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Facts
Three appeals were filed against the order of NFAC, Delhi, for AY 2015-16 to 2017-18. The reassessment proceedings were initiated under Section 147 based on information about cash deposits. Notices under Section 148 were issued, and additions were made under Section 69. The assessee challenged the validity of the notices and the approval process.
Held
The Tribunal held that for AY 2015-16, the notice issued under Section 148 was barred by limitation as it was issued beyond the surviving time limit, rendering the assessment proceedings null and void. For AYs 2016-17 and 2017-18, the Tribunal found that the sanctioning authority for the notices under Section 148 did not comply with the requirements of Section 151(ii) of the Act, making the notices invalid.
Key Issues
Whether the notices issued under Section 148 were within the prescribed limitation period and duly sanctioned by the appropriate authority as per the provisions of the Income Tax Act, 1961.
Sections Cited
Section 139(1), Section 132, Section 147, Section 144B, Section 148, Section 151, Section 151A, Section 149, Section 148A, Section 69, Section 115BBE, Section 143(3), Section 149(1), Section 151(ii)
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI.B.R. BASKARAN & SHRI ANIKESH BANERJEE
These threeappeals of the assessee werefiled against the order of the National Faceless Appeal Centre, Delhi (NFAC) (for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (in brevity, ‘the Act’) for Assessment years 2015-16to 2017-18, date of orders24/06/2024 for A.Y. 2015-16 to 4288 /Mum/2024 Ashok Amratlal Shah AND 25/06/2024 for A.Ys 2016-17 & 2017-18. The impugned orders were emanated from the orders of the Learned Assessment Unit, Income-tax Department (for brevity the Ld. AO),order passed under section 147 read with section 144B of the Act, date of order 03/03/2023, 26/05/2023 and 18/05/2023 for Assessment years 2015-16 to 2017-18 respectively.
All the appeals have common grounds, so we heard them together and are disposed of together.
& 4288/Mum/2024 are adjudicated on the ground of sanction of notices u/s 148 of the Act.
(A.Y. 2015-16) 2.1 The assessee has taken the following grounds of appeal:-
1. The Ld. Commissioner of Income Tax Appeals - NFAC erred in conforming the actions of the Assessing Officer of re-opening the assessment u/s. 147 of the Income Tax Act, 1961, without appreciating that the re-assessment is barred by limitation as per section 149 of the Income Tax Act, 1961. Re-assessment is without jurisdiction, void and bad in law.
2. The Ld. Commissioner of Income Tax Appeals - NFAC erred in conforming the actions of the Assessing Officer of re-opening the assessment u/s. 147 of the Income Tax Act based on invalid sanction u/s.151 of the Income Tax Act, 1961. That the entire reassessment proceeding is void-ab-initio.
3. The Ld. Commissioner of Income Tax Appeals - NFAC erred in conforming the assessment order passed u/s. 147 of the Income Tax Act, 1961 based on the notices issued by Jurisdictional Assessing Officer instead of National Faceless Assessment Centre as mandated section 151A of the Income Tax Act, 1961.
4. The Ld. Commissioner of Income Tax Appeals- NFAC erred in not following the Jurisdictional Bombay High Court decision and giving precedence to the Office memorandum and non-jurisdictional Calcutta High Court decision.
5. The Ld. Commissioner of Income Tax Appeals -NFAC erred in conforming the actions of the Assessing Officer of re-opening u/s. 147 of the Income Tax Act, 1961. The reopening is illegal, void and bad in law.
6. The Ld. Commissioner of Income Tax Appeals -NFAC erred in confirming the actions of the Assessing Officer in making an addition of Rs.68,15,933/- under to 4288 /Mum/2024 Ashok Amratlal Shah section 69 treating it as unexplained investments without appreciating the factual matrix of the case. 7. All of the above grounds are without prejudice to each other. The appellant craves leave to add, amend, alter, or delete any of the above grounds of appeal.”
3. The brief facts of the case are that the assessee filed the return under Section 139(1) of the Act, declaring a total income of Rs. 15,19,360/- comprising "Income from House Property" and "Income from Other Sources." Subsequently, a search was conducted under Section 132 in the premises of M/s Sri Renuka Mata Multi-State Urban Co-operative Credit Society Ltd., based on information received from the investigation department. It was revealed that during the relevant year, the assessee had deposited cash amounting to Rs. 72,96,383 in the said credit society's bank account. Pursuant to this information, proceedings under Section 147 were initiated, and a notice under Section 148 was issued on 23/06/2021, under the old legal framework. However, in light of the Hon’ble Supreme Court's ruling in Ashish Agarwal v. Union of India (2022) 138 Taxmann.com 64, dated 03/05/2022, the Ld. AO issued a fresh notice under Section 148A(b) on 30/05/2022, providing the assessee an opportunity to comply under the updated procedural framework of Section 148A of the Act.Subsequently, an order under Section 148A(d) was passed, and a notice under the revised provisions of Section 148 was issued on 30/06/2022. Upon completing the assessment, the Ld. AO made an addition of Rs.68,15,933 under Section 69 of the Act, read with Section 115BBE of the Act. The assessee challenged the validity of the notice under Section 148, as well as the approval process, before the Ld. CIT(A), while also disputing the substantive to 4288 /Mum/2024 Ashok Amratlal Shah facts of the case. After examining the matter, the Ld. CIT(A) rejected the assessee's contentions on both procedural and factual grounds. Aggrieved by the appeal order, the assessee has now filed an appeal before this tribunal.
We have carefully considered the submissions made by both parties and perused the records presented before us. The Learned Authorized Representative (Ld. AR) has primarily relied on the rulings of the Hon’ble Supreme Court in Ashish Agarwal v. Union of India, (2022) 138 Taxmann.com 64 and Union of India v. Rajeev Bansal, (2024) 167 Taxmann.com 70 (SC) to argue their case.
The first issue pertains to the limitation for issuing notices under Section 148 of the Act under both the old and the new regimes. The Ld. AR has heavily relied on the aforementionedjudgments of Hon’ble Apex Court. The detailed facts, including the timeline of events for issuing notices for the relevant assessment years, are as follows: Particulars AY 2015-16 AY 2016-17 AY 2017-18 Notice u/s 148 as per old regime 23/06/2021 20/06/2021 22/06/2021 (deemed to be show cause notice u/s. 148A(b) of the Act). Sanctioning authority u/s 151 for the PCIT, Mumbai-17 JCIT, Range JCIT, Range above-mentioned notice u/s 148 (old 32(1), Mumbai 32(1), Mumbai regime) Issue Letter / deemed notice 30/05/2022 30/05/2022 30/05/2022 u/s.148A(b) providing relevant material and information to the assessee Response filed by assessee to the 31/05/2022 31/05/2022 31/05/2022 above issue letter. Order u/s. 148A(d) and notice u/s 148 30/06/2022 30/06/2022 30/06/2022 (under new law) Sanctioning Authority of notice issued PCIT-2, Mumbai PCIT-2, Mumbai PCIT-2, Mumbai u/s. 148 (under new regime)
6.Notices under Section 148 of the Act were originally issued under the old regime. Pursuant to the directions in Ashish Agarwal (supra), such notices are deemed to be issued under Section 148A(b) of the Act. Accordingly, the Ld. AO issued fresh notices under Section 148A(b) on 30/05/2022 and passed orders under Section 148A(d) on 30/06/2022, before the expiration of the statutory timeline. The Ld. AR contended that the Ld. AO erroneously extended the time limit for issuing notices under the new regime by adding "surviving days" from the old regime, calculated at seven days. For AY 2015-16, the Ld. AR argued that the notice issued under the new regime exceeded the prescribed limitation period. Reference was made to Rajiv Bansal (supra), which clarified that any notice issued beyond the surviving time limit is time-barred. Accordingly, the Ld.AO respectfully followed the order of the Hon’ble Supreme Court in the case of Ashish Agarwal (supra) and issued notice under section 148A(b) on 30/05/2022. The assessee complied the said notice of the Ld. AO andbefore completion of 61 days, the final order under section 148A(d) was passed on 30/06/2022. Further, the Ld.AR submitted that the Ld.AO got the benefit of time limit for issuance of new notice by adding the surviving days, which is calculated 7 (seven) days. Respectfully following the direction of Rajeev Bansal (supra) the said notice under section 148 is not duly covered as per the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) which overrides Income- tax Act to extend the relaxation in time limit for issuance of assessment notice which fell for completion on 20/03/2020 to 31/03/2021 till 30/06/2021. The issue to 4288 /Mum/2024 Ashok Amratlal Shah is considered by the Hon’ble Apex Court. Respectfully considering the order of Hon’ble Apex Court in Rajeev Bansal (supra) the relevant paragraphs are reproduced as below:- “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.
In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defenses, 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.” We consider the ruling and calculated the limitation for issuance notice U/s 148 of the Act which is as follows: - sl Date of Surviving no Particulars Notice days 1 Notice U/s 148 under old regime 23-06-2021 2 Due date for issuance under old regime 30-06-2021 7 3 Time limit to issue notice U/s 148 under new regime 31-05-2022 4 Due date for issuance notice after surviving period 07-06-2022 7
5 Notice issued U/s 148 under new regime 30-06-2022 The issue was duly followed by the order of the Hon’ble High Court of Delhi in the case of IBIBO group Pvt Ltd vs ACIT W.P.(C) 17639/2022, date of order 13/12/2024 and allowed in favour of the assessee.
The Ld. Departmental Representative (Ld. DR) supported the order of the Ld. CIT(A), emphasizing that the notices under Section 148 were issued in compliance with the Supreme Court's decision in Ashish Agarwal (supra) and were within the prescribed time limits. Paragraphs 7 to 7.1.1 of impugned appeal order are as below: - “7. There are thirteen (3) grounds of appeal raised by the appellant. The appellant has contended vide ground No. 1 that the notice u/s. 148 was issued on 30/06/2022, which was beyond the stipulated period of six years and therefore barred by limitation, The appellant has also contended that notice u/s. 148 was issued after 01/04/2021, when an altogether new regime of taxation related to "reopening of assessment", had come into force, in the form of section 148A and to 4288 /Mum/2024 Ashok Amratlal Shah sub-sections thereof. In this regard, the appellant has claimed that the notice cannot be issued beyond 3 years as per the amended provisions of the section. Before adjudicating the appeal, the allegation of belated issue of notice u/s.148 as raised in the appellant vide the Ground No. 1 of the appeal needs to be deliberated. In the said submission, it is contended that notice u/s.148 of the IT Act, 1961 dated 30-06-2022 was issued which is beyond the stipulated period and therefore barred by limitation. The contention of the appellant in this regard is not acceptable as the AO has issued and served the notice u/s. 148 initially on 23/06/2021 and subsequently in compliance to the Hon'ble Supreme Court decision in the case of UOI Vs. Ashish Agarwal in civil appeal No. 3005/2022 dated 04/05/2022, the notice u/s. 148 was issued on 30/06/2022 which is within the due date prescribed as per the Act. Therefore, II is held that the notice issued u/s.148 is well within the prescribed time limits and calls for no interference. This argument of the appellant is therefore rejected. 7.1. The appellant has further contended that notice u/s. 148 was issued on 23/06/2021 which was after 3 years from the end of assessment year. Also, [he appellant has contended that the notice can be issued beyond the 3 years only if the income escaped is more than 50lakhs, which is not in the case of him since the same income has been already declared under PMGKY. In this regard, the appellant has contended that since the notice was issued after statutory limitation as per [he provisions of the act, the assessment order passed by the AO is illegal and against the law and facts of the case. In support of his contention, the appellant has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Hexaware Technologies Ltd. v/s. ACIT [2024J 162 taxmann.com 225 (Bombay)in and contended that facts of the case law are squarely covered the facts of the present case. As such, requested the appellate authority to quash the assessment order passed by the AO. 7.1.1. In the said submission, it is contended that notice u/s.148 of the IT Act, 1961 dated 23-6-2021 was beyond the stipulated period of three year and to 4288 /Mum/2024 Ashok Amratlal Shah therefore barred by limitation as per the amended provision of the section 149 of the Act w.e.f. 01/04/2021. The contention of the appellant cannot be accepted as it is seen that the appellant has compiled with amended provisions of the section consequent to the Hon'ble Apex court decision in the case of Ashish Agarwal Vs. UOI. Moreover, it is seen that prima facie escaped income as per the order u/s. 148A(d) id Rs. 72,96,383/- which is more than 50 lakhs. As such, it is held that no such protection for the appellant against the reassessment proceedings is available as per the provisions of the section 149(1)(b) of the Act. Further, the case law relied upon by the appellant have been perused and it is seen facts of the case are distinguishable to the facts of the case law. In the instant case, the AO in compliance to Hon'ble Apex Court's decision in the case of Ashish Agarwal Vs. UOI has issued the notice as per the provisions of the Act. In view of the above discussion, this argument of the appellant is therefore rejected.
8. Upon review, we find merit in the Ld. AR’s argument. The ruling in Rajeev Bansal (supra) explicitly addresses the issue of limitation for notices issued under the new regime. The relevant observations from paragraphs 112 and 113 of the judgment clarify that any reassessment notice issued beyond the surviving time limit is invalid. For AY 2015-16, the surviving time limit was exceeded, and the notice issued on 30/06/2022 is therefore barred by limitation. The Ld. CIT(A) observed that the notices under Section 148 were issued in compliance with the directions of the Hon’ble Supreme Court in Ashish Agarwal (supra) and the escaped income for AY 2015-16 exceeded Rs. 50 lakhs, and therefore, the extended limitation period under Section 149(1)(b) of the Act applied. to 4288 /Mum/2024 Ashok Amratlal Shah The Ld. DR could not present any contrary facts or rulings to refute the submissions of the Ld. AR. Respectfully following the decisions in Ashish Agarwal (supra) and Rajeev Bansal (supra), we hold that the notice issued under Section 148 for AY 2015-16 is invalid, rendering the subsequent assessment proceedings null and void. Accordingly, the legal ground no-1 raised by the assessee for AY 2015-16 is allowed. Since we have adjudicated the issue of limitation in favor of the assessee, the remaining grounds of appeal are rendered academic and do not require further deliberation.
A.Ys 2016-17 & 2017-18 9.The assessee challenged the validity of the sanction under Section 151 of the Act for the issuance of notices under Section 148 for both assessment years. In these years, the Joint Commissioner of Income Tax (JCIT), Range-32(1), Mumbai, acted as the sanctioning authority under Section 151 of the Act. However, the question of whether the appropriate authority sanctioned the notices, as required under Section 151 of the Act, is central to the matter. This issue has already been addressed by the coordinate bench, Mumbai Bench "D" of the ITAT in the case of ACIT-19(1) v. Manish Financials, & 5055/Mum/2024, decided on 2/12/2024. The relevant paragraphs 14 & 15 are reproduced as below: - “14. We heard the parties and perused the material on record. In assessee's case for AY 2016-17 pursuant to the directions of the Hon'ble Supreme Court in the case of Ashish Agrawal, the AO passed an order under section 148(d) of the Act and issued a notice under section 148 on 30.07.2022. From the above observations of the Hon'ble Supreme Court it is clear that the though the prior to 4288 /Mum/2024 Ashok Amratlal Shah approval under section 148A(b) and 148(d) were waived in terms of the decision of Ashish Agarwal (supra), for issue of notice under section 148A(a) and under section 148 on or after 1 April 2021, the prior approval should be obtained from the appropriate authorities specified under Section 151 of the new regime. The provisions of section 151 of the Act under the new regime read as under: Sanction for issue of notice.
Specified authority for the purposes of section 148 and section 148A shall be, —(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.
In assessee's case from the perusal of para 3 of the notice issued under section 148 for AY 2016-17 we notice that the same is issued with the prior approval of Pr.CIT-19 Mumbai accorded on 29.07.2022 vide reference No.Pr.CIT19/148/2022-23 and this fact is not contravened by the ld DR. For AY 2016-17, the period of three years have elapsed as of 31.03.2020 and the notice is issued beyond three years on 30.07.2022. Therefore as per the decision of the Hon'ble Supreme Court, the approval should have been obtained under the amended provisions of section 151(ii) of the Act i.e. the approval should have been obtained from the Principal Chief Commissioner whereas the approval has been obtained from Pr.CIT as stated in the notice under section 148 itself. Therefore we see merit in the contention of the assessee that the notice under section 148 for AY 2016-17 is issued without obtaining the prior approval from the appropriate authority. Accordingly we hold that the notice under section 148 is invalid and the consequent assessment under section 147 is liable to be quashed.” to 4288 /Mum/2024 Ashok Amratlal Shah 10. As per the provisions of Section 151(ii) under the new procedural regime, for assessment years where the notice under Section 148 is issued after more than three years from the end of the relevant assessment year, the sanction must be obtained from the Principal Chief Commissioner or Principal Director General. The ITAT’s ruling in Manish Financials clarified that while the Hon’ble Supreme Court in Ashish Agarwal (supra) allowed certain procedural relaxations for notices issued during the transition period, post-01/04/2021, the amended provisions under Section 151 must be strictly adhered to. Specifically, for cases where more than three years have elapsed, the required sanction must come from the higher authorities mentioned under Section 151(ii) of the Act.
In Manish Financials, for AY 2016–17, the Bench found that the notice issued under Section 148 was approved by the Principal Commissioner of Income Tax (Pr.CIT) instead of the Principal Chief Commissioner, as mandated. Consequently, the notice and the subsequent assessment order were deemed invalid. Applying the same rationale here, it is evident that for both assessment years under consideration, the sanctioning authority failed to comply with the specific requirements of Section 151(ii) of the Act. Since the notices were issued under the new regime but lacked the necessary approval from the appropriate authority, the sanction process stands invalid. As a result, the notices under Section 148 are deemed to have no legal foundation. In light of this, the assessment orders passed by the Ld. AO under Sections 148/143(3) are quashed. This decision reinforces the principle that procedural compliance, particularly regarding approval from the correct authority, is a fundamental requirement under the Act. to 4288 /Mum/2024 Ashok Amratlal Shah 12. Accordingly, the ground no-2of the appeal for AYs. 2016-17 & 207-18 are allowed. As the legal ground of the assessee is survived, the other grounds are only for academic purposesand do not require further deliberation. 13. In the result, the appeals of the assessee bearing to 4288/Mum/2024 are allowed.