SHAMBHAVEE SHASHIKANT KADAM,ANDHERI (WEST) vs. NATIONAL FACELESS ASSESSMENT CENTRE, NEW DELHI

Aggrieved, assessee filed appeal before the CIT(A). There was a delay in filing the appeal before the CIT(A) and the assessee filed the affidavit in this regard. However, the CIT(A) dismissed the appeal in limine without condoning the delay. The assessee is in appeal before the Tribunal against the order of the CIT(A).

During the course of hearing the ld. AR raised two legal contentions with regard to the notice issued under section 148 of the Act. The first contention of the ld. AR is that the notice under section 148 is issued by the ITO Ward 24(1)(1), Mumbai whereas the assessee has filed the return of income in Satara. Accordingly the ld AR submitted that the notice which is issued by non-jurisdictional AO is invalid. The second contention of the ld. AR is that the notice under section 148 has been issued without getting the approval of appropriate authority as per the provisions of section 151 of the Act. For the purpose of adjudication we will first consider the second legal contention on the approval given under section 151 of the Act.

The ld. AR submitted that the original 148 notice in assessee's case was issued on 30.06.2021 and as per the directions of the Hon'ble Supreme Court in the case of Union of India vs. Ashish Agrawal in Civil Appeal No. 3005/2022 the said notice was deemed to have been issued under section 148A of the Act and accordingly the AO had issued notice under section 148A(b) of the Act. After passing the order dismissing the objections of the assessee under section 148A(d) of the Act, the AO issued fresh notice under section 148 on 28.07.2022. The ld. AR submitted that for the purpose of issuing notice under section 148 the approval has been obtained from the Pr.CIT on 22.07.2022 which is violation of the provisions of section 151 under the new regime. The ld. AR placed reliance in this regard on the decision of the Hon'ble Supreme Court in the case of Rajeev Basal (Civil Appeal No. 8629 of 2024).

The ld. DR on the other hand placed reliance on the order of the lower authority.

We heard the parties and perused the material on records. In assessee's case the original notice under section 148 reopening the assessment was issued on 30.06.2021 and as per the decision of the Hon'ble Supreme Court in the case of Ashish Agrawal (supra) the said notice is deemed to been issued under the new section 148A of the Act. Subsequently, the AO passed an order under section 148A(d) on 28.07.2022 and issued fresh notice under section 148 on the same day. From the perusal of records, we notice that the AO for the purpose of section 148A(d) and issue of notice under section 148 of the Act has obtained approval from Pr.CIT on 22.07.2022 vide reference no. Pr.CIT – 20/148 approval / 2022- 23/83 (page 18 of the Paper Book). The contention of the assessee is that the AO has not obtained the approval from the appropriate authority as per the provisions of section 151 of the new regime. In this regard, it is relevant to notice the following observations of the Hon'ble Supreme Court in the case of Rajeev Bansal (supra): “73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments. A table representing the prescription under the old and new regime is set out below:

The above table indicates that the specified authority is directly co- related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh; (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

After 1 April 2021, the new regime has specified different authorities for granting sanctions under Section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.

Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under Section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151 (ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the "elevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148.

Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre- conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.

For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under Section 3(1) of TOLA. Resultantly, the authority specified under Section 151(i) of the new regime can grant sanction till 30 June 2021.

Under Finance Act 2021, the a sessing officer was required to obtain prior approval or sanction of the specified authorities at four stages: a. Section 148A(a) to conduct any enquiry, if required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under Section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022; c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under Section 148; and d. Section 148-to issue a reassessment notice.

In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts "shall be deemed to have been issued under Section 148-A of the Income Tax Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b)." Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under Section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under Section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law. 130 81. This Court in Ashish Agarwal (supra) directed the assessing officers to "pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned." Further, it directed the assessing officers to issue a notice under Section 148 of the new regime "after following the procedure as required under Section 148-A." Although this Court waived off the requirement of obtaining prior approval under Section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148. Therefore, the assessing officer was required to obtain prior approval of the specified authority according to Section 151 of the new regime before passing an order under Section 148A(d) or issuing a notice under Section 148. These notices ought to have been issued following the time limits specified under Section 151 of the new regime read with TOLA, where applicable.

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 28.07.2022. From the above observations of the Hon'ble Supreme Court it is clear that the though the prior 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 the notice issued under section 148 for AY 2016-17 we notice that the same is issued with the prior approval of Pr.CIT on 22.07.2022 vide reference no. Pr.CIT – 20/148 approval / 2022-23/83 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.

Since we have already quashed the order under section 147 based on the legal contention of notice being issued without obtaining proper approval, the other legal contentions have become academic not warranting any adjudication. Further we have quashed the reassessment proceedings for AY 2016-17 considering the legal contentions raised by the assessee, and therefore the grounds raised by the assessee on merits have become academic not warranting adjudication.

In result the appeal of the assessee is partly allowed.