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Facts
The assessee filed a return declaring income of Rs. 9,01,350, which was considered invalid. The AO received information about an undisclosed income of Rs. 50,78,160 declared under the Income Declaration Scheme, 2016. As the tax was not paid, the scheme application was cancelled, leading the AO to issue a notice under Section 148 for escaped assessment.
Held
The Tribunal held that the notice issued under Section 148, dated 31.03.2021 and digitally signed on 07.04.2021, was invalid. This is because the notice was issued after the introduction of the new reassessment scheme (effective from 01.04.2021) but the AO failed to follow the prescribed procedure under the new scheme, as well as the directions of the Supreme Court in Ashish Agrawal's case.
Key Issues
Whether the notice issued under Section 148 is valid, considering it was digitally signed after the effective date of the amended reassessment provisions and whether the AO followed the correct procedure for reassessment.
Sections Cited
148, 147, 148A, 149, 151, 69A, 142(1), 144
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI RAHUL CHAUDHARY, JM
O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi [for short 'the CIT(A)'] dated 16.10.2023 for Assessment Year (AY) 2017-18. The assessee has raised the following grounds of appeal:
“1. On the facts and circumstances of the case and in law, the notice issued u/s. 148, the consequential assessment proceeding and also the assessment order passed u/s. 147 may please be declared as null and void on the ground that the learned Assessing Officer had issued the notice u/s. 148 on 7th April, 2021 (when it was digitally signed by her) but without complying with the mandatory requirements as provided under Section 148/148A/149/151 as amended by the Finance Act, 2021.
2. On the facts and circumstances of the case and in law, without prejudice to the above, the notice issued u/s. 148, the consequential assessment proceeding and also the assessment order passed u/s. 147 may please be declared as null and void even in a case where the relief if sought under the extension granted under Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 as there was no compliance with the direction issued by the Supreme Court in the case of Ashish Agrawal [2022] 138 taxmann.com 64 (SC).
3. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in confirming the addition of Rs.50,78, 160 made u/s. 69A.
4. On the facts and circumstances of the case and in law, without prejudice, the income so added should be assessed as the regular business income of the appellant.
5. On the facts and circumstances of the case and in law, without prejudice, the Ld. Assessing Officer may please be directed to grant the credit of the amount paid aggregating to Rs.22,85,172 under the Income Declaration Scheme, 2016 against the tax liability which has become payable consequent to the addition made.”
The assessee is a senior citizen of 72 years of age. The assessee for the year under consideration filed return of income on 28.09.2017 declaring income of Rs. 9,01,350/-. However, this return is considered as invalid by the revenue. The Assessing Officer (AO) has received information that the assessee has made a declaration under Income Declaration Scheme, 2016 (Scheme) wherein an undisclosed income of Rs. 50,78,160/- was declared as Income from Business. Since the assessee failed to pay the tax liability on the income disclosed, the application made under the Scheme was cancelled. Based on this information the AO had reason to belief that the income of assessee has escaped assessment and accordingly issued notice under section 148 of the Act. Since the assessee did not respond to the notice under section 148 and the subsequent notices issued under section 142(1)/144 of the Act. The AO completed the assessment under section 144 r.w.s. 147 of the Act wherein the AO added the income declared under the Scheme as undisclosed income of the assessee. Aggrieved the assessee preferred
Motilal Lachhmandas Rijhwani further appeal before the CIT(A). Even before the CIT(A), the assessee could not make an appearance and accordingly based on materials available on record, the CIT(A) confirmed the addition made by the AO. The assessee is in appeal before the Tribunal against the order of the CIT(A).
There is a delay of 136 days in filing the appeal before the Tribunal. The assessee filed a petition for condonation of delay along with the affidavit and prayed for condonation of delay. The ld. Authorized Representative (AR) of the assessee with regard to the condonation submitted that the assessee is a senior citizen aged 72 years and was not guided properly by the counsel who was handling the tax matters. Considering the age of the assessee and his lack of knowledge on the tax related matter, the ld. AR prayed that the delay may be condoned.
The ld. DR on the other hand vehemently opposed the condonation of delay in filing the appeal before the Tribunal.
Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC) we condone the delay of 136 days in filing the appeal and admit the appeal for adjudication.
The main contention of the ld. AR is that the notice issued under section 148 is not valid. The ld. AR submitted that the notice under section 148 though dated 31.03.2021 is digitally signed on 07.04.2021 and therefore, would clearly fall within the amended provisions of re-assessment as introduced by the Finance Act,
Motilal Lachhmandas Rijhwani 2021. The ld. AR further submitted that even in case it is argued that the notice is covered by the extension granted under Taxation and other laws (Relaxation And Amendments of certain provisions) Act, 2020 (TOLA) there was no compliance with a direction issued by the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agrawal (2022) 138 taxmann.com 64 (SC). Therefore, the ld. AR submitted that the entire proceeding which is done based on invalid notice is liable to be quashed.
The ld. DR on the other hand submitted that the notice under section 148 is dated 31.03.2021 which is before the introduction of new scheme of re-assessment and therefore, the notices is valid. The ld. DR further submitted that the digital signature date cannot be considered as the date of notice and therefore the assessment cannot be held to be invalid.
We heard the parties and perused the material on record. The Finance Act, 2021 amended the scheme of reassessment under the Act with effect from 01.04.2021 whereby new sections 147, 148, 149 and 151 were substituted and section 148A was introduced in the Act. As per the new scheme of reassessment, the AO is required to issue a notice under section 148A and pass an order under section 148A before initiating the re-assessment proceedings by issuing notice under section 148. This amendment was brought effective from 01.04.2021. In assessee's case on perusal of the below notice issued under section 148 though the date of the notice is stated to be 31.03.2021 the notice is digitally signed on 07.04.2021
We also notice that it is clearly mentioned in the footer of the notice that the date of digital signature may be taken as the date of the document. Therefore based on the perusal of these facts we are unable to agree with the contention with the ld. DR that the date of notice is 31.03.2021 and not 07.04.2021. Since the notice is issued after the introduction of the new scheme reassessment i.e. after 01.04,2021, there is merit in the submission that the AO should have followed the procedure as laid down in the new scheme. In assessee's case it is an undisputed fact that the AO has not followed the procedure laid down under the new scheme of re-assessment
Motilal Lachhmandas Rijhwani and therefore the re-assessment done based invalid notice issued under section 148 is liable to be quashed.
Even if we consider that the impugned notice is covered by the time limit extended by TOLA, then in that case the AO is required to follow the directions as given by the Hon'ble Apex Court in the case of Ashish Agrawal (supra). The AO in the given case has failed to follow the mandate given by the Hon'ble Supreme Court and therefore the notice issued would become invalid on that count also. To summarise, in assessee's case the AO has not followed the procedure laid down either under the new scheme of re-assessment nor has followed the directions given by the Hon'ble Supreme Court. Therefore, on both counts, we are of the considered view that the impugned notice issued under section 148 is invalid. Accordingly, the re-assessment done based on invalid notice is liable to be quashed.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 23-07-2024. Sd/- Sd/- (RAHUL CHAUDHARY) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Assessee 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,