Loading judgment…
Facts
The assessee filed her return for A.Y. 2017-18, claiming exemption for Long-term Capital Gains (LTCG) under Section 10(38) from share sales. Based on information regarding accommodation entries, the Assessing Officer (AO) initiated reassessment proceedings under Section 147, treating the sale proceeds as unexplained cash credit under Section 68 and estimated commission under Section 69C. The AO consequently determined a significant income, leading the assessee to file a cross-objection challenging the validity of the Section 148 reassessment notice.
Held
The Tribunal determined that the reassessment notice issued under Section 148 on 28.07.2022 for A.Y. 2017-18 was beyond three years from the end of the assessment year. As per Section 151(ii) of the Income Tax Act, 1961 (amended by Finance Act, 2021), such a notice required prior approval from a higher specified authority (Principal Chief Commissioner/Principal Director General/Chief Commissioner/Director General). Since the AO had only obtained approval from the Pr. Commissioner of Income Tax, who was not the correctly specified authority, the Tribunal found the assumption of jurisdiction invalid and quashed the assessment order.
Key Issues
Whether the reassessment proceedings initiated by the Assessing Officer under Section 147 for A.Y. 2017-18 were valid, given that the notice under Section 148 was issued beyond three years from the end of the assessment year and with approval from an authority not specified under Section 151(ii) of the Income Tax Act, 1961, as amended by the Finance Act, 2021.
Sections Cited
10(38), 68, 69C, 132, 132A, 133A, 139, 144, 144B, 147, 148, 148A, 149, 151, 153, 153A, 153C, 159
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI RAVISH SOOD, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the revenue against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1068361834(1) dated 05.09.2024 for the A.Y.2017-18 arising out of order passed under section 147 r.w.s. 144 of Income Tax Act, 1961 (in short ‘Act’) dated 30.05.2023. Cross objection is filed by the assessee.
Brief facts of the case are, assessee E-filed her return of income on 01.08.2022 declaring income of Rs.4,63,720/-. Subsequently, based on the information received on INSIGHT Portal about accommodation entries activities done by Shri. Naresh Jain of providing bogus LTCG/STCL and Business loss entries through various penny scrips. M/s.Steel Exchange India Ltd was identified as one of such scrip and the assessee was identified as one of beneficiaries who entered into transaction in the said scrip to the tune of Rs.3,87,36,001/-. Subsequently, notice under section 148 dated 28.07.2022 was duly issued. In response, assessee filed return of income on 01.08.2022 disclosing an income of Rs.4,63,720/-. The Long-term Capital gains of Rs.1,94,13,599/- is disclosed in the return of income and exemption is claimed under section 10(38) of the Act. During the assessment proceedings, assessee
Page. No 2
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy submitted that assessee was allotted 6,62,000 shares of the Company Steel Exchange India Ltd through Preferential allotment at the rate of Rs.29/- per share through a Board resolution. The assessee paid a purchase consideration of Rs 1,91,98,000/- to the Company towards the shares allotted. The purchase transaction is entered into by the assessee,during the F.Y. 2008-09 relevant for A.Y. 2009-10. The assessee raised a loan of Rs59,51,000/- from M/s Uma shiv garments Pvt Ltd which is a non-banking financial company (NBFC). The assessee also received an amount of Rs.1,17,47,000/- from M/s VPL Projects Pvt Ltd out of the amount’s receivable from that Company. The assessee thus raised total funds of Rs.1,76,98,000/- (Rs.59,51,000 + Rs 1,17,47,000) for payment of purchase consideration for the shares acquired under preferential allotment. This amount and other funds available with the assessee are utilised for acquisition of the shares. Further, assessee submitted that assessee paid Rs.1,91,98,000/- to the Company Steel Exchange India Ltd towards sale consideration for the purchase of 6,62,000 shares allotted on Preferential basis. The transaction is entered into during F.Y. 2008-09 relevant for A.Y.2009-10. The assessee sold 6,62,000 shares during this financialyear relevant for the A.Y.2017-18 through the Share broking firm M/s.Zen Securities Ltd. The assessee realised Long-term Capital Gain of Rs.1,94,13,599/- which is disclosed in the return of income filed in response to notice under section 148 of the Act. In support of the above submissions, assessee filed relevant evidence in support
Page. No 3
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy of the funds mobilised for investment in the Company Steel Exchange India Ltd. The assessee also furnished evidence for Preferential allotment of shares.
Not convinced with the submissions as well as evidence produced by the assessee, Ld. Assessing Officer [hereinafter in short “Ld. AO"] considered the sale proceeds of the shares of Rs.3,87,36,001/- as unexplained cash credit under section 68 of the Act. The Ld. AO concluded that the transactions of purchase and sale of shares is in the nature of accommodation entries and estimated the commission allegedly paid by the assessee at 3% amounting to Rs11,62,080/-. Thus, Ld. AO determined the income/Loss of the assessee at Rs.4,03,61,801/-.
4. On being aggrieved by the order of the Ld. AO, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) after considering the submissions and relying on various judicial pronouncements, partly allowed the appeal of the assessee.
On being aggrieved by the order of the Ld. CIT(A), revenue is in appeal before us and assessee filed a cross objection. Firstly, we proceed to adjudicate the cross objection filed by the assessee.
6. Assessee has raised following grounds of appeal in cross objection: -
“1. The learned Commissioner of Income-Tax (Appeals) is justified in deleting the addition of Rs.3,87,36,001 made by the assessing officer u/s 68 of the Act towards unexplained cash credits.
Page. No 4 I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy 2. The learned Commissioner of Income-Tax (Appeals) is justified in deleting the addition of Rs.11,62,080 made by the assessing officer u/s 69C of the Act towards alleged unexplained payment of commission.
3. The learned Commissioner of Income-Tax (Appeals) ought to have held that the notice issued u/s 148 of the Act is not in accordance with law in as much as: a) The notice was issued by JAO contrary to the stipulations of'E- Assessment of Income escaping assessment scheme'. b) The notice was issued without any tangible material to form the belief that the income of the appellant escapedassessment.
Any other grounds of Cross-Objection that may the raised at the time of hearing.”
7. Further, assessee has raised following additional legal ground: -
"On the facts and in the circumstances of the case, the notice issued u/s.148 of the Act on 28.07.2022 without prior approval of Pr. Chief Commissioner of Income Tax being the appropriate authority in terms of S.151(ii) of the Act is invalid".
8. We admit the legal ground raised by the assessee as additional ground since it goes to the root of the matter and proceed to adjudicate the same at first.
Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the Ld. AO had grossly erred in law and on facts of the case in assuming jurisdiction and framing the impugned assessment vide his order passed under section 147 r.w.s. 144B of the Act, dated 30.05.2023. Elaborating on his contention, the Ld.AR submitted that, as notice under section 148 of the Act, dated 28.07.2022 for the year under consideration i.e. A.Y. 2017-18 had been issued by the Ld. AO beyond a period of three years from the end of the Page. No 5
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy relevant assessment year, therefore, as per the mandate of Section 151 of the Act, as was made available on the statute by the Finance Act, 2021 w.e.f. 01.04.2021 and was applicable at the time of issuing of the notice, the said notice could have been issued only after obtaining the prior approval of the authorities contemplated in sub-section (ii), viz. Principal Chief Commissioner/Principal Director General/ Chief Commissioner/Director General. The Ld. AR, to fortify his contention, has drawn our attention to the notice under section 148 of the Act, dated 28.07.2022, which revealed that the same was issued after obtaining the prior approval of Pr. CIT-1, Visakhapatnam-1 accorded on 27.07.2022 vide reference No.Pr.CIT- 1/VSP/148A(d)/2022-23. Carrying his contention further, the Ld. AR submitted that as the impugned notice under section 148 of the Act, dated 28.07.2022 had been issued by the Ld. AO without obtaining the approval of the specified authority, therefore the said notice and the consequential assessment framed by him vide his order passed u/s 147 r.w.s 144 r.w.s 144B of the Act, dated 30.05.2023 cannot be sustained and is liable to be quashed on the said count itself.
10. Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] on being confronted with the aforesaid factual position as was canvassed before us, failed to rebut the same. However, the Ld. DR submitted that as the Ld. AO after validly assuming jurisdiction had issued notice under Page. No 6
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy section 148 of the Act, dated 28.07.2022, therefore, no infirmity emanates from the assessment order passed by him.
We have heard both the sides and perused the material available on record as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home the contentions.
12. As the Ld. AR has assailed the validity of the jurisdiction assumed by the Ld. AO for issuance of notice under section 148 dated 28.07.2022, i.e., without obtaining any approval from any of the authorities specified u/s 151 of the Act (as was applicable at the relevant point of time), therefore, we shall first deal with the same.
Admittedly, it is a matter of fact discernible from the record that the notice under section 148 of the Act, dated 28.07.2022, had been issued by the ITO, Ward-2(5), Visakhapatnam after obtaining the prior approval of the Pr. CIT-1, Visakhapatnam, dated 27.07.2022 vide reference No.Pr.CIT- 1/VSP/148A(d)/2022-23. For the sake of clarity, we deem it fit to cull out the notice u/s 148 dated 28.07.2022.
Page. No 7 I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy Page. No 8 I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy Page. No 9
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy 14. At this stage, we may herein observe that nothing has been placed on our record by the Ld.DR to rebut the aforesaid factual position as has been brought to our notice.
Apropos the challenge thrown by the Ld. AR regarding the validity of the jurisdiction assumed by the Ld.AO for initiating proceedings under section 147 of the Act, i.e., without obtaining the approval of the specified authority under section 151(ii) of the Act, we find substance in the same. Admittedly, the reassessment proceedings under section 147 of the Act had been revamped vide the Finance Act, 2021 w.e.f. 01.04.2021. The substituted Sections 147 to 159 and Section 151 of the Act applicable w.e.f. 01.04.2021 are culled out as under:
“Income escaping assessment- 147. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Explanation.—For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.”. Issue of notice where income has escaped assessment 148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his incomeor the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and Page. No 10
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,— (i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act. Explanation 2.—For the purposes of this section, where,— (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under subsection (2A) or subsection (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or under section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officershall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.”
Page. No 11
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy Conducting inquiry, providing opportunity before issue of notice under section 148- “148A. The Assessing Officer shall, before issuing any notice under section 148,— (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 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 and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the showcause notice referred to in clause (b); (d) 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, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,— (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee. Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.” Time limit for notice-
Page. No 12
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy “149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of subsection (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this subsection shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per showcause notice issued under clause (b)of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this subsection shall be deemed to be extended accordingly. Explanation.—For the purposes of clause (b) of this subsection, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of subsection (1) as to the issue of notice shall be subject to the provisions of section 151.’ Sanction for issue of notice- “151. Specified authority for the purposes of section 148 and section 148A shall be—
Page. No 13
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.”
The Hon’ble Apex Court in the case of Union of India &Ors. Vs. Ashish Agrawal, Civil Appeal No.3005/2022, dated 04.05.2022, after deliberating at length on the aforesaid amended provisions had, inter alia, observed as under:
“5 We have heard Shri N. Venkataraman, learned ASG appearing on behalf of the Revenue and Shri C.A. Sundaram and Shri S. Ganesh, learned Senior Advocates and other learned counsel appearing on behalf of the respective assessee.
It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act (IT Act) by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended sections 147 to 149 and section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as (1) no valid “reason to believe” (2) no tangible/reliable material /information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and ors; (2003) 1 SCC 72, has not been followed. 6.1 Further pre Finance Act, 2021, the reopening was permissible for a maximum period up to six years and in some cases beyond even six years leading to uncertainty for a considerable time. Therefore, Parliament thought it fit to amend the Income Tax Act to simplify the tax administration, ease compliances and reduce litigation. Therefore, with a view to achieve the said object, by the Finance Act, 2021, sections 147 to 149 and section 151 have been substituted. 6.2 Under the substituted provisions of the IT Act vide Finance Act, 2021, no notice under section 148 of the IT Act can be issued without following the procedure prescribed under section 148A of the IT Act. Along with the notice under section 148 of the IT Act, the assessing officer (AO) is required to serve the order passed under section 148A of the IT Act. section 148A of the IT Act is a Page. No 14 I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy new provision which is in the nature of a condition precedent. Introduction of section 148A of the IT Act can thus be said to be a game changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation. 6.3 But prior to pre-Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in the case of GKN Driveshafts (India) Ltd. (supra). 6.4 However, 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 heardto the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the showcause 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 of the IT Act and (v) the AO is required to pass a specific order within the time stipulated. 6.5 Therefore, all safeguards are provided before notice under section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per section 148A(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under section 148A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. 6.6 Substituted section 149 is the provision governing the time limit for issuance of notice under section 148 of the IT Act. The substituted section 149 of the IT Act has reduced the permissible time limit for issuance of such a notice to three years and only in exceptional cases ten years. It also provides further additional safeguards which were absent under the earlier regime preFinance Act, 2021.
Thus, 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 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.
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 of the IT Act. The Revenue cannot be made remediless and the object and Page. No 15
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy 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 w.e.f.01.04.2021, under the unamended section 148. In our view 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 of the IT Act as per the Finance Act, 2021. There appears to be genuine nonapplication of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion 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 Courts 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 of the IT Act 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 of the IT Act 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 of the IT Act and which may be available under the Finance Act, 2021 and in law. Therefore, we propose to modify the judgments 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 of the IT Act as substituted by the Finance Act, 2021 and treated to be showcause 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 onetime measure visàvis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts; (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees; (iv) All the defences which may be available to the assessee under section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to theAssessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and; (v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not.
Page. No 16 I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy 9. There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessees. We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. Therefore, we have proposed to pass the present order with a view avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA.
In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under: (i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be showcause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information andmaterial relied upon by the Revenue, so that the assessee can reply to the showcause notices within two weeks thereafter; (ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a onetime measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required; (iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted);
Page. No 17 I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy (iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.
11. The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act 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, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge.
The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only. All these appeals are accordingly partly allowed to the aforesaid extent. In the facts of the case, there shall be no order as to costs.”
Apart from that, we find that the CBDT vide Instruction No.01/2022 while directing implementation of the judgment of the Hon’ble Supreme Court in the case of Union of India &Ors Vs. Ashish Agrawal, Civil Appeal No.3005/2022, dated 04.05.2022, while laying down the procedure that is required to be followed by the jurisdictional Assessing Officers/Assessing Officer had, inter alia, held, that if it is a fit case to issue notice under section 148 of the Act, the Assessing Officer shall serve on the assessee a notice under section 148 after obtaining approval of the specified authority u/s. 151 of the new law.
Page. No 18
I.T.A.No.450/VIZ/2024 C.O. No. 17/VIZ/2024 Duvvuru Rekha Reddy 18. We, thus, in terms of our aforesaid observation, concur with the Ld. AR that in the present case before us for A.Y. 2017-18, wherein notice under section 148 of the Act was issued on 28.07.2022, i.e. beyond a period of three years from the end of the assessment year, the Ld. AO was statutorily obligated to have obtained the approval from either of the authorities specified under section 151(ii) of the extant law, viz. Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General. However, as the Ld. AO had obtained the approval from the Pr. Commissioner of Income Tax, i.e. an authority who was not vested with any jurisdiction as per the mandate of Section 151 of the Act (as made available on the statute w.e.f 01.04.2021), therefore, the assessment so framed by him under section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 30.05.2023 being devoid and bereft of valid assumption of jurisdiction, is liable to be quashed. Accordingly, we quash the assessment framed by the Ld. AO under Section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 30.05.2023 in terms of our aforesaid observations.
Since the legal grounds are adjudicated in favour of the assessee by quashing the assessment order the other grounds raised by the assessee on merits are not adjudicated.
In the result, the cross objection filed by the assessee is allowed.
Page. No 19
With respect to grounds raised by the revenue in the Ld. AO under Section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 30.05.2023 in the aforesaid paragraphs while adjudicating the cross objection filed by the assessee, the grounds raised by the revenue in its appeal are dismissed.
In the result, appeal of the revenue is dismissed.
To sum-up, appeal of the revenue is dismissed and cross objection filed by the assessee is allowed.
Order pronounced in the open court on 24th September 2025.