DCIT CENTRAL CIRCLE- 7(1), MUMBAI, MUMBAI vs. JINALBEN BHAVIKBHAI VORA, GUJRAT

In law and in the facts and circumstances of the case, Ld. CIT(A) has grossly erred in not adjudicating the ground relating to the validity of the reassessment proceeding despite the fact that the notice issued u/s 148 by the jurisdictional assessing officer is in violation of Section 151A of the Act and CBCT Notification No. 18/2022 dated 29.03.2022.

In law and in the facts and circumstances of the case, Ld. CIT(A) has grossly erred in not adjudicating the ground relating to the validity of the reassessment proceeding despite the fact that the Notice under section 148 of the Act dated 31.08.2022 is void and bad in law as it was issued without DIN.”

We have heard both the sides on the above cross objections and have perused the material on record in relation to the issues raised therein. We have also taken into consideration the judicial precedents cited during the course of hearing.

There is no dispute as to facts. It is admitted position that the notice issued under Section 148 of the Act (old regime) on 17/06/2021, 3 C.O. No.23/Mum/2026 Assessment Year 2013-2014 was treated as notice issued under Section 148A(b) of the Act by the Assessing Officer. Thereafter, order under Section 148A(d) of the Act, was passed on 24/07/2022, and the same was followed by issuance of notice dated 29/06/2022, under Section 148 of the Act (new regime). Thus, the notice under Section 148 of the Act (new regime) was issued after the expiry of 6 years from the end of the relevant assessment year (but within the extended period covered by TOLA1).

The contention raised on behalf of the Assessee is that the Assessing Officer has passed order under Section 148A(d) of the Act and has issued notice under Section 148 of the Act (new regime) after the expiry of surviving period as computed according the judgment of the judgment of the Hon’ble Supreme Court in the case Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC)[03/10/2024]. Therefore, both, the order under Section 148A(d) of the Act and the notice under Section 148 of the Act (new regime) are barred by limitation. In this regard the Learned Authorized Representative for the Assessee furnished following details:

Per Contra, the stand taken by the Revenue is that there is no infirmity in the order passed by the CIT(A).

We note that in the facts and circumstances of the present case the issue that arises for consideration is whether the Order, dated 29/07/2022, passed under Section 148A(d) of the Act and notice, dated 29/07/2022, issued under Section 148 of the Act (new regime) were passed/issued within the surviving period calculated as per the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC)[03/10/2024]. In the aforesaid judgment, the Hon’ble Supreme Court had made the following observations in relation to the interplay between the judgment of Hon’ble Supreme Court in the case of Ashish Agarwal (supra) and TOLA:

If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. A P Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom."] 110.The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices].As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation.Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149. 111.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. 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 6 C.O. No.23/Mum/2026 Assessment Year 2013-2014 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.

In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred. (Emphasis Supplied)

On perusal of the above it becomes clear, that the Hon’ble Supreme Court has clarified that the assessing officer was required to complete these procedures within the ‘surviving time limit’ which can be calculated by computing the number of days between the date of issuance of the deemed notice under Section 148A(d) of the Act and 30th June 2021 (i.e. the extended the time limit provided by TOLA for issuing reassessment notices under section 148, which fell for completion from 20 March 2020 to 31 March 2021,). The clock of limitation which has stopped with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notice under Section 148A(b) of the Act], 7 C.O. No.23/Mum/2026 Assessment Year 2013-2014 would start running again when final reply to the notice deemed to have been issued under Section 148A(b) of the Act is received by the Assessing Officer. It was clarified that a reassessment notice issued beyond the surviving time limit would be time-barred.

We find in the present case notice under Section 148 of the Act (old regime) was issued on 17/06/2021 and was deemed to be notice issued under Section 148A(b) of the Act (new regime). Thus, the surviving time limit can be calculated by computing the number of days between the date of issuance of the deemed notice (i.e., 07/06/2021) and 30/06/2021, which comes to 13 days. The clock started ticking only after Revenue received the response of the Assesses to the show causes notices on 16/06/2022. Once the clock started ticking, the Assessing officer was required to complete these procedures within the surviving time limit of 13 days which expired on 29/06/2022. Even the extended period of 7 days available to the Assessing Officer as per Proviso to Section 149(1) of the Act expired on 06/07/2022. Since notice under Section 148 of the Act was issued on 29/07/2022 after the expiry of the time available with the Assessing Officer calculated as aforesaid, the said notice issued under Section 148 of the Act is time-barred and therefore, bad in law. Therefore, notice, dated 29/07/2022, issued under Section 148 of the Act (new regime), the consequential reassessment proceedings and the Assessment Order, dated 31/05/2023, passed under Section 147 of the Act are quashed. Thus, Cross-Objection No.1 to 3 raised by the Assessee are allowed, while all the other cross objections are dismissed as having been rendered infructuous. In terms of aforesaid, the Cross Objections raised by the Assessee are partly allowed.

Since the Assessment Order, dated 31/05/2023, passed under Section 147 of the Act has been quashed, all the grounds raised

In result, the Cross-Objection raised by the Assessee is partly allowed and the appeal preferred by the Revenue is dismissed.