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Facts
The assessee challenged the order of the National Faceless Appeal Centre (NFAC), Delhi. The dispute pertained to the assessment year 2014-15, where the assessee's appeal was dismissed by the CIT(A) without deciding jurisdictional issues. The original assessment was made under section 147 r.w.s. 144, with an addition of Rs. 20,00,056/- as unexplained money.
Held
The Tribunal held that the reopening of the assessment was without jurisdiction, as the notice under Section 148 was issued beyond the period of limitation. The Tribunal quashed the assessment order and allowed the appeal on technical grounds.
Key Issues
Whether the reopening of assessment and issuance of notice under Section 148 were within the period of limitation prescribed under Section 149 of the Income Tax Act, 1961, considering the amendments made by the Finance Act, 2021.
Sections Cited
147, 144, 144B, 143(3), 69A, 250(6), 148, 142(1), 149, 132, 132A, 151, 148A, 131, 133A, 153A, 153C, 271(1)(c)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,’’SMC” JAIPUR
ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM By way of present appeal the assessee challenges the order of the National Faceless Appeal Centre, Delhi[ for short NFAC/ CIT(A) ]dated 19- 09-2024. The dispute relates to the assessment year 2014-15. That order of the ld. CIT(A) arise because the assessee challenged the assessment order dated 27.03.2022 passed by the National Faceless Assessment Centre ( Delhi ) [ for short AO ]passed as per provisions of section 147 r.w.s. 144 with section 144B of the Income Tax Act, 1961 [ for short Act ].
SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR 2. In the present appeal the assessee has raised following grounds of appeal; ‘’1. The ld. CIT(A) has erred on facts and in law in dismissing the appeal of the assessee without deciding the jurisdictional issue.
2. The ld. CIT(A) has erred on facts and in law in confirming the addition made by the AO without considering the reply of the assessee filed on 23-03- 2022.
3. Apropos to the grounds of appeal of the assessee, it is noticed that the ld. CIT(A) has dismissed the appeal of the assessee as the assessee had not advanced any argument to support his grounds of appeal raised before him. The narration so made by the ld. CIT(A) at para 5 to 6 of his order is reproduced as under:-
5. Decision: 5.1 The facts relating to the present appeal in brief are that the assessee filed her return of income on 30.03.2015 declaring total income of Rs. 4,34,000/-. The return of income was assessed u/s 143(3) on the return income on 31.08.2016. Subsequent to the regular assessment the AO received information that the appellant had received an accommodation entry of loan in her books of account amounting to Rs. 20,00,056/- from Vidya Lakshmi Pvt. Ltd. A group company of Mr. Mukesh Chand Banka who during the course of process of investigation had admitted to be an entry provider. On strength of this information reason to believe was found and after approval of the appropriate authority, Jurisdiction to reassess was assumed by the AO. It is matter of record that the proceedings of reopening was never challenged by the appellant during the course of assessment proceedings. From perusal of sub missions made during the course of assessment proceedings it is observed that the appellant had made his first reply on 04.01.2022, per which he only informed that bank account of the appellant was submitted by him in the first proceedings of regular assessment. No reply to any of the queries was made by the appellant. In the given circumstances the following conclusion was drawn by the AO which is at para V of the impugned order. "The contention of the assessee is not acceptable. The search and seizure action in the case of M/s Banka Group was carried out by the Investigation Wing of SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR Department on 21.05.2018 resulting in to collection of evidences and recording of the statements of various persons including Mukesh Banka. And the information was communicated to the JAO by the DDIT (Investigation). Unit 1(3), Kolkata vide his letter No. 8073 dated 26.02.2019. Soit is clear that the nexus between the assessee and the entry provider Mukesh Banka was discovered after the search and seizure action dated 21.05.2018. The assessee was requested to substantiate the source of above transaction with documentary evidences. But in reply the assessee has not spared a single word regarding the source of transaction. Soit is clear that the assessee has nothing to say in relation to the accommodation entry for Rs.20,00,056/- from Mukesh Banka Group. Having no explanation/submissions from the assessee regarding the above mentioned transaction amount of Rs.20,00,056/-, the said amount remain unexplained, In view of this, addition of Rs. 20,00,056/- is made on account of unexplained money u/s 69A of the IT Act, 1961 and the same is added to the total income of the assessee." Aggrieved by the above decision of the AO the assessee is in present appeal. 5.2 Gr No. 4 and 6 These are technical grounds. It is relevant to record the sequence of events after the request made by the appellant for video conferencing which has been recorded by the AO at para V of the Impugned order. "The assesse was issued show cause notice dated 16/03/2022 proposing the Draft Assessment Order in which the proposed addition amount as mentioned above has been intimated to the assesse requesting the assesse to file its submission. In response, the assessee has filed submissions which is not found to be substantive considering the facts of the cases. The assessee has opted for personal hearing through video conferencing in this case. The date of video conferencing was fixed at 22/03/2022 at 01:00 PM. But the assessee has not attended the same. Later on, the assessee has sought for adjournment of the Video Conference and again video conferencing was fixed at 25/03/2022 at 01:00 PM, considering the request of the assessee. But this time also the assessee has preferred not to attend the VIDEO CONFERENCE. Hence, the assessment is completed as per the Draft Assessment Order proposed to the assesse.’’ In view of the above record of sequence of events these grounds of appeal appear to have been raised only to mislead the appellate authorities. These grounds are not maintainable and therefore, are being dismissed. 5.3 Ground no.
3. In this ground, the appellant has challenged the validity of the order on the basis of denial of opportunity to cross examine. At this juncture it is pertinent to point out that the appellant was asked to explain the entry of credit of Rs. 20,00,056/-. I have personally gone through the digital record of assessment. The appellant has not discharged his primary onus of explaining the credit entry SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR in his books of account. Only at the fag end of the proceeding, more specifically on 17.03.2022 the assessee makes the following request- "Please provide the opportunity of cross examination of the facts." This is an absurd request, on the face of it the appellant had requested not to cross examine any specific person. He merely has requested for cross examination of facts. The facts relevant for the present appeal was already communicated to him. Therefore, the present ground that he was denied to cross examine by itself is not specific ground of appeal
. This ground read with the request made by the appellant on 17.03.2022 is found to be absurd and therefore, dismissed. 5.4 Ground no. 1 and 2. Both these grounds are technical in nature and the appellant has failed to demonstrate as to how and why the impugned order is bad in law on these grounds. Both these grounds are therefore, dismissed. 5.5 Ground no.
6. This ground is misleading in nature. The appellant, as per the digital record available before the undersigned, has made his last submission on 17.03.2022. This ground istherefore, not maintainable. 5.6 Ground no.
7. There is nothing before me to interfere in the decision of the AO. It is relevant to point out that neither at the time of assessment proceedings not during the present proceeding the appellant has discharged his primary onus of explaining the credit entry appearing in his books of accounts. It is trite law as decided in many cases including In Roshan Di Hatti Vs. CIT [1977] 107 ITR 938 (SC), that the onus of proving the source of money found to have been received by an assessee is on him, if he disputes, it is not liable to tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation and in the absence of such proof the revenue is entitled to treat it as taxable income. In view of the above, this ground is dismissed. 5.7 During the course of present proceedings, the appellant has not changed any of the grounds of appeal. Therefore, ground no. 8 is not to be adjudicated. The appeal filed by the assessee is dismissed.’’ 6.
4. During the course of hearing, the ld.AR of the assessee submitted that this is the second round of litigation. The notice issued u/s. 148 of the Act on two occasions as per page 4 and 5 of the paper book which shows to have been issued on 09.04.2021 and 16.04.2021 respectively. He SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR thereby submitted that the notice u/s. 148 of the Act issued for A. Y. 2014- 15 after 31.03.2021 and thereby the impugned notice is issued beyond the period of limitation provided for in Section 149 of the Act and hence, the impugned notice is bad in law and thereby the assessment framed there upon is also bad in law. The decision as cited and relied upon by the ld. DR in the case of Kanglia Institute of Industrial Technology wherein the issue of notice beyond the 6 year was not there and therefore, the fact of that case and that of the case of the assessee are different. In support of the contention raised the ld. AR of the assessee filed the following written submission: MAY IT PLEASE YOUR HONOUR, The appellant respectfully begs to submit following facts and details for your honor’s kind consideration in support of the grounds of appeal already submitted : Facts of the case- The appellant had filed original return for AY 2014-15 on 30.03.2015, disclosing an income of Rs. 4,34,000/-. The case was selected for scrutiny and assessment was completed u/s 143(3) on 31.08.2016 accepting the returned income. Later, notice u/s 148 was issued on 31.03.2021 on the basis of information that the assessee had taken accommodation entry for Rs.20,00,056/- from Mukesh Banka Group and has introduced his unaccounted cash in regular books of accounts. The return was scrutinized u/s 144 r.w.s. 147 and was accordingly assessed on 16.12.2021 at Rs. 24,34,056/- creating a demand of Rs. 11,56,191/-. Addition of Rs. 20,00,056/- was made as unexplained money u/s 68A. Penalty was also initiated u/s 271(1)(c) of the Act. At the outset, it would be pertinent to mention that the assessee had filed complete details, along with supporting evidence, which was being duly reflected on the ITBA portal, but the Ld.AO did not give cognizance to the same, and passed the assessment order u/s 144, by falsely stating that the assessee has not filed any details. However, during the appellate proceedings, compliance of the hearing notices could not be made on account of non- SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR service of the notices. In view of these peculiar facts of the case, it is requested that the appeal may kindly be decided on merits, not withstanding the fact that the assessment has been completed u/s 144 .
Submission on the grounds of appeal -
Ground No.1- The Ld CIT(A) has erred on facts and in law in dismissing the appeal of the assessee, without deciding the jurisdictional issue. The assessee was not provided with the copy of the reasons recorded for reopening the case and the copy of approval obtained u/s 151 for the same. The order of the AO mentions that approval was given by PCIT-1, Guwahati. It may be mentioned that the assessee had been filing her returns in the jurisdiction of PCIT-1, Jaipur. For the relevant year also, the ITR had been filed at Jaipur. So, the case ought to have been reopened by the jurisdictional AO and the approval ought to have been given by PCIT-1, Jaipur, in order to assume a valid jurisdiction. But in the instant case, from the order of the AO, it is clear that the approval has been taken from PCIT-1, Guwahati. It is not in dispute that reasons for reopening of the assessment have been recorded in this case by ITO, Guwahati, who was having no jurisdiction over the case of the assessee. It seems that later the case was transferred to Ward-1(3), Jaipur who issued the the notice u/s 148. In this case even the shelter of provisions of section 129 of the Act is not applicable because it is a matter of assumption of valid jurisdiction in the matter or to validly initiate the reassessment proceedings against the assessee. It is not a case of succession to exercise jurisdiction by one ITO to another ITO. Since, reasons have been recorded for reopening of the assessment by ITO, Guwahati, who was not authorized to do so, therefore, mere recording of reasons for reopening of the assessment by him is of no consequence and has no value under the law. The AO who has jurisdiction over the case of assessee i.e. ITO, Ward-1(3) Jaipur admittedly did not record any reasons for reopening of the assessment. Therefore, the issue is covered in favour of the assessee by order of ITAT Agra Bench in the case of S N Bhargawa vs. ITO in ITA No.58/AGRA/2009. It is, therefore, clear that assumption of jurisdiction by the AO is illegal and bad in law. The AO at Guwahati had not validly assumed jurisdiction to initiate reassessment proceedings against the assessee. This view is further supported by judgment of Hon’ble Gujarat High Court in the case of Hynoup Food & Oil Industries Ltd. vs. ACIT (2008) 307 ITR 115 in which it is observed that AO recording reasons for reassessment and AO issuing a notice u/s 148 must be the same person. Successor AO cannot issue notice u/s 148 on the basis of reasons recorded by predecessor AO. The Hon’ble Gujarat High Court held as under: “Held, (i) that so far as the assessment years 1990-91 and 1991-92 were concerned, the officer who had issued the notice under section 148 of the Act, was different from the officer who had recorded the reasons and hence, the notices for both these years were invalid and deserved to be quashed on this ground alone.” In the instant case, as the reasons have SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR been recorded by ITO, Guwahati and notice u/s 148 has been issued by ITO, Ward-1(3), Jaipur, the assessment made in consequence thereof is a nullity and deserves to be annulled. In view of the above legal position, the reopening being without jurisdiction, the assessment made in consequence thereof, may kindly be quashed. Ground No.2 - The Ld CIT(A) has erred on facts and in law in confirming the addition made by the AO, without considering the reply of the assessee filed on 23.03.2022 - The appellant uploaded the written submission on the ITBA portal on 25.03.2022 explaining the loan, alleged to be accommodation entry, enclosing with the reply the supporting documents in the form of confirmation and bank statements, which clearly showed the repayment of the loan having been made along with interest. It was also submitted that all these documents were filed at the time of original assessment, as well, which was considered by the then AO. The Ld.AO (NFAC) completely ignored the submission and passed the assessment order. The Ld.CIT(A) had access to the entire material. The grounds of appeal before him, elaborately mentioned the facts on each issue. It is stated that the assessee had taken unsecured loan of Rs.20,00,000/- from M/s Vidyalaxmi Fabrics Pvt. Ltd., which has been transferred in her SB A/c through RTGS on 27.02.2014. This loan was repaid along with interest on 12.04.2014, through RTGS. During assessment proceedings, the assessee had provided the confirmation of the loan, duly signed by the director of the lending company, which mentioned the complete address and PAN of the assessee. The copy of the bank account in which the amount was credited was made available. These evidenceprove the genuineness of the loan, which is further strengthened by the repayment of the loan having been made in the next FY, through the same bank account, via RTGS (banking channel). The documentary evidence submitted by the assessee overpower the assumptions and presumptions on the basis of which the additions have been made by the AO, on the basis of generalization. The assessee vide Gr. No.6 and Gr. No.7 had raised these issues before the Ld.CIT(A). For ready reference these grounds and the decision of Ld.CIT(A) on these grounds are reproduced here- Gr. No.6That the NFAC totally ignored the written submission uploaded on IT portal at 12.46 PM of dated 25-03-2022, prior to the time of personal hearing fixed for 1.00 PM through video conference on the same day, in disposing of the reassessment proceeding . The NFAC grosslyerred in facts and laws also. That the Ld.A.O. NFAC totally erred in facts and laws in framing the reassessment order. Decision -This ground is misleading in nature. The appellant, as per the digital record available before the undersigned, has made his last submission on 17.03.2022. This ground istherefore, not maintainable. As a matter of fact, the ground of the appellant is not misleading. Rather, the observation made by the Ld.CIT(A) is misleading. The digital record available on the portal clearly reflects the submission filed by the assessee along with supporting evidence. Kindly refer to page- of the paper book. The screen shot of SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR the Response sheet and the acknowledgement of the reply filed, along with supporting documents, in response to SCN issued by the AO, negate the observation made by the Ld.CIT(A). As a matter of fact, the CIT(A) was keen on dismissing the appeal on account of non-compliance of notices issued by him, but he was consciously aware that in view of Section 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non-prosecution, as held by various judicial forums. So, he pretended to show as if he is disposing of the appeal on merits. The order passed by him is perverse and non-speaking. The documents and evidences produced before the AO and to which the Ld.CIT(A) had access, are being again filed before the Hon’ble Bench, for deciding the issue on merits. Gr. No.7That the addition of Rs.20,00,056/- in total income of the appellant assessee was erroneously made. The Ld. A.O. NFAC grossly erred in adding Rs. 20,00,056/- in total income of the appellant assessee. The erroneous addition was based on assumptions, surmises and conjecture contrary to the real facts and evidences. Decision - There is nothing before me to interfere in the decision of the AO. It is relevant to point out that neither at the time of assessment proceedings not during the present proceeding the appellant has discharged his primary onus of explaining the credit entry appearing in his books of accounts. The adjudication by the Ld.CIT(A) on these issue is contrary to the evidence and is perverse. During assessment, the confirmation by the party, the relevant bank account showing the receipt and repayment of the loan, the copy of ledger account of the loan as appearing in the books of the assessee, were duly provided. The Ld.CIT(A) had access to all these documents which appeared on the ITBA portal. When the loan has been taken through banking channel and the same has been repaid through the same channel, there was no point in holding the same to be bogus and making addition u/s 69A. The Ld.CIT(A) could have at least considered the legal position that addition, if at all it was warranted, could not have been made u/s 69A, as the transactions of obtaining and repaying the loan stood duly recorded in the books. All these documents are again attached in the paper book for kind consideration of the Hon’ble Bench. In view of the above submission, it is humbly prayed that the decision of the Ld.CIT(A) and the AO being perverse, may be set aside and the returned income be accepted.’’
5. To support his submission, the ld. AR of the assessee has filed the following paper books –I dated 12-03-2025 & II dated & 22-04-2025 . S.N. ParticularsI Paper Book 1 dated 12-03-2025 Page No.
1. Copy of reply filed to AO at the time of reassessment 1-6 2. Copy of original assessment order passed u/s 143(3) dated 7 SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR 31-08-2016 by ITO 3(4) 3. Copy of P&L A/c and Balance Sheet 8 4. Copy of Bank Account of the assessee for F.Y. 2013-14 9-12 5. Copy of bank acount of the assessee for F.Y. 2014-15 13-14 6. Confirmation of Vidhyalakshmi Fabric Pvt Ltd. 15 7. Copy of Ledger A/c of Vidhyalakshmi Fabric Pvt Ltd. 16 8. Copy of Screen Shot of Response Shet of Ass. Proceedings 17 9. Copy of acknowledgement showing written submission and 18-22 supporting documents filed during assessment proceedings S.N. Particulars – Paper Book II dated & 22-04-2025 Page No.
1. Copy of notice u/s 142(1) dated 16-12-2021 alongwith 1-3 Screenshot of Adjournment request made on 23-12-2021 2. Copy of Notice u/s 148 dated 9-04-2021 and uploaded on portal 4 on 9-04-2021 3. Copy of notice u/s 148 dated 31-03-2021 and uploaded on 5 portal on 16-04-2021 4. Copy of screenshort of the online response 6-8 5. Copy of notice issued u/s 143(2) dated 30-08-2015 9 6. Copy of request to PCIT for change in jurisdiction alongwith 10-11 copy of ITR 7. Copy of Notice u/s 147 dated 03-01-2022 12 8. Copy of reply of notice u/s 143(2) alongwith confirmation 13-15 statement of M/s Vidhdyalaxmi Fabric Pvt. Ltd. and ITR & Computation, Financial Statement including Balance Sheet and P&L Account
6. On the other hand, the ld. DR supported the order of the ld.CIT(A) and simultaneously submitted the copy of report received from ITO, Ward 1(3), Jaipur vide 01-05-2025 and this report has also been taken into consideration. Ld. DR in support of the arguments also filed a copy of Decision of Kalinga Institute of Industrial of the Apex Court wherein it has been held that once the assessee participated pursuant to the notice they cannot take the plea of jurisdiction.
SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR 7. We have heard both the parties and perused the materials available on record. Brief facts of the case are that the assessee filed her return of income by declaring total income of Rs.4,34,000/- for the year under consideration on 30-03-2015. The assessment u/s 143(3) of the Act was made on 31-08-2016 at a total income of Rs.4,34,000/-. Later on information was received from the DDIT (Investigation) Unit 1(3), Kolkata vide letter No. 8073 dated 26-23-2019 that a search and seizure action in the case of M/s. Banka Group was carried out by the Investigation Wing of Department on 21-05-2018 resulting into collection of evidences and recording of the statements of various persons including Mukesh Banka. The Department noted that during the investigation it was revealed that Mukesh Bank Group, a leading entry provider through bank account of concerns is indulged in providing accommodation entries in the nature of bogus unsecured loans, or in other forms in lieu of cash from the interest beneficiaries and it is also noted that the assessee is also one of the beneficiaries who have obtained accommodation entries from various concerns of above group. From the evidence, it is evident to the Department that the entries of transaction entered into by the assessee with various companies of Banka Group are as under:-
SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR Account Account No. Bank Transaction Transaction Transaction Bank IFSC Name Name date amount amount MukeshChand beneficiary Banka Account No. Companay Vidyalaxmi 01900210014264 UCO 27-02-2014 20,00,056 51100552618 SBBJ0010828 Fabrics Pvt Bank Ltd.
From the above details, the Department noted that the assessee had obtained accommodation entry for Rs.20,00,056/- from Mukesh Banka Group and filed its return of income during the year under consideration showing total income of Rs.4,34,000/- and thus amounts of financial transaction are not verifiable and it is felt by the Department that the amount of Rs.20,00,056/- given by the assessee in cash is ought to be from assessee’s undisclosed income from other sources which has escaped assessment within the meaning of Section 147 of the Act. Therefore, the case was reopened u/s 148 of the Act after taking approval from the ld. Pr.CIT, Guwahati-1. Notice u/s 148 dated 31-03-2021 was issued and served upon the assessee, requiring the assessee to deliver a return in the prescribed form for the assessment year under consideration within 30 days from the service of this notice but the assessee failed to file the return in response to notice u/s 148 of the Act. Further notices u/s 142(1) of the Act were issued to the assessee and served upon to the assessee with the direction to give details of the transactions amounting to SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR Rs.20,00,056/- in her accounts maintained with State Bank of Bikaner and Jaipur and substantiate the source of above transaction with documentary evidence. The AO observed that the assessee has not adduced any explanation / submission and thus the AO made addition of Rs.20,00,056/- in the hands of the assessee by observing as under:- "V. The contention of the assessee is not acceptable. The search and seizure action in the case of M/s Banka Group was carried out by the Investigation Wing of Department on 21.05.2018 resulting in to collection of evidences and recording of the statements of various persons including Mukesh Banka. And the information was communicated to the JAO by the DDIT (Investigation). Unit 1(3), Kolkata vide his letter No. 8073 dated 26.02.2019. Soit is clear that the nexus between the assessee and the entry provider Mukesh Banka was discovered after the search and seizure action dated 21.05.2018. The assessee was requested to substantiate the source of above transaction with documentary evidences. But in reply the assessee has not spared a single word regarding the source of transaction. Soit is clear that the assessee has nothing to say in relation to the accommodation entry for Rs.20,00,056/- from Mukesh Banka Group. Having no explanation/submissions from the assessee regarding the above mentioned transaction amount of Rs.20,00,056/-, the said amount remain unexplained, In view of this, addition of Rs. 20,00,056/- is made on account of unexplained money u/s 69A of the IT Act, 1961 and the same is added to the total income of the assessee."
In first appeal, the ld. CIT(A) has dismissed the appeal of the assessee as the assessee has not submitted any argument in support of the grounds of appeal raised before the ld. CIT(A). The Bench noticed that the main thrust of the assessee in this appeal was that the AO had no jurisdiction to issue notice u/s 148 of the Act and subsequently made addition to the tune of Rs.20,00,056/- in the hands of the assessee. The ld.AR of the assessee submitted that the case was opened u/s 148 of the Income Tax Act, after SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR taking necessary approval from the ld. Pr.CIT-1, Guwahati-1 whereas the assessee is resident of Jaipur and filed her return of income by declaring total income of Rs.4,34,000/- for the assessment year 2014-15 and the assessment u/s 143(3) of the Act was on 31-08-2016 at a total income of Rs.4,34,000/-. It is pertinent to note that the order of the AO mentions that the approval was given by PCIT-1, Guwahati whereas the assessee had been filing her returns in the Jurisdiction of PCIT-1, Jaipur and her case ought to have been reopened by the Jurisdictional AO and the approval ought to have been given by the PCIT-1, Jaipur in order to assume a valid jurisdiction. However, the AO, Guwahati has no jurisdiction over the case of the assessee. It is noticed that since the reasons have been recorded for reopening of the assessment by the ITO, Guwahati, therefore, he was not authorized to do so and mere recording of reasons for reopening of the assessment by him is of no consequence and have no value under the law whereas the AO who has jurisdiction over the case of the assessee i.e. ITO,Ward-1(3), Jaipur who did not record any reasons for reopening of the assessment. Thus, it is noticed that the assumption of jurisdiction by the AO,Guwahati is not legal and he had not validly assumed jurisdiction to initiate assessment proceedings against the assessee. Even the argument of the assessee that in the present case one notice u/s. 148 of the Act was SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR issued on 31.03.2021 [ paper book page 5 ]wherein DIN no. mentioned is ITBA/AST/S/148/2020-21/1032064841(1) was reported to have been served online/ issued on 16.04.2021 [ paper book page 7]. Whereas the second notice dated 09.04.2021[ paper book page 4 ] wherein DIN no. mentioned is ITBA/AST/S/148/2020-21/1032064831(2) was reported to have been served online/issued on 09.04.2021 [ paper book page 7]. Thus, it is obvious that the notice for A. Y. 2014-15 was issued after 31.03.2021. When this issue was confronted to the ld. DRhe seek time on 22.04.2025 to seek AO’s comments. But when the matter finally heard on 17.09.2025 this fact that the notice was served after 31.03.2021 was not disputed. The issue of notice after 31.03.2021 for A. Y. 2014-15 has already been recently decided by our Jurisdictional High Court in the case of Shree Cement Ltd., Vs. Assistant Commissioner of Income [ 177 taxmann.com 538(Rajasthan) wherein Hon’ble High Court held that after 31.03.2021 notice for Assessment year 2014-15 cannot be issued. The relevant observation of the Hon’ble High Court is reiterated hereinbelow:
Being aggrieved by this notice as also order passed and referred to hereinabove, petitioner has filed this petition on various grounds. The issues that arise are: Whether the notice dated 1st May 2024 issued under Section 148 of (A) the Act is barred by limitation as per first proviso to Section 149 of the SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR Act? Whether impugned notice dated 1st May 2024 is invalid and bad in (B) law being issued by Jurisdictional Assessing Officer (JAO) and not Faceless Assessing Officer (FAO)? (C) Whether the issues raised in impugned order show an alleged escapement of income represented in the form of an asset or expenditure in respect of transaction in relation to an event or an entry in the books of accounts as required under Section 149(1) (b) of the Act? (D) Whether Respondent No. 1 has proposed to reopen on the basis of change of opinion? and (E) When the claim of deduction under Section 80IA of the Act has been consistently allowed in favour of petitioner by Assessing Officer and the Appellate Authority in the earlier years can the Assessing Officer carry a belief that there is escapement of income.
Identical issues have been considered by a Division Bench of High Court of Bombay, authored by one of us (the Chief Justice), in Hexaware Technologies Ltd. v. Asstt. CIT [2024] 162 taxmann.com 225/464 ITR 430 (Bombay) Issue 'A': 11. In Hexaware Technologies Ltd. (supra) also, the issue under consideration was whether notice issued under Section 148 of the Act was barred by limitation. That question came to be answered by the Court in Paragraph Nos. 24 to 30 thereof. It is also settled law that validity of notice under Section 148 of the Act must be judged on the basis of law existing on the date on which such notice is issued. Paragraph Nos. 24 to 30 of the decision of Hexaware Technologies Ltd. (supra) read as under: "24. As regards issue no. 2, Section 149 of the Act reads as under: 149. Time limit for notice.—(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 SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR 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— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] 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 28[a notice under section 148 or section 153A or section 153C 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 or section 153A or section 153C, as the case may be], 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 cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,- (a) a search is initiated under section 132; or (b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year:
SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of, (a) a search under section 132 which is initiated; or (b) a search under section 132 for which the last of authorisations is executed; or (c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:] 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 30[does not exceed 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. [(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.] SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR The first proviso to Section 149 of the Act provides that no notice under section 148 shall be issued at any point of time in a case for a relevant assessment year beginning on or before the 1st day of April 2021, if a notice under section 148 could not have been issued at that time on account of being beyond the time limit specified under the provision of clause (b) of sub-section (1) of this Section, as it stood immediately before the commencement of the Finance Act, 2021. The term 'at that time' in the first proviso refers to the date on which notice under section 148 is to be issued by the Assessing Officer. The term 'at that time' has to refer to the term 'at any time' used earlier in the said proviso. The reference to 'at any time' is to the date of the notice to be issued by the Assessing Officer and, therefore, the term 'at that time' would also refer to the said date. On the said date, if a notice could not have been issued under the erstwhile provision of Section 149(1)(b) of the Act, for any assessment year beginning on or before the 1st day of April 2021, the notice cannot be issued even under the new provisions.
Section 149(1)(b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under section 148 of the Act. For the relevant assessment year, being Assessment Year 2015- 2016, 6th year expired on 31st March 2022. The notice under section 148 of the Act, in the present case, is issued on 27th August 2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said section. This is squarely covered by paragraphs 36 and 37 of New India Assurance (supra) which has been reproduced above in paragraph 23.
The purpose of the first proviso to Section 149 of the Act is consistent with the stated object of the government to make prospective amendments in the Act. Accordingly, the proviso provides that up to Assessment Year 2021-2022 (period before the amendment), the period of limitation as prescribed in the erstwhile provisions of Section 149(1)(b) of the Act would be applicable and only from Assessment Year 2022-2023, the period of ten years as provided in Section 149(1)(b) of the Act, would be applicable. The submission of the Revenue to interpret the first proviso to Section 149 of the Act to be applicable only for Assessment Years 2013-2014 and 2014-2015, i.e., for assessment years where the period of limitation had already expired on 1st April 2021 is not sustainable. The interpretation canvassed by the Revenue is clearly contrary to the plain language of the proviso. When the language in the statute is clear, it has to be so interpreted and there is no scope for interpreting the provision on any other basis. The taxing statue should be strictly construed. [Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2017] 81 taxmann.com 111/247 Taxman 361/394 ITR 449 (SC).
The interpretation as canvassed by the Revenue would render the first proviso to Section 149 of the Act redundant and otiose. The time limit to issue notice under section 148 of the Act had already expired on 1st April 2021 for Assessment Year 2013-2014 and 2014-2015, when Section 149 of the Act was amended. Therefore, reopening for Assessment Years 2013-2014 and 2014- 2015 had already been barred by limitation on 1st April 2021. Accordingly, the SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR extended period of ten years as provided in Section 149(1)(b) of the Act would not have been applicable to Assessment Years 2013-2014 and 20142015, de hors the proviso. It is a settled principle of law that when limitation has already expired, it cannot be revived by way of a subsequent amendment and, hence, for Assessment Years 2013-2014 and 2014-2015 proviso to Section 149 of the Act was not required. Hence, to give meaning to the proviso it has to be interpreted to be applicable for' Assessment Years upto 2021-2022. In CIT v. Onkarmal Meghraj (H.U.F.) [1974] 93 ITR 233 (SC), the Hon'ble Apex Court was dealing with the question whether a proviso could be applied without reference to any period of limitation. It held that "it is a well-settled principle that no action can be commenced where the period within which it can be commenced has expired. It is unnecessary to cite authorities in support of this position. Does the fact that the second proviso says that there is no period of limitation make a difference?" The interpretation canvassed by the Revenue would render the following parts of the proviso redundant - (i) 'at any time' in the first line of the proviso. (ii) 'beginning on or before 1st day of April, 2021,' in the second line of the proviso. (iii) 'at that time' in the fourth line of the proviso. If we have togive effect to the interpretation suggested by the Revenue, then the proviso would have read as under : "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 a notice under section 148 or Section 153A or Section 153C could not have been issued at that time [on 1st day of April, 2021] on account of being beyond the time limit specified under the provisions of clause (b) of subsection (1) of this Section or Section 153A or Section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021; OR Provided that no notice under section 148 shall be issued in a case for the relevant assessment year, if a notice under section 148 or Section 153A or Section 153C could not have been issued at that time [on 1st day of April, 2021] on account of being beyond the time limit specified under the provisions of clause (b) of subsection (1) of this Section or Section 153A or Section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021".
Section has to be interpreted so as to give meaning to all the words/phrases used in the Section and it should not be interpreted in such a way so as to render any part or phrase in the Section otiose. As stated aforesaid, if the interpretation canvassed by the Revenue is to be accepted then, not only various parts of the SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR Section would be rendered otiose, one would have to also substitute one phrase with another phrase in the said Section, which is clearly not permissible in law. Reliance in this regard is placed on the decision of the Hon'ble Apex Court in the case of CIT v. Sham L. Chellaram [2015] 54 taxmann.com 348/373 ITR 292 (Bom.).
It was submitted on behalf of Revenue that the period of limitation for the purposes of Section 149 of the Act has to be seen with respect to the original notice under section 148 of the Act, which was issued to petitioner on 8th April 2021 and as the said notice was issued within the period of six years from the end of the relevant assessment year, which was expiring on 31st March 2022, the reassessment proceedings are within the period of limitation prescribed in Section 149 of the Act. It is not acceptable. Section 149 of the Act sets out, inter alia, the time limit for issuing notice under section 148 of the Act. Apart from the period of limitation set out in the said Section, the first proviso lays down a further restriction on the issue of a notice under section 148 of the Act. The period of limitation as well as the said further restriction is framed/provided in respect of a notice under 148 of the Act, and not for a notice under section 148A of the Act. The notice dated 8th April 2021, which though originally issued as a notice under section 148 of the Act, (under the provisions of the Act prior to the amendments made by the Finance Act, 2021), has now been treated as a notice issued under section 148A(b) of the Act in accordance with the decision of the Hon'ble Apex Court in Ashish Agarwal (supra). Once the notice dated 8th April 2021 has been treated as having been issued under section 148A(b) of the Act, the said notice is no longer relevant for the purpose of determining the period of limitation prescribed under section 149 or the restriction as per the first proviso below Section 149 of the Act. Therefore, for considering the restriction on issue of a notice under section 148 of the Act prescribed in the first proviso to Section 149 of the Act, the fresh/presently impugned notice dated 27th August 2022 issued under section 148 of the Act is required to be considered. The said notice is admittedly beyond the erstwhile period of limitation of six years prescribed by the Act prior to its amendment by the Finance Act, 2021. For the Assessment Year 2015-2016, the erstwhile time limit of six years expired on 31st March 2022 and, the impugned notice under section 148 of the Act has been issued on 27th August 2022 and, therefore, the impugned notice dated 27th August 2022 is barred by the restriction of the first proviso to Section 149 of the Act.
With respect to applicability of the fifth proviso and the sixth proviso to Section 149(1)(b) of the Act for extension of limitation for issuing the notice under section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed in Section 149(1) of the Act, i.e., three years or ten years, as the case may be. Fifth proviso or sixth proviso extend limitation for issuing notice under section 149 of the Act, however, the first proviso is an exception to the period of limitation and provides for a restriction on the notices under section 148 being issued for Assessment Years upto 2021-22 beyond a SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR certain date. Therefore, the way the Section would operate, is first to decide whether a notice issued under section 148 of the Act is within the period of limitation in terms of Section 149(1)(a) or (b) of the Act. To decide whether the notice is within the period of limitation under section 149(1)(a) or (b) of the Act, the extension of time as per the fifth and/or sixth proviso would be considered. Once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said time limit is within the restriction provided in the first proviso or not. If the notice is beyond the restriction period, the notice is invalid. The fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per the first proviso. Hence, if a notice is not within the time prescribed under the first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth proviso and sixth proviso. In Godrej Industries Ltd. (supra) paragraph 15 reads as under : 15. Based on petitioner's facts, the show cause notice under section 148A(b) of the Act was issued on 24th May 2022 asking petitioner to furnish a reply by 8th June 2022. Petitioner filed a detailed reply in response to the show cause notice on 8th June 2022 and, therefore, only the period from 24th May 2022 to 8th June 2022 could be excluded by virtue of the first limb of the fifth proviso to Section 149 of the Act. Subsequently, petitioner received another letter dated 28th June 2022 which annexed certain details and provided further time for making detailed submissions upto 8th July 2022. Petitioner replied to the letter and made detailed submissions on 2nd July 2022. Therefore, even assuming this period is to be excluded, the period which could be excluded is only from 24th May 2022 to 8th June 2022. Even after considering the letter dated 28th June 2022 and the reply dated 2nd July 2022, at the highest a further period from 28th June 2022 to 8th July 2022 could be excluded but the period of time from 8th June 2022 to 28th June 2022 cannot be excluded as per the fifth proviso. This is because petitioner on 8th June 2022 did not request for any further time and furnished its response to the show cause notice under section 148A(b) of the Act. It is the Assessing Officer who has suo moto issued another letter on 28th June 2022 asking petitioner to furnish further details by 8th July 2022. Therefore, even assuming a period of 27 days (i.e., 16 days from 24th May to 8th June and 11 days from 28th June to 8th July) are excluded from the date of the impugned notice under section 148 of the Act issued on 31st July 2022, the impugned notice would yet be barred by limitation and could not have been issued by virtue of the first proviso to Section 149 of the Act. Even if the fifth and sixth provisos are held to be applicable, the impugned notice would still be beyond the period of limitation. The fifth proviso extends limitation with respect to the time or extended time allowed to an assessee as per the show cause notice issued under section 148A(b) of the Act or the period, during which the proceeding under section 148A of the Act are stayed by an order of injunction by any Court. Hence, in the present case, in view of the fifth proviso, the period to be excluded would be counted from 25th May 2022, i.e., the date on which the show cause notice was issued under section 148A(b) of the Act by respondent no. 1 subsequent to the decision of the Hon'ble Apex Court in the SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR case of Ashish Agarwal (supra) and upto 10th June 2022, which is a period of 16 days. Further, the time period from 29th June 2022 upto 4th July 2022 cannot be excluded as the same was not based on any extension sought by petitioner, but at the behest of respondent no.
Even if the same was to be excluded, still it will mean further exclusion of 5 days. Considering the said excluded period as well, the impugned notice dated 27th August 2022 is still beyond limitation. The fact that the original notice dated 8th April, 2021 issued under section 148 of the Act, was stayed by this Court on 3rd August 2021, and its stay came to an end on 29th March 2022 on account of the decision of this Court, will not be relevant for providing extension as per the fifth proviso. The fifth proviso provides for extension for the period during which the proceeding under section 148A of the Act is stayed. The original stay granted by this Court was not with respect to the proceeding under section 148A of the Act, but with respect to the proceeding initiated as per the erstwhile provision of Section 148 of the Act and, hence, such stay would not extend the period of limitation as per the fifth proviso to Section 149 of the Act. The question of applicability of the sixth proviso does not arise on the facts of the present case. We find support for this in Godrej Industries Ltd. (supra). In view of the aforesaid, the impugned notice dated 27th August 2022 is clearly barred by the law of limitation."
In this case, as it pertains to Assessment Year 2017-18, six years period would have expired on 31st March 2024 whereas notice under Section 148 of the Act itself came to be issued on 1st May 2024. Mr. Siddharth Bapna, counsel for Revenue, made an attempt to argue that fifth and sixth provisos to Section 149 (1) (b) of the Act would save the period of limitation for issuing notice under Section 148 of the Act. We are afraid we do not agree with him. Same argument was raised in Hexaware Technologies Ltd. (supra) and was rejected. The Court held, with respect to applicability of fifth and sixth provisos to Section 149(1)(b) of the Act for extension of limitation for issuing notice under Section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed under Section 149(1) of the Act, i.e., three years or ten years, as the case may be. The Court also held that fifth and sixth provisos extend limitation for issuing notice under Section 149 of the Act, however, first proviso is an exception to the period of limitation and provides for a restriction on the notices under Section 148 of the Act being issued for assessment years up to 2021-22 (in this case, it is Assessment Year 2017-18) beyond a certain date. Therefore, the way the section would operate, is to first decide whether a notice issued under Section 148 of the Act is within the period of limitation under Section 149(1)(a) or (b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the extension of time as prescribed in fifth and/or sixth proviso would be considered. The Court further held once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said limit is within the prescribed restriction provided in first proviso or not. If the notice is beyond the restriction period, the notice is invalid, and the fifth and/or the sixth proviso cannot apply at this stage to extend SMT. NITU KHADARIYIA VS ITO,WARD 1(3), JAIPUR the period of restriction as per first proviso. Hence, if a notice is not within the time prescribed under first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth or sixth proviso. In Hexaware Technologies Ltd. (supra), the Court had relied upon another judgment of Bombay High Court in Godrej Industries Ltd. v. Assistant Commissioner of Income-tax [2024] 160 taxmann.com 13 (Bombay)/(2024) 338 CTR (Bom) 25, which was also authored by one of us (the Chief Justice), where Paragraph No. 15 reads as under: "15. The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued under s. 148 of the Act, which in the present case is 31st July, 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under s. 148 of the Act for asst. yr. 2014-15 could be issued on or after 1st April, 2021 based on the first proviso to s. 149 of the Act. Therefore, the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under s. 148 of the Act could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices. The fifth proviso can only apply where one has to determine whether the time-limit of three years and ten years in s. 149(1) of the Act are breached."
In fact, Mr. Pardiwala, Senior Advocate brought to notice of the Court that what has been quoted in Paragraph No. 30 in Hexaware Technologies Ltd. (supra) is actually Paragraph No. 12 in Godrej Industries Ltd. (supra) and correct quotation should have been Paragraph No. 15 which is quoted above.
In the circumstances, since the case at hand pertains to Assessment Year 2017-18, the law as laid down by High Court of Bombay will squarely apply and the notice issued under Section 148 of the Act on 1st May 2024 will be barred by limitation.
Respectfully following the above binding precedent on the legal issue raised by the assessee, we hold that there was no legal notice u/s. 148 of the Act and thereby the assessment based on that illegal notice cannot survive and thereby the same is quashed. Based on these observations the appeal of the assessee is allowed on technical ground and the ground raised for the merits of the dispute becomes academic at this stage.