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Facts
The assessee's appeals for Assessment Years 2016-17 and 2017-18 were against the CIT(A)/NFAC's order confirming additions made by the AO. Re-assessment proceedings were initiated under Section 147, with notices issued on March 31, 2021, but served on April 3/4, 2021. The assessee's application for condonation of delay was filed due to issues with email communication.
Held
The Tribunal held that the notices under Section 148 were issued after the due date of March 31, 2021, and therefore, the re-assessment proceedings should have followed the amended provisions effective from April 1, 2021. Since these new procedures were not followed, the notices and consequential assessment orders were deemed invalid and bad in law.
Key Issues
Whether the re-assessment notices issued on March 31, 2021, but served after April 1, 2021, are valid under the amended provisions of the Income Tax Act, 1961, and whether the consequential assessment proceedings are liable to be quashed.
Sections Cited
147, 148, 144, 144B, 250, 68, 151, 153C, 132, 148A, 142(1)
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Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeals at the instance of assessee pertaining to A.Yrs. 2016-17 and 2017-18 are directed against the separate order dated 11.01.2024 of ld.CIT(A)/NFAC passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) which is arising out of respective Assessment Orders dated 23.03.2022 passed u/s.147 r.w.s.144 r.w.s.144B of the Act.
2. Since common issues have been raised in these two impugned assessment years, we proceed to dispose these appeals by way of this consolidated order for the sake of convenience.
Registry has informed that appeal before this Tribunal is time barred by limitation by 50 days. Assessee has filed an application for condonation of delay stating as follows :
“1. The assessee submits that in the present case, the appellate order u/s.250 passed by the CIT(Appeals), NFAC, Delhi for A.Y.2016 received by the appellant through email on 11.01.2024. Thus, the due date for filing the appeal before Hon'ble ITAT was 11.03.2024. The appeal is being filed on 30.04.2024. Thus, there is a delay of 50 days in filing the present appeal before Hon'ble ITAT. The assessee submits that the above delay in filing the appeal was on account of reasonable cause.
In this regard, it is submitted that the appellate order passed u/s 250 dated 11.01.2024 was not received physically by post, but the same was received on email. The appellant individual, who is only a matriculate resides in rural town of Sangamner and he is not into the practice of checking emails regularly. Therefore, the email containing the appellate order went unnoticed from the side of the appellant individual.
3. It is to be noted that around the first week of March 2024, the appellant contacted his tax consultant to enquire the status of appeal. At that time, on verification, it was noticed that the appellate order u/s 250 was already passed on 11.01.2024. Thereafter, the local tax consultant directed the appellant to pay challan of Rs.10,000 towards ITAT appeal filing fees and the said challan was paid on 10.03.2024. The tax consultant advised the appellant to approach a Counsel practicing before Hon'ble ITAT, Pune for filing appeal. After enquiry, the appellant visited the Office of CA Sanket Milind Joshi at Nashik for filing appeal in the third week of March 2024. Thereafter, the relevant documents and information was provided to the Counsel and the appeal memo was prepared. However, there was a technical problem viz. OTP on email was not being issued even after trying multiple times and hence, the appeal could not be filed. The appeal was finally filed on 30.04.2024 and thus, there was a delay of 50 days in filing the appeal. It is prayed that the said delay in filing the appeal may please be condoned in the interest of justice.
4. It may be noted that the challan towards appeal filing fees was paid on 10.03.2024 i.e. within the due date of filing appeal which was 11.03.2024. This fact clearly demonstrates the intention of the appellant to file the present appeal within time. It is submitted that the said delay was due to genuine reasons and there was no deliberate delay in filing the appeal before Hon'ble ITAT.
In this respect, the assessee places reliance on the ratio laid down in the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Ors. [167 ITR 471] wherein it has been held that "When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred".
6. Reliance is also placed on the decision of Hon'ble ITAT, Pune in case of Lubricare Pvt. Ltd. v. DCIT [ITA No. 01/PUNE/2023] & Others, dated 23.01.2023 wherein substantial delay of 997 days to 2197 days in different cases, has been condoned by holding that none should be deprived of adjudication on merits unless it is found that the litigant deliberately delayed filing of appeal.
In view of the above facts and judicial decisions cited, the assessee humbly prays that the delay in filing the present appeal may kindly be condoned in the interest of justice and the case may be decided on merits. The appellant would be very grateful if the delay is condoned and the appeal is adjudicated on merits.”
After hearing both the sides we notice that the appeal fees has been paid on 10.03.2024 which is within the due date of filing the appeal which was 11.03.2024. We have also gone through the averments made in the condonation application filed by the assessee and find that due to ‘reasonable cause’ assessee failed to file the appeals within the stipulated time limit. We therefore condone the delay of 50 days in filing the appeal and admit the appeals for adjudication in light of judgments of Hon’ble Supreme Court in the case of Collector, Land Acquisition, Anantnag & Anr. Vs. Mst. Katiji & Ors. reported in (1987) 2 SCC 107 and in the case of Inder Singh Vs. State of Madhya Pradesh judgment dated 21.03.2025 (2025 INSC 382).
“1] The learned CIT(A) erred in confirming the addition u/s 68 of Rs.1,38,39,394 made by the A.O. by taxing entire deposits in bank account held with Renuka Mata Multi State Urban Credit Co-op. Society, in the asst. order passed u/s.147 r.w.s. 144 without appreciating that the said addition made by the A.O. in the asst. order u/s.147 was not justified in law and on facts of the case.
2] The assessee submits that the notice u/s.148 for A.Y.2016-17 was digitally signed by the A.O. on evening of 31.03.2021 and the same was issued through ITBA portal only on 01.04.2021 as clearly reflected on the income tax portal and therefore, the said notice issued under the erstwhile provisions of section 148 after 31.03.2021 may be declared as null and void in law.
3] Without prejudice to ground no. 2 above, it is submitted that the notice u/s.148 for A.Y.2016-17 was issued on 01.04.2021 i.e. after a period of four years from end of A.Y.2016 17 and hence, the approval u/s.151 obtained from the Jt. CIT before issuing such notice was bad in law and thus, the notice u/s 148 may be declared as void in law.
4] Without prejudice to above grounds, the appellant submits that the approval u/s 151 obtained from the Jt. CIT does not contain any DIN and therefore, the said approval u/s.151 issued in direct contradiction to the CBDT Mandate notified vide Circular No. 19/2019 dated 14.08.2019 and Circular No. 27/2019 dated 26.09.2019 is void in law and this fact may please be verified by directing the A.O. to furnish copy of such approval u/s.151 obtained from Jt. CIT before issuing notice u/s. 148.
5] Without prejudice to above grounds, the assessee submits that the asst. proceedings in the instant case were initiated on the basis of certain documents relating to the assessee which were found in the course of search action conducted on M/s. Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. on 26.05.2017 and hence, action, if any, in case of assessee ought to have been initiated under the specific provisions of section 153C which were applicable in the above scenario and therefore, notice u/s 148 may be declared as null and void in law.
6] The learned CIT(A) failed to appreciate that the appellant was engaged in the business of trading in livestock and he was also holding License issued by APMC during the relevant period and the deposits made in the above bank account represented turnover of the above business which was withdrawn in cash for incurring business expenses and hence, only net profit @ 1% on the total deposits in bank account ought to have been estimated and the entire deposits could not be taxed as undisclosed income u/s.68 in the hands of the appellant.
7] The learned CIT(A) erred in not appreciating that in the ITRs filed from A.Y.2020 21 onwards, the appellant had duly disclosed income from the above business of trading in livestock and therefore, in the absence of any material brought on record to prove that the entire deposits made in bank account constituted income of the appellant, there was no reason to tax the entire cash deposits as income u/s 68.
8] Without prejudice to the above grounds, it is prayed that if at all, any addition u/s.68, is to be sustained, then the A.O. may be directed to tax only peak cash deposits made during the year after allowing benefit of cash withdrawals made from the same account and the entire cash deposits may not be taxed as income of the appellant. 9] The appellant craves, leave to add, alter, amend and delete any of the above grounds of appeal.”
Brief facts of the case are that the assessee is an individual and based upon the information that huge cash has been deposited in Shri Renuka Mata Multi State Urban Cooperative Credit Society (in short SRM). On the basis of this information search u/s.132 of the Act was conducted in SRM on 26.05.2017. Ld. Assessing Officer (AO) issued notice u/s.148 of the Act on 31.03.2021 asking the assessee to file the return to which the return was furnished on 26.04.2021 declaring income of Rs.2,85,500/- under Presumptive Taxation scheme but the return was declared as invalid by the system. Therefore, notice u/s.142(1) of the Act was issued but assessee failed to appear. Ld. AO concluded the assessment proceedings by passing best judgment assessment making addition u/s.68 of the Act at Rs.1,38,31,394/- for A.Y. 2016- 17.
7. Aggrieved assessee preferred appeal before ld.CIT(A) but failed to succeed on any of the grounds raised legal as well as merits. Dissatisfied assessee is in appeal before this Tribunal.
Now the assessee is in appeal before this Tribunal
Ld. Counsel for the assessee made submissions raising the following multifold contentions :
(i) That the notice u/s.148 of the Act dated 31.03.2021 has been issued to the assessee after 01.04.2021 and therefore the proceedings ought to have been carried out under the amended provisions u/s.148 r.w.s.148A from 01.04.2021 and in absence thereof the re-assessment proceedings deserves to be declared as null and void. In support, reliance placed on the following decisions :
(a) Kalyan Chillara & Ors Vs. DCIT and Ors reported in 465 ITR 729 (Telangana High Court) (b) Mukesh Khurana Vs. DCIT – order dated 21.03.2025 (c) SVR Creations Pvt. Ltd. vs. PCIT – order dated 05.03.2025 (d) ITO Vs. Hirakhand Transport and Multi State Co.op. Society Ltd. – ITAT No.282/Cuttack/2024 order dated 04.0.2024 (e) DCIT Vs. SBC Minerals Pvt. Ltd. – ITA No.3411/Del./2024 order dated 21.02.2025.
(ii) That since the re-assessment proceedings were based on the documents relating to the assessee found during the course of search conducted u/s.132 of the Act at SRM, therefore, ld. AO ought to have carried out the proceedings u/s.153C of the Act and not u/s.147 of the Act. In support, reliance placed on the Coordinate decision of this Tribunal in the case of Vijaykumar Mangilalji Chordia – order dated 19.09.2024.
(iii) Legal issue raised in Ground No.4 regarding absence of Document Identification Number (DIN) in the approval u/s.151 obtained from Jt. CIT is stated to be ‘not pressed’.
(iv) On merits of the case, it has been contended that the alleged deposits in the bank account are basically the turnover of the assessee from the business of trading in Livestock and cash deposits are the sale consideration received from various customers. He submitted that normally the net profit is in the range of 1% to 2% in this kind of business. Reference made to the Audited financial results of A.Y. 2020-21, A.Y. 2022-23 and A.Y. 2023-24 where the net profit has been declared at 1.35%. Reference also made to the decision of this Tribunal in the case of Haroon Shaikh Vs. ITO – and 1715/PUN/2024 order dated 12.02.2025 where the estimated net profit from trading in Livestock has been held to be @1.5%.
(v) He also raised an alternate plea that in case the assessee fails to succeed on the legal issue as well as on the quantum addition regarding the net profit percentage, then the addition may be sustained based on the Peak balance theory.
On the other hand, ld. Departmental Representative supported the order of ld.CIT(A) and submitted that assessee failed to appear before ld. AO eventhough sufficient notices were issued and assessee failed to give the details of alleged cash deposits.
We have heard the rival contentions and perused the record placed before us. We first take up the legal issue challenging the validity of notice u/s.148 of the Act and that the reassessment proceedings are null and void as the procedure mandated under the new provisions of section 148 r.w.s.148A of the Act applicable w.e.f. 01.04.2021 has not been followed. This being legal issue the same is admitted in view of the judgment of Hon’ble Apex Court in the case of National Thermal Power Corporation Ltd. reported in 229 ITR 373 (SC).
From perusal of the factual paper book, we notice that for selecting the assessee’s case for re-assessment proceedings, notice u/s.148 of the Act has been digitally signed by the ld. Assessing Officer on the evening of 31.03.2021 at 5.10 pm. As per the Income-tax portal under the PAN of the assessee, it reflects that the notice has been issued to the assessee on 01.04.2021. Copy of the screenshot is placed at pages 2 to 6 of the paper book. We further find that a letter has been issued by the ld. AO, Ward-2, Ahmednagar on 17.09.2024 where it is stated that notice u/s.148 of the Act dated 31.03.2021 has been dispatched through Speed Post on 03.04.2021. We also note that the notice u/s.148 of the Act has not been issued on the e-mail and the mode of dispatch is through DAK post. Ld. AO has himself admitted that notice u/s.148 dated 31.03.2021 has been issued on 03.04.2021.
13. Under these facts and circumstances the notice u/s.148 of the Act has been digitally signed by the ld. AO on 31.03.2021 but issued to the assessee on 03.04.2021 and the re-assessment proceedings should have been carried out by issuing notice u/s.148 of the Act as per the old provisions applicable upto 31.03.2021. Now we have to see that whether notice u/s.148 of the Act dated 31.03.2021 and issued to assessee on 03.04.2021 is a valid notice for carrying out the alleged re-assessment proceedings.
14. We observe that similar issue came up before the Hon’ble High Court of Telangana in the case of Kalyan Chillara Vs. DCIT where the issue was regarding validity of notice u/s.148 of the Act dated 31.03.2021. Time limit for issuing notice u/s.148 of the Act was getting barred on 31.03.2021. However, Hon’ble Court observed that the notice issued from the office of the respondent department either on 01.04.2021 or on subsequent date. In this situation, Hon’ble Court has held that since the notice has been issued after 31.03.2021 re- assessment proceedings were barred by limitation and notice u/s.148 of the Act is barred by limitation. Hon’ble Court has referred to the judgment(s) of Hon’ble Madras High Court in the case of Smt. Parveen Amin Bhathara Vs. ITO reported in (2022) 446 ITR 201, Hon’ble Allahabad High Court in the case of Daujee Abhushan Bhandar Pvt. Ltd. Vs. Union of India and others reported in (2022) 444 ITR 41, Hon’ble Madhya Pradesh in the case of Yuvraj Vs. ITO and others reported in (2022) 444 ITR 329. Hon’ble Court has held that the impugned notices in all these batch of writ petitions are barred by limitation u/s.148 and 149 of the Act since the said notices have left the ITBA portal on or after 01.04.2021. Hon’ble Court has also referred to the judgment of Hon’ble Apex Court in the case of Union of India and others Vs. Ashish Agarwal in Civil Appeal No.3005/2022 order dated 04.05.2022 wherein it is held that for any notice of re-assessment on or after 01.04.2021 it would be under the new amended law which would be governing the field, as the un-amended provisions were valid only till 31.03.2021.
15. We further find that Coordinate Bench, Cuttak in the case of ITO Vs.Hirakhand Transport and Multi Purpose Cooperative Society Pvt. Ltd. – order dated 04.09.2024 dealing with very same issue where also notice u/s.148 dated 31.03.2021 was served upon the assessee on 01.04.2021 at 5.29 am through e-mail and this Tribunal held that since the notice us/.148 of the Act has been issued to the assessee on or after 01.04.2021, the re- assessment proceedings under the amended Finance Act, 2021 stood dropped by the department. Relevant finding of the Tribunal reads as under :
17. The other issue taken by the assessee is with regard to the issue of notice on 01.04.2021 where the law as amended vide Finance Act, 2021 has come into force. As per the certified copy supplied by the AO vide dated 09.07.2024 it is clear that the notice u/s.148 of the Act dated 31.03.2021 was sent and delivered to the assessee on 01.04.2021 at 5.29 AM through email and not on 31.03.2021, therefore, if the notice u/s.148 of the Act is issued on or after 01.04.2021, the amended provision of Section 148A of the Act by the Finance Act, 2021 are applicable. In the instant case, the assessment has been completed on the basis of the proceedings initiated by a notice issued u/s.148 of the Act dated 31.03.2021. Further the proceedings were also initiated under the amended Act u/s.148A of the Act which were dropped by the authorities by observing that it is a mere change of opinion since the reassessment has already been done as a consequence of proceedings initiated u/s.148 of the Act vie notice dated 31.03.2021. This being so, we are of the considered view that when the notice u/s.148 of the Act dated 31.03.2021 was not issued nor served upon the assessee within the closing hours of 31.03.2021 and the proceedings under amended Act vide Finance Act, 2021 stood dropped by the department, the consequential order passed is liable to be quashed.
Similar view was also taken by Coordinate Bench, Delhi in the case of Mukesh Khurana Vs. DCIT Vs. DCIT order dated 21.03.2025 and the relevant part of the finding of this Tribunal reads as under :
“12. Considered the rival submissions and material placed on record. We observed from the record submitted before us that the AO has issued the notice u/s 148 only on 1st April, 2021 as per the communication reference ID 100033652101 and also the relevant notice was delivered to the assessee through the email dated 01.04.2021 at 8.27 AM. Therefore, it is clear from the above information that the AO has generated the document only on 01.04.2021 and there is no other counter submissions made by the Revenue. Therefore, based on the evidence brought on record, it is proved beyond doubt that the notice u/s 148 was issued by the AO only on 01.04.2021.
We noticed that sections 148 was amended and introduced new provisions 148A, 148B in the Finance Act 2021. The above provisions are applicable with effect from 01.04.2021. As held in the case of Daujee Abhushan Bhandar P. Ltd (supra), the date of issuance of notice is the date on which the digitally signed as well as were emailed to the assessee is the date of issue of notice. Therefore, as per the above decision, the notice was emailed to the assessee only on 06.04.2021 even though the 3923 & 3925/Del/2024 3905 & 3904/Del/2024 same was dated 31.03.2021, the same was held to be time barred. It is settled position of law as far as issuance of notice is concerned, it is the date of issue of notice relevant for the provisions of section 147/148 of the Act. The various courts have rejected the submissions of the Revenue that signing of notice without despatch would not amount to issue of notice. In this case, the issue raised by the assessee is that the notice was issued on 01.04.2021 but the same was dated 31.03.2021. The issue of notice has to be treated as issued only on 01.04.2021 and relevant amended provisions and new provisions applicable from 01.04.2021 are applicable and the AO has not followed the due procedure as per new provisions which are applicable from 01.04.2021.
After careful consideration of facts on record, we noticed that the claim of the assessee is proper and justified and the AO must have followed the new provisions with effect from 01.04.2021. As per which, (a) he should have conducted enquiries, (b) should have provided opportunities to the assessee to respond within 7 days or may extent further period depending upon the requirements and (c) considered the response or reply of the assessee before coming to decide the issue of escapement of income. The AO has proceeded to complete the assessment without resorting to the new provisions. It is fact on record that the notice u/s 148 was issued only on 01.04.2021 and he cannot proceed to apply the old provisions to 3923 & 3925/Del/2024 3905 & 3904/Del/2024 complete the assessment. From the record, we observed that the AO has proceeded to complete the assessment in hurry without even waiting for information from the assessee considering the limitation period based on the old provisions. The fact brought on record shows that the AO merely satisfied the information received from the investigation wing on receipt of STR without proper investigation on his part and after collecting partial information from the assessee and proceeded to complete the assessment with the incomplete information and without giving any opportunity, also not shared the information to the assessee and also not considered the information filed by the assessee.
In our considered view, the AO should have followed the amended and new provisions with effect from 01.04.2021 based on the fact that the notice was actually issued only on 01.04.2021 and even AO was aware of the fact that the notice was only issued on 01.04.2021 and also, he was aware of the fact that new provisions are applicable with effect from 01.04.2021. Therefore, the assessment passed u/s 147 is without adhering to the new procedure applicable from 01.04.2021 and it is beyond jurisdiction and bad in law. Hence, we are inclined to set aside the order passed u/s 147 of the Act. In the result, ground no.2 raised by the assessee is allowed.
Respectfully following the ratio(s) laid down by Hon’ble High Court of Telangana and the decisions of Coordinate Benches in the above referred cases, we after considering the facts of the case find that the re-assessment proceedings for A.Y.2016-17 have been triggered by the notice u/s.148 of the Act dated 31.03.2021, but issued to the assessee on 03.04.2021, therefore ld. AO should have followed the new provisions of section 148 r.w.s.148A of the Act applicable from 01.04.2021 for carrying out the re-assessment proceedings. But since notice u/s.148 of the Act has been issued on 03.04.2021 under the erstwhile old provisions applicable prior to 31.03.2021, the said notice u/s.148 of the Act is invalid and bad in law and therefore the consequential re-assessment proceedings for A.Y. 2016-17 in the case of the assessee are held to be invalid and bad in law and are hereby quashed. Legal ground raised by the assessee in grounds of appeal No.2 is allowed.
So far as the other legal issues and merits of the case are concerned, as we have quashed the re-assessment proceedings carried out for A.Y. 2016-17, the impugned addition stands deleted therefore dealing with the remaining grounds of appeal becomes academic in nature.
In so far as the appeal for A.Y. 2017-18, we find that similar legal issues have been raised as that of A.Y. 2016-17. For the A.Y. 2017-18 also, Ld. Assessing Officer prepared notice u/s.148 of the Act on 31.03.2021 under the erstwhile provisions of section 148 but served on the assessee on 03.04.2021. Since for A.Y. 2016-17 following the judicial precedents, we have held that since the notice u/s.148 of the Act was issued after 31.03.2021 without following the procedure mandated under the new provisions of section 148 and 148A of the Act effective from 01.04.2021, therefore the consequential re-assessment proceedings are illegal, invalid and bad in law. Therefore, our decision given in A.Y. 2017-18 also stands quashed.
In the result, both the appeals of the assessee are allowed.
Order pronounced on this 06th day of August, 2025.