted that there is no application of mind by the ITO as well as the authority who approved it. Ld.AR relied on following case laws : 3 UNION OF INDIA & ORS. vs. RAJEEV BANSAL MS Larsen & Toubro Limited & Anr vs State Of Karnataka & Anr Mahesh Subhash Shukla Vs. ITO - Mumbai ITAT Pune ITAT - Arthbharati Nagari Sahakari Patsanstha Maryadit Vs. ITO Raju Shreedhar Ghodake Vs. ITO - Pune ITAT‖ Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of the Assessing Officer and ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the records. In this appeal, we are going to deal with only the legal ground raised by the Assessee.
4.1 It is an admitted fact that notice u/s.148A(b) was issued on 27.05.2022 for A.Y. 2017-18. Assessee filed an elaborate submission. The e-Acknowledgment displaying submission made by Assessee is at page no.15 of the paper book. The ITO, Ward- 14(5), Pune passed an order u/s.148A(d) for A.Y.2017-18 on 26.07.2022. It is noted that said order has been approved by Pr.CIT- 4, Pune. 4 4.2 It is mentioned in the order u/s.148A(d) of the Act, that “Assessee had not filed return of income for A.Y.2017-18”. However, Assessee had informed the ITO, in response to notice u/s.148A(b) of the Act, that Assessee had filed Return of Income for A.Y.2017-18 having Acknowledgment Number 602496930290921 dated 29.09.2021. Copy of the said acknowledgment was filed by Assessee before the ITO. Inspite of that ITO in the order u/s.148A(d) has stated that “Assessee had not filed return of income” and hence, amount of Rs.11,70,300/- remains unexplained and has escaped assessment for A.Y.2017-18. This clearly demonstrates non-application of mind by the ITO who has not even bothered to read the reply filed by the assessee and refer to copy of the return of income. The Pr.CIT-4, Pune who approved the said order u/s.148A(d) has not also applied his mind and not bothered to read the submission of Assessee.
In this case, order u/s.148A(d) was passed on 26.07.2022 for A.Y.2017-18, thus, the order u/s.148A(d) was passed after the lapse of three years from the end of the Assessment Year. Section 149 & 151 are reproduced here as under : ―Section – 149 : 5 [A] [Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.—For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.] 6 Section – 151 : [Sanction for issue of notice.
Specified authority for the purposes of section 148 and section 148A shall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.] 6. As per Section 149 of the Act, after the lapse of three years from the end of the Assessment Year, no notice can be issued unless the income chargeable to tax which has escaped assessment is likely to be Rs.50 lakhs or more. In this case, the paragraph 5, 6 and 7 of order u/s.148A(d) of the Act, are reproduced here as under : ―05. Finding of the AO: The submission made by the assessee is duly considered. It is seen from the information received that during the course of assessment proceedings in the case of M/s Ishanya motors for AY 2017-18 it was noticed that assessee firm had deposited substantial cash in his bank account during the FY 2016-17 relevant to AY 2017-18. When asked about the source of the said cash, Shri Satyen Gathani (Designated partner) submitted that he is engaged in the business of automobile dealership. As per his submission, customer books the car by paying small amount of token as advance money, mostly received in cash. He has submitted the details of customers who have booked car by paying advance in cash. On verification of the details (list of the customers) submitted by M/s Ishanya motors it is noticed that the assessee Shri Atul Bhanudas Shinde have booked car by paying advance in cash amounting to Rs 11,70,300/- during the FY 2016-17 relevant to AY 2017-18. On verification through the system the assessee has not filed his return of income for the AY 2017-18. Further the assessee in his reply has stated that the source of car purchase amounting to Rs 11,70,300/- was from his earlier saving but he did not produce any 7 documentary evidences. As such the source of cash payment made Rs 11,70,300/- remains unexplained and has escaped assessment within the meaning of section 147 of the Income tax Act for the A.Y 2017-18.
6. In view of the above facts, the information in my possession as mentioned above suggests that the income chargeable to tax of Rs. 11,70,300/- has escaped the assessment. Therefore this is a fit case for issue of notice u/s 148.
7. This order is passed with prior approval of Pr. CIT-4, Pune vide letter No - No.PN/PrCIT-4/148/Proposal/2022-23/1223 dated 22/07/2022.‖ 6.1 Thus, it can be observed from the said order u/s.148A(d) that the income alleged to have escaped assessment is only Rs.11,70,300/-. Since three years from the end of the assessment year have elapsed and the amount of alleged escapement is only Rs.11,70,300/- which is less than Rs.50 lakhs, no order under section 148A(d) could be passed.
6.2 Therefore, order u/s.148A(d) is bad in law. Hence, consequential assessment order is bad in law.
It is also observed that order u/s.148A(d) was approved by Pr.CIT-4, Pune. Since three years from the end of the Assessment Years have been elapsed, as per Section 151 of the Act, the order should have been approved by Pr.CCIT. Therefore, the order u/s.148A(d) is bad in law. The Hon’ble Jurisdictional High Court in Holiday Developers Private Limited Vs. ITO 159 taxmann.com 178(Bombay) dated 29.01.2024 held as under : ―1. Petitioner is impugning a order under section 148A(d) and the notice, both dated 7th April 2022 passed under section 148 of the Income Tax Act, 1961 ("Act"). Of-course Petitioner has also impugned the notice dated 17th March 2022 issued under section 148A(b) of the Act. Various grounds have been raised but one of the primary grounds for challenging the notice under section 148A(d) and the notice under section 148 of the Act both dated 7th April 2022 is that order as well as the notice both mention the authority that has granted approval, is the Principal Commissioner of Income Tax ("PCIT"), Mumbai 5 and the approval has been granted on 7th April 2022.
Mr. Gandhi is correct in saying that the Assessment Year ("AY") is 2018-19 and, therefore, since more than three years have expired from the end of the assessment year, Sanctioning Authority under section 151(ii) of the Act should be the Principal Chief Commissioner of Income Tax ("PCCIT") and not the PCIT. Mr. Gandhi says, as held in Siemens Financial Services (P.) Ltd. v. Dy. CIT [2023] 154 taxmann.com 159/457 ITR 647 (Bom.),the sanction is invalid and consequently, the order and the consequent notice under section 148A(d) and section 148, respectively, of the Act should be quashed and set aside.
In view of these facts and circumstances, we do not see any reason to just grant Rule and keep the matter pending.
As held in Siemens (Supra), the order passed under section 148A(d) and notice issued under section 148 of the Act both are quashed and set aside.‖ 7.1 Thus, the facts of the Holiday Developers Private Limited(supra) are identical to the facts of the present case of the assessee. In Holiday Developers Private Limited for A.Y.2018-19, order u/s.148A(d) was issued on 07.04.2022 and in the present case of Assessee Atul Shinde, the order u/s.148A(d) was passed on 26.07.2022. Therefore, respectfully following Hon’ble 9 Jurisdictional High Court, it is held that the order u/s.148A(d) is bad in law and notice u/s.148 dated 27.07.2022 is bad in law. Therefore, the Assessment Order is void ab initio.
7.2 Similarly, Hon’ble Madras High Court in the case of Core Logistic Company Vs. ACIT 175 taxmann.com 453(MADRAS) dated 05.06.2025 has held as under : “9. A perusal of Section 151(i) would show that, the specified authority for the purpose of issuing notice underSection 148 within a period of three years from the end of the relevant assessment year is, the PrincipalCommissioner or Principal Director or Commissioner or Director. Further, in terms of provision of Section149, three year time period is fixed for issuance of 148 notice, in the event of the amount is below 50 lakhs. Inthe present case, the amount involved is Rs.3,65,09,748/-, which is more than 50 lakhs. 148 notice was issuedon 25.07.2022, which is beyond the period of three years. So admittedly, the approval has to be obtained fromthe Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director Generalas defined under Section 151(ii). But, in the present case, the approval was obtained from the PrincipalCommissioner in terms of Section 151(i) and no approval was obtained before issuance of 148 notice in termsof provision of Section 151(ii), which is mandatory. Therefore, the notice under Section 148 was issued in thepresent case in violation of provision of Section 151(ii) of the Income Tax Act. In view thereof, the initiationof proceedings itself is without any jurisdiction. Hence, the same is liable to be quashed.
Accordingly, the impugned proceedings of the 3rd respondent dated 30.05.2023 is hereby quashed.‖ 7.3 Accordingly, Ground Nos.4 and 7 raised by the Assessee are allowed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 26 Aug, 2025.