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Facts
The Revenue appealed against the order of the CIT(A) which partly allowed the assessee's appeal. The assessee had filed a return for AY 2013-14. The AO noted bogus purchases amounting to Rs. 6,93,70,500/- and issued a notice u/s 148. The AO later reopened assessment proceedings and completed the assessment disallowing the bogus purchases.
Held
The Tribunal held that the AO issued the notice u/s 148 (new regime) on 19.07.2022, which was beyond the permissible time limit of 09.07.2022, as calculated based on the Supreme Court's ruling in the case of Union of India Vs. Rajeev Bansal. Therefore, the notice was time-barred.
Key Issues
Whether the notice issued u/s 148 was time-barred, considering the pronouncements of the Supreme Court regarding the period for issuing such notices post-amendments.
Sections Cited
147, 144B, 148, 149, 148A
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ NEW DELHI
Before: SHRI MAHAVIR SINGH
ORDER PER MAHAVIR SINGH, VP:
This appeal filed by the Revenue is arising out of the Ld. CIT(A)/NFAC, Delhi in Appeal No. NFAC/2012-13/10262316 dated 14.11.2024. Assessment was framed by the AO/NFAC, Delhi for the AY 2013-14 u/s. 147 read with section 144B of the Income Tax Act, 1961 (hereinafter referred as the Act) vide order dated 27.5.2023.
The Revenue has raised the following grounds:- 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in dismissing the appeal on the ground of validity of notice u/s. 148 without considering the facts of the case that notice u/s. 148 has been issued as per the direction of the Hon’ble Supreme Court in the judgement of Ashish
Aggarwal and Others and as per CBDT Instruction No. 1 / 2022 dated 11.5.2022. 2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in quashing the assessment proceedings getting time barred in violation of provision of clause (b) of sub section (1) to section 149 of the Act.
Brief facts of the case are that the assessee, an individual filed his return of income for the AY 2013-14 declaring total income of Rs. 40,48,410/-. As per the information available with the department AO noted that the assessee has made bogus purchases to the tune of Rs. 6,93,70,500/- from various paper / bogus entities who are not engaged in any genuine business activity. Accordingly, the AO issued notice u/s. 148 on 17.6.2021. Thereafter several writ petitions were field by certain assessee against the notice u/s. 148 of the Act before the Hon’ble High Courts and the same were disposed by the respective Hon’ble High Courts. Subsequently the issue was taken up to Supreme Court. In view of the Hon’ble Supreme Court order and subsequently Instruction No. 01/2022 issued by the CBDT, underlying information and material was provided to the assessee. Thereafter the Jurisdictional AO passed the order u/s. 148A(d) of the Act on 19.7.2022 and reopened the assessment proceedings by issuing notice u/s. 148 of the Act dated 19.7.2022. In response to the notice u/s. 148 assessee filed his return of income declaring Rs. 40,84,410/- as his total income for the year under consideration. The AO not satisfied with the documents / submission made by the assessee in support of his claim and treated the amount of Rs. 6,93,70,500/- as unexplained non-genuine transactions and disallowed the same treating it as bogus purchase expenses. Therefore, the AO assessed the total income of the assessee at Rs. 7,34,18,910/- (40,18,410/- + 6,93,70,500/-) and completed the assessment u/s. 147 r.w.s. 144B of the Act. Against the AO’s action, assessee appeal before the Ld. CIT(A), who vide his impugned order dated has partly allowed the appeal of the assessee. Aggrieved, Revenue is in appeal before the Tribunal.
At time of hearing, ld. CIT(DR) submitted that Ld. CIT(A) has erred in dismissing the appeal on the ground of validity of notice u/s. 148 without considering the facts of the case that notice u/s. 148 has been issued as per the direction of the Hon’ble Supreme Court in the judgement of Ashish Aggarwal and others and as per the CBDT Instruction No. 01/2022 dated 11.5.2022. It was also stated that the Ld. CIT(A) erred in quashing the assessment proceedings getting time barred in violation of provision of clause (b) of sub section (1) to section 149 of the Act. Hence, it was requested to set aside the order of the Ld. CIT(A) by allowing the appeal of the Revenue.
Per contra, Ld. AR submitted that AO issued original notice u/s 148 of the Act on 17.06.2021 without following the mandate provision of section 148A as introduced by Finance Act, 2021. However, the validity of notices u/s 148 issued between 01.04.2021 and 30.06.2021 became subject matter of writ petition before different High Courts. It was submitted that the matter was finally decided by Hon'ble Supreme Court Civil Appeal No. 3005/2022 in the case of Union of India & Ors. Vs. Ashish Agarwal and others whereby by order dated 04.05.2022 passed by Hon ble Supreme Court of India in Civil Appeal No. 3005/2022 in the case of Union of India & Ors. vs. Ashish Agarwal and others has pronounced the judgment that "The notices Section 148 issued to the respective assesses which were issued under un-amended 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 show-cause notices in terms of Section 148A(b) of the Act.” Further, notice u/s 148A(b) of the Act dated 27.05.2022 along with information was issued alleging that the purchases of the assessee are bogus in nature. Against the notice dated 27.05.2022, the assesee duly submitted reply and detailed submission on 25.06.2022. He further submitted that without considering the submission of the assessee, AO passed the order u/s 148A(d) of the Act dated 19.07.2022 and initiated re-assessment proceedings (copy placed at Page No. 24-31 of PB). The notice u/s 148 of the Act was issued on 19.07.2022, copy thereof placed at page no. 32-33 of PB. He drew our attention towards the judicial decision delivered by the Apex Court in case of Union of India versus Rajeev Bansal - Civil Appeal No. 8629/2023 dated 03.10.2024 which is squarely covered with the case of the Assessee wherein the Hon'ble Apex Court held that the third proviso to Section 149 of the new regime provides that the period during which the proceedings under Section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under Section 148A(b) and the date of the decision of this Court in Ashish Agarwal (supra), the Assessing Officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show cause notices were deemed to have been stayed by order of this Court from the date of their issuance (somewhere from 1 April 2021 till 30 June 2021) till the date of decision in Ashish Agarwal (supra), that is, 4 May 2022. Further, the Apex Court held that the Court has allowed thirty days time to provide information to assessee from the date of decision of Ashish Agarwal (supra) and also directed to provide two weeks' time to assessee to respond. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices. Further, the Hon’ble Apex Court held that the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021. He submitted that the Hon'ble Apex Court concluded that the clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the Assessing Officer had to perform the following responsibilities: (i) consider the reply of the assessee under Section 149A(c); (ii) take a decision under Section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime.
5.1 It was submitted that in para 112 the Apex Court has also given example as under "112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022."
5.2 He further submitted that the Apex court allowed all the assessee to avail all the defenses, including the defense of expiry of the time limit specified under section 149(1) and held that a reassessment notice issued beyond the surviving time limit will be time barred.
After hearing the rival contentions and perusing the records, we find that in the present case of the assessee, the date of original notice issued u/s 148 of the Act (under old regime) is 17.06.2021 and of submission of reply in response to information provided by the AO after in judgment of Ashish Agarwal (supra) is 26.06.2022. However, as per Hon'ble Apex Court judgment of Union of India Vs. Rajeev Bansal (supra) surviving time available to the AO to issue notice u/s 148 of the Act (under new regime) would be difference of days between 17.06.2021 to 30.06.2021 i.e., 14 days. Hence, according to the Apex Court ruling the AO could issue notice only upto 09th July 2022 i.e by adding the survival period of 14 days to the date on which response submitted by the assessee (26.06.2022). However, in the present case the AO issued notice u/s 148 (under new regime) on 19/07/2022 which is time barred.
After hearing the rival contentions and gone through the above noted facts and the decision of the Hon’ble Supreme Court in the case of UOI vs. Rajeev Bansal (Supra), we are of the considered view that AO could issue notice u/s. 148 (new regime) of the Act upto 09.07.2022 i.e. 14 days (survival time) from the date of reply submitted by the assessee, however, the same was issued u/s. 148 (new regime) of the Act on 19.7.2022 which is barred by limitation and accordingly, we set aside the same by upholding the action of the Ld. CIT(A) on this issue.
In the result, the Revenue’s appeal is dismissed.