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Facts
The assessee, Mr. Vinod Kumar Jangir, an NRI, had purchased an immovable property for Rs. 2.2 crores, with his share being Rs. 55 lakhs. The Assessing Officer (AO) initiated reassessment proceedings under Section 147/144C of the Income Tax Act, proposing an addition of Rs. 55 lakhs as unexplained investment. The assessee challenged the validity of the notice under Section 148.
Held
The Tribunal held that the notice issued under Section 148 was time-barred, rendering the reassessment proceedings bad in law. The Tribunal relied on the Supreme Court's judgment in Ashish Agarwal's case, but distinguished it based on the specific facts of limitation applicable to this case.
Key Issues
The primary issue was whether the reassessment notice issued under Section 148 was valid and within the prescribed limitation period, considering the amendments to the Income Tax Act and relevant Supreme Court pronouncements.
Sections Cited
147, 144C, 148, 148A, 139(4), 69, 149, 151, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: SHRI GAGAN GOYAL & SHRI NARINDER KUMAR
This appeal by the assessee is directed against the order of AO dated 24.03.2024 passed u/s. 147 r.w.s 144C of the Income Tax Act, 1961 (in short ‘the Act’).The assessee has raised the following grounds of appeal:-
1. That on the facts and in the circumstances of the case and in law, the Ld. A.O. passed assessment order with the direction issued by Hon'ble DRP-1, New Delhi is wrong, illegal and bad in Law.
2. That on the facts in the circumstances of the case and in Law, the Ld. A.O. passed assessment order with the direction issued by Hon'ble DRP-1, New Delhi and dismissed the following 4 legal objections raised by appellant, which are as follows:- A. Notice issued by Non Jurisdictional Assessing Officer. B. Notice is barred by limitation. C. The so called Ld. A.O. did not provide copy of sanction/approval of specified authority D. Notice is issued by the Jurisdictional AO instead of Faceless AO is violation of CBDT Notification No. 18/2022, dated 29.03.2022.
Therefore, the reassessment proceeding was initiated by passing an order u/s. 148A(d) of the Act & issued notice u/s. 148 of the I.T. Act, 1961 is illegal and bad in law. Kindly quash the proceeding.
3. That on the facts and circumstances of the case Ld. AO passed assessment order with the direction issued by Hon’ble DRP-1, New Delhi is wrong, unjust and erred in law in making an addition u/s. 69 of the IT Act, 1961 amounting to Rs. 55,00,000/- on account of unexplained investment is wrong and bad in law. Kindly delete the same.
4. That the appellant craves permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.
2. The brief facts of the case are that the assessee was non-resident in the year under consideration and in the earlier years also, filed his return of income at Rs. 3, 06,600/- on 30.03.2014 u/s. 139(4) of the Act. Information in this case was received from AIR/TAS/26AS that the assessee purchased an immovable property on 07.08.2012 amounting to Rs. 2.2 Cr. along with three other co-owners; assessee’s share in this investment was Rs. 55 Lacs, i.e. 1/4th Share. Based on this information a notice u/s. 148 of the Act was issued on 25.07.2022. After detailed deliberation on the issue under consideration the AO passed a draft assessment order u/s. 144C (1) of the Act and proposed an addition of Rs. 55 Lacs. Against this draft assessment order the assessee approached the Dispute Resolution Panel-1, New Delhi (DRP). The DRP confirmed the draft order passed u/s. 144C (1) and issued the direction for final assessment order u/s. 144C (5) of the Act. As the AO is duty bound with the directions issued by the DRP, he passed the final assessment order u/s. 147 r.w.s. 144C (13) of the Act. The assessee being aggrieved with this order of the AO passed u/s. 147 r.w.s. 144C (13) of the Act in compliance to the directions issued by the DRP u/s. 144C (5) of the Act preferred the present appeal before us.
3. We have gone through the draft assessment order passed u/s. 144C (3), directions of the DRP u/s. 144C (5) of the Act and final assessment order passed u/s. 147 r.w.s. 144C (13) of the Act alongwith the submissions of the assessee and grounds taken before us. It is observed that the notice u/s. 148 of the Act was issued to the assessee on 25.07.2022. The assessee challenged the notice issued u/s. 148 of the Act on the ground of validity. While issuing this notice the AO relied upon the judgment of the Hon’ble Apex Court in the case of UOI Vs. Ashish Agarwal [2022] 138 taxmann.com 64 (SC) and CBDT Instruction No. 01/2022/F. No. 279/Misc./M-51/2022-ITJ dated: 11.05.2022. For better understanding and adjudication, we deem it fit to reproduce both the documents relied upon by the AO as under:
Union of India vs. Ashish Agarwal [2022] 138 taxmann.com 64 (SC)
Under the substituted provisions of the IT Act vide Finance Act, 2021, no notice under section 148 can be issued without following the procedure prescribed under section 148A. Along with the notice under section 148, the Assessing Officer is required to serve the order passed under section 148A. Section 148A is a new provision which is in the nature of a condition precedent. [Para 6.2] By way of section 148A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under section 148, the Assessing Officer shall (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the show-cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under section 148 and (v) the Assessing Officer is required to pass a specific order within the time stipulated. [Para 6.4] The new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1-4-2021. The view taken by the various High Courts in holding so is completely agreed with. [Para 7] However, at the same time, the judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151. The revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced with effect from 1-4-2021, under the unamended section 148. It is viewed that the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 as per the Finance Act, 2021. There appears to be genuine non-application of the amendments as they may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, it is opined that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Court’s ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A as per the new provision section 148A and the revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 and which may be available under the Finance Act, 2021 and in law. Therefore, the judgments are proposed to be modified and orders passed by the respective High Courts as under: - (i) The respective impugned section 148 notices issued to the respective Assessees shall be deemed to have been issued under section 148A as substituted by the Finance Act, 2021 and treated to be show-cause notices in terms of section 148A(b). The respective Assessing Officers shall within thirty days from today provide to the Assessees the information and material relied upon by the revenue so that the Assessees can reply to the notices within two weeks thereafter; (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a one-time measure vis-à- vis those notices which have been issued under section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. [Para 8] The present order would be applicable PAN INDIA on all judgments and orders passed by different High Courts on the issue under which similar notices issued after 1-4-2021 under section 148 are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under article 142 of the Constitution of India so as to avoid any further appeals by the revenue on the very issue by challenging similar judgments and orders. [Para 11] INSTRUCTION REGARDING IMPLEMENTATION OF JUDGMENT OF HON'BLE SUPREME COURT, DATED 4-5-2022 (UNION OF INDIA V. ASHISH AGARWAL [2022] 138 TAXMANN.COM 64) INSTRUCTION NO. 1/2022 [F.NO. 279/MISC/M-51/2022-ITJ], DATED 11-5-2022 1. Hon'ble Supreme Court, vide its judgment dated 4-5-2022 (2022 SCC Online SC 543), in the case of Union of India v. Ashish Agarwal has adjudicated on the validity of the issue of reassessment notices issued by the Assessing Officers during the period beginning on 1st April, 2021 and ending with 30th June, 2021, within the time extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 2020 [hereinafter referred to as "TOLA"] and various notifications issued there under (these reassessment notices hereinafter referred to as "extended reassessment notices").
These extended reassessment notices were issued by the Assessing Officers under the provision of section 148 of the Income-tax Act. 1961 (hereinafter referred to as "the Act") following the procedure prescribed under various sections pertaining to reassessment namely sections 147 to 151, as they existed prior to their amendment by the Finance Act. 2021 (hereinafter referred to as "old law"). With effect from 1st April 2021, the old law has been substituted with new sections 147-151 (hereinafter referred to as the "new law").
3. Hon'ble Supreme Court has held that these extended reassessment notices issued under the old law shall be deemed to be the show cause notices issued under clause (b) of section 148A of the new law and has directed Assessing Officers to follow the procedure with respect to such notices. It has also held that all the defences available to Assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available. Hon'ble Supreme Court has passed this order in exercise of its power under Article 142 of the Constitution of India.
4. The implementation of the judgment of Hon'ble Supreme Court is required to be done in a uniform manner. Accordingly, in exercise of its power under section 119 of the Act, the Central Board of Direct Taxes (hereinafter referred to as "the Board") directs that the following may be taken into consideration while implementing this judgment.
5. Scope of the judgment: 5.1 Taking into account the decision of the Hon'ble Supreme Court in various paragraphs. it is clarified that the judgment applies to all cases where extended reassessment notices have been issued. This is irrespective of the fact whether such notices have been challenged or not.
6. Operation of the new section 149 of the Act to identify cases where fresh notice under section 148 of the Act can be issued: 6.1 With respect of operation of new section 149 of the Act, the following may be seen: ♦ Hon'ble Supreme Court has held that the new law shall operate and all the defences available to Assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available.
♦ Sub-section (1) of new section 149 of the Act as amended by the Finance Act, 2021 (before its amendment by the Finance Act, 2022) reads as under: —
(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. ♦ Hon'ble Supreme Court has upheld the views of High Courts that the benefit of new law shall be made available even in respect of proceedings relating to past assessment years. Decision of Hon'ble Supreme Court read with the time extension provided by TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that point.
6.2 Based on above, the extended reassessment notices are to be dealt with as under:
(i) A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16: Fresh notice under section 148 of the Act can be issued in these cases, with the approval of the specified authority, only if the case falls under clause (b) of sub-section (I) of section 149 as amended by the Finance Act, 2021 and reproduced in paragraph 6.1 above. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (ii) of that section.
(ii) A.Y. 16-17. A.Y. 17-18: Fresh notice under section 148 can be issued in these cases, with the approval of the specified authority, under clause (a) of sub-section (1) of new section 149 of the Act, since they are within the period of three years from the end of the relevant assessment year. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (i) of that section.
7. Cases where the Assessing Officer is required to provide the information and material relied upon within 30 days: 7.1 Hon'ble Supreme Court has directed that information and material is required to be provided in all cases within 30 days. However, it has also been noticed that notices cannot be issued in a case for A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16. if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Hence, in order to reduce the compliance burden of Assessees, it is clarified that information and material may not be provided in a case for A.Y. 2013-14. A.Y. 2014-15 and A.Y. 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Separate instruction shall be issued regarding procedure for disposing these cases.
Procedure required to be followed by the Assessing Officers to comply with the Supreme Court judgment: 8.1 The procedure required to be followed by the Jurisdictional Assessing Officer/Assessing Officer, in compliance with the order of the Hon'ble Supreme Court, is as under: ♦ The extended reassessment notices are deemed to be show cause notices under clause (b) of section 148A of the Act in accordance with the judgment of Hon'ble Supreme Court. Therefore, all requirement of new law prior to that show cause notice shall be deemed to have been complied with. ♦ The Assessing Officer shall exclude cases as per clarification in paragraph 7.1 above.
♦ Within 30 days i.e. by 2nd June, 2022, the Assessing Officer shall provide to the Assessees, in remaining cases, the information and material relied upon for issuance of extended reassessment notices. ♦ The assessee has two weeks to reply as to why a notice under section 148 of the Act should not be issued, on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year. The time period of two weeks shall be counted from the date of last communication of information and material by the Assessing Officer to the assessee. ♦ In view of the observation of Hon'ble Supreme Court that all the defences of the new law are available to the assessee, if assessee makes a request by making an application that more time be given to him to file reply to the show cause notice, then such a request shall be considered by the Assessing Officer on merit and time may be extended by the Assessing Officer as provided in clause (b) of new section 148A of the Act. ♦ After receiving the reply, the Assessing Officer shall decide on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148 of the Act. The Assessing Officer is required to pass an order under clause (d) of section I48A of the Act to that effect, with the prior approval of the specified authority of the new law. This order is required to be passed within one month from the end of the month in which the reply is received by him from the assessee. In case no such reply is furnished by the assessee, then the order is required to be passed within one month from the end of the month in which time or extended time allowed to furnish a reply expires. ♦ If it is a fit case to issue a notice under section 148 of the Act, the Assessing Officer shall serve on the assessee a notice under section 148 after obtaining the approval of the specified authority under section 151 of the new law. The copy of the order passed under clause (d) of section 148A of the Act shall also be served with the notice u/s 148. ♦ If it is not a fit case to issue a notice under section 148 of the Act, the order passed under clause (d) of section 148A to that effect shall be served on the assessee. Tanay Sharma DCIT (OSD), ITJ-I 4. In view of the above judicial pronouncement and Board’s instruction read with the facts of the case under consideration, it is undisputed fact that last day for issuance of notice in the case of the assessee was 31.03.2020, but the same was extended by virtue of TOLA 2020 as mentioned above. Accordingly, the reliance placed by the AO on Ashish Agarwal’s case (supra) and Board’s instruction is misplaced. In this case limitation expired on 31.03.2021 and reference to Ashish Agarwal’s case (supra) and Board’s instruction is basically a misinterpretation of the legal and factual position. The judicial pronouncement of Hon’ble Apex Court and Board’s instruction deals with the issue only in case limitation is beyond 31.03.2021 but inadvertently instead following the new law the department has followed the old law; in that case the case of Ashish Agarwal (supra) is there to rescue the department as the Apex Court has used its extraordinary powers as provided in Article 142 of the Constitution. As a matter of fact, TOLA, 2020 also not meant for this type of situation what we are dealing in this matter.
5. It is also observed that the travel back theory as propounded by the CBDT is against the spirit of the ratio laid down by the Hon’ble Apex Court and the Board’s Circular/Instruction can’t run contrary to the decision of the Hon’ble Apex Court. Board’s circular is otherwise also beyond parent Act, it is only by virtue of the Hon’ble Apex Court Ruling in Ashish Agarwal (supra) they got a new lease of life in time barred matter as a matter of extraordinary powers used by the Hon’ble Apex Court in public interest and to save the genuine mistake of the department. But that does not mean that the same can be extended as per the whims and fancies of the Board.
In view of the above, the ground no. 2(b) raised by the assessee is allowed and it is observed that the notice issued by the Revenue is clearly time barred, consequently the whole assessment proceeding is treated to be bad in law. Rest of the grounds not adjudicated, as the purpose of the appeal is met out with this decision itself pronounced by the bench. It is also observed that the judicial pronouncements relied upon by the assessee are applicable on the facts of the case and can be raised at appropriate level and time, if required.
In the result, the appeal of the assessee is allowed and orders of the authorities below are set-aside.
The Order is pronounced in the open court on the 1st day of May 2025. Sd/- (GAGAN GOYAL) ACCOUNTANT MEMBER
ITAs No(s). 779/JPR/2024 (Assessment year 2013-14) Vinod Kumar Jangir vs. DCIT PER: NARINDER KUMAR, JUDICIAL MEMBER.
I have gone through the draft order prepared by Learned Accountant Member whereby, the appeal filed by the assessee is proposed to be allowed, while accepting ground No. 2(b) of the grounds of appeal that the notice issued by the department was barred by limitation, and accordingly, the assessment proceedings are to be treated as bad in law.
2. I intend to deal with an additional ground for disposal of this appeal.
In the course of arguments, on 28.04.2025, Ld. AR for the appellant submitted paper book.
At serial No. 11 of the paper book is available copy of assessment order dated 29.05.2023, passed by Assessing Officer as regards Smt. Mali wife of Shri Ram Niwas Lama, relating to the same assessment year 2013- 14 and the same immovable property.
As is available from the above said assessment order qua Smt. Mali, she was also served with a notice u/s 148 of the Act on 19.04.2021, for the purposes of verification of transaction relating to immovable property i.e. Plot No. A-2, Road No. 1, Station Road, Man Nagar Yogana, Jhunjhunu, the very property in respect of which notice was issued to the assessee- appellant Vinod Kumar Jangir.
The notice was issued to Smt. Mali on the basis of information received by the department that the assessee had made investment, to the tune of Rs. 55,00,000/-, during financial year 2012-13, in the immovable property, and that source of investment was neither known nor commensurate with the return of income already filed by her.
Smt. Mali responded to the said notice by claiming that she had only 1/4th share in the aforesaid immovable property purchased. Though initially, Smt. Mali is stated to have claimed that source of purchase of the said property was unsecured loan from family members and relative, her regular income and her past savings, when she was served with notice u/s 142(1) of the Act, she pleaded that the payment of entire sale consideration of Rs. 2,20,00,000/- for the said immovable property was made from the bank account of a partnership firm, namely, Golden Tower (PAN No. AAKFG9580F), through banking channels; that she was a partner in the said firm having only 25% shares; and that the said firm had made payment of only Rs. 55,00,000/- i.e. being her share in the sale consideration.
6. It may be mentioned here that after having gone through reply submitted by Smt. Mali, and having analyzed the entire material available on record as well as the relevant case law, the Assessing Officer accepted the plea put forth by her regarding source of funds, and that the payment of the entire sale consideration, in respect of the above said immovable property was made by the above named firm, consisting of 4 partners.
7. As noticed above, it is case of the assessee-appellant here that he is one of the 4 partners of the aforesaid firm. This fact has not been disputed by the authorities below.
8. Having regard to the conclusion drawn by the Assessing Officer after conducting assessment proceedings qua Smt. Mali, in respect of source of investment for purpose of above said immovable property, it stands established that vide assessment order dated 29.05.2023, passed qua Smt. Mali, the department accepted the above said version, but the Assessing Officer, Circle (International Taxation) vide draft order of same date i.e. 29.05.2023 proposed the above said addition of Rs. 55,00,000/- u/s 144C(1) of the Act qua the assessee-appellant herein. Conclusion
Keeping in view the principle of consistency, it can safely be said that the Assessing Officer (International Taxation) fell in error in passing the draft order and the assessment order as regards the assessee, and for the same reason
Result
Consequently, this appeal filed by the assessee deserves to be allowed on the aforesaid ground i.e. principles of consistency, and the impugned assessment order deserves to set aside.