NISHA THOMAS,MUMBAI vs. COMMISSIONER OF INCOME TAX (A)-DRP-2 , MUMBAI
Facts
The Assessing Officer (AO) reopened the assessment of the assessee, an individual residing in Qatar, for AY 2015-16 based on information regarding the purchase of an immovable property. The AO issued notices under section 148 and later under section 148A, alleging that Rs. 25,00,000/- was unexplained investment. The assessee claimed the entire consideration was paid from her savings and not in cash, but later admitted to sending cash through her father. The AO confirmed the addition, and the DRP upheld the AO's order, stating the assessee changed her stand.
Held
The Tribunal held that the notice issued under section 148 dated 22.07.2022 was barred by limitation as per Section 149 read with the first proviso. The original notice dated 30.06.2021, though initially issued under the old section 148, was treated as a notice under section 148A(b) as per the Supreme Court's decision in Ashish Agarwal. Therefore, the subsequent notice dated 22.07.2022 had to be considered for limitation purposes.
Key Issues
The primary issue was whether the notice issued under Section 148 of the Income Tax Act, 1961, was barred by limitation, considering the changes in reassessment provisions and the sequence of notices issued.
Sections Cited
Section 147, Section 144, Section 148, Section 148A, Section 142(1), Section 149, Section 151, Section 132, Section 132A, Section 131, Section 133A, Section 153A, Section 153C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI RAJ KUMAR CHAUHAN, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE MS PADMAVATHY S, AM & SHRI RAJ KUMAR CHAUHAN, JM I.T.A. No. 2764/Mum/2024 (Assessment Year: 2015-16) Nisha Thomas CIT(A) DRP-2, Room No. 1, 28th Floor, Flat No. 203, A-10, Tejasvi Apartment, Saibaba Nagar, World Trade Centre-1, Vs. Mira Road (East), Cuffe Parade, Maharashtra-401107. Mumbai-400005. PAN : AKCPT1993K Assessee) : Respondent) Assessee/Appellant by : Shri Gunjan Kakkad, CA Revenue/Respondent by : Shri Himanshu Sharma, CIT-DR : 08.07.2024 Date of Hearing : 15.07.2024 Date of Pronouncement O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the final order of assessment passed by the Income Tax Officer, International Tax, Ward-4(1)(1), Mumbai [for short 'the AO] under section 147 r.w.s.144 of the Income Tax Act (the Act) dated 14.03.2024 for the AY 2015-16. The assessee raised the following grounds of appeal:
“Each ground is without prejudice to each other. The grounds of appeal are taken hereunder:
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On the facts and circumstances of the case and in law, the Income-tax Officer, International Tax Ward 4(1)(1), Mumbai (hereinafter referred to as "the AO") has erred in initiating the reassessment proceedings in the case of the Appellant.
The AO has failed to appreciate the facts of the case and erred in making an addition to the total income of the Appellant.
The AO has failed to appreciate that the Assessee has been a non-resident and thus, no income chargeable to tax in India had arisen for the purpose of purchasing immoveable property in India.” 2. The assessee is an individual residing in Qatar. The AO received an information from DCIT Central Circle-1(3), Mumbai that during the search action conducted by the Department in the group concerns of M/s Bhagwati Developers incriminating materials have been found containing the details that the assessee has paid Rs. 25,00,000/- in cash during the Financial Year (FY) 2014-15 to M/s Shanti Enterprises belonging to the group of M/s Bhagwati Developers for the purchase of an immovable property being Flat No.B-604, 6th Floor, Sky Oasis, Plot No. 29, sector-9, Ulwe, Navi Mumbai. The AO re-opened the assessment based on the above information by issuing a notice under section 148 of the Act on 30.06.2021 stating that he had reason to believe that the income chargeable to tax has escaped assessment. The assessee did not file any return in response to the notice under section 148 of the Act. Subsequently as per the directions of the Hon'ble Supreme Court as rendered in the case of Ashish Agarwal Vs. Union of India [2022] 138 taxmann.com 64 dated 04.05.2022 the AO issued a notice under section 148A(b) dated 25.05.2022 calling on the assessee to file necessary response. The AO after passing the order under section 148A(d) issued notice under section 148 dated 22.07.2022 re-opening the assessment of the assessee. The assessee did not file any return in response to the said notice also. The assessee however filed submissions in response to the various notices issued by the AO under section 142(1) of the
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Act. The assessee submitted that she has purchased the impugned property from the builder M/s Shanti Enterprises which is a group concern of M/s Bhagwati Developers for an agreement value of Rs. 35,10,000/- out of her savings from the salary income as she was employed with Qatar Commercial Bank and the assessee filed the supporting documents such as registration receipt, payment receipt, bank statements, etc. before the AO in this regard. The assessee further submitted that she has not paid any cash to the builder and the entire consideration paid was only Rs. 35,10,000/-. The AO did not accept the submissions of the assessee for the reason that the incriminating materials seized during the course of search contained certain documents where it has been mentioned a sum of Rs. 60,10,000/- as amount received towards sale of the impugned flat. Since the assessee did not file any further details, the AO proceeded to treat the difference amount of Rs. 25,00,000/- (Rs. 60,10,000 – Rs. 35,10,000) as unexplained investment and made addition accordingly.
The assessee filed its objections before the DRP against the draft assessment order passed by the AO. Before the DRP, the assessee admitted that she has sent certain amounts to her father who in turn has withdrawn the sums in cash and has given to the builder. The assessee further submitted that the source for the cash payment is her earning abroad which are not taxable in India. The assessee filed the bank statements in support of the claim. The assessee accordingly, submitted that even otherwise the addition made by the AO is not sustainable for the reason that the source for the payment of cash has been substantiated and therefore the same cannot be treated as unexplained. The DRP however, rejected the submissions of the assessee stating that the assessee has changed her stand about the payment of cash which she claimed before the AO as not paid at all. The DRP therefore confirmed the addition made by the AO. The assessee is in appeal before
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the Tribunal against the final order of assessment passed by the AO pursuant to the directions of the DRP.
There is a delay of 3 days in filing the appeal before the Tribunal and the assessee filed an affidavit explaining the reasons for the delay and praying for condonation of delay. The ld. AR in this regard submitted that since the assessee had to physically sign Form No. 36 to file the appeal before the Tribunal there was a slight delay in the physical paper to reach India. The ld. AR accordingly prayed for condonation of delay. The DR on the other hand vehemently opposed that the delay should not be condoned.
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 3 days in filing the appeal and admit the appeal for adjudication.
The first contention of the ld. AR is with regard to the legal issue that the notice issued under section 148 of the Act dated 22.07.2022 is barred by limitation. The ld. AR submitted that the AO issued a notice under the old section 148 of the Act on 30.06.2021 i.e. after the amendment brought in by Finance Act, 2021 whereby the scheme of reassessment have undergone change and a new section 148A was inserted. Several writ petitions were filed before the Hon'ble Bombay High Court by various assessees who have received similar notices challenging the validity of notice under section 148 wherein the Hon'ble High Court has held those notices issued under section 148 as invalid. Subsequently Hon'ble Supreme Court
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in the case of Ashish Agarwal (supra) directed that the notices issued under section 148 be deemed to have been issued under section 148A(b) of the Act. The ld. AR in this regard drew our attention to the relevant observations of the Apex court as extracted below: 8. However, at the same time, the judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 of the IT Act. The Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced w.e.f. 1-4- 2021, under the unamended section 148. In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021. There appears to be genuine non-application of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law. Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under : - (i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be show-cause notices in terms of section 148A(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter; (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a one-time
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measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts; (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees; (iv) All the defences which may be available to the assessee under section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and; (v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not. 9. There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessees. We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. Therefore, we have proposed to pass the present order with a view avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA.
The ld. AR submitted that accordingly, the AO in the present appeal issued a notice under section 148A(b) dated 25.05.2022 and issued a notice under section 148 dated 22.07.2022 after passing order under section 148A. The ld AR further submitted that as per the provisions of section 149 of the Act for AYs prior to
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01.04.2021, the time limit for issue of notice under section 148 of the Act is Six years from the end of the relevant AY and therefore in assessee's case for AY 2015-16 the notice dated 22.07.2022 is barred by limitation. The ld AR argued that accordingly the assessment done based on the said notice is liable to be quashed. The ld. AR relied on the decision of the Hon'ble Bombay High Court in the case of Hexaware Technologies Ltd. Vs. ACIT [2024] 162 taxmann.com 225 (Bom.).
The ld. DR on the other hand, submitted that the original notice under section 148 of the Act was issued on 30.06.2021 which is well before the time limit and therefore, the legal contentions of the assessee are not valid. The ld. DR further submitted that it was not the intention of the Hon'ble Supreme Court to invalidate the original notice issued under section 148 of the Act and accordingly the Court issued the direction that the same could be treated as a notice issued under section 148A(b) of the Act. The ld. DR therefore, submitted that the subsequent notice under section 148 dated 22.07.2022 cannot be the considered as the basis on which the assessment is done but it is the notice dated 30.06.2021 that needs to be considered. The ld. DR accordingly submitted that the assessment cannot be quashed for the reason that the notice under section 148 was issued beyond time limit.
We heard the parties and perused the material on record. Before proceeding further, we will have a look at the brief journey of the changes that happened in the scheme of reassessment. 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. Accordingly, the old provisions or the old scheme of reassessment was applicable only till 31.03.2021. However due to the onslaught of the COVID-19
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pandemic from March 2020 the functioning of the Income-tax department was also affected. To counter the difficulties faced in initiating the reassessments within the prescribed time limits under the old scheme for the period ending 31.03.2020 and 31.03.2021, the legislature enacted the Taxation and Other Laws (Relaxation of certain provisions) Act, 2020 [referred to as TOLA] on 29.09.2020. In excise of the powers given by TOLA the Central Government issued various notices from time to time as per which the time limit for issue of notice under section 148 for reopening the assessment got extended till 30.06.2021. As a result, several notices were issued by the Department between 01.04.2021 and 30.06.2021 under the old scheme of reassessment, seeking shelter under the extended time limits of TOLA. Therefore, a controversy arose whether such notices issued under the old scheme post 01.04.2021 are valid or not, given that the new scheme of reassessment was made applicable with effect from 01.04.2021 vide Finance Act, 2021. Several Writ Petitions were filed by taxpayers from across the country in various High Courts, challenging the validity of Notices issued under section 148 of the Act under the old law post 01.04.2021. Almost all the High Courts including the Bombay High Court, took an uniform view and quashed the respective reassessment notices issued under section 148 between 01.04.2021 and 30.06.2021. The Hon'ble Supreme Court while considering the issue in the appeal filed by the Revenue in the case of Ashish Agarwal (supra) held that the Revenue should not be remediless, and accordingly issued certain directions as extracted in the earlier part of this order.
In the present appeal, the AO issued a notice dated 25.05.2022 as per the directions of the Apex Court and subsequently issued the notice under section 148 dated 22.07.2022 to complete the assessment under section 147 vide order dated 14.03.2024. The contention of the assessee is that the notice dated 22.07.2022 is
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barred by limitation, since as per the provisions of the section 149 r.w. the first proviso, the time limit of six years from the end of the relevant assessment year for issue of notice under section 148 for AY 2015-16 has expired on 31.03.2022. The Department is arguing that the original notice issued under section 148 on 30.06.2021 initiating the reassessment proceedings was within the time limit and therefore the reassessment order cannot be quashed. The counter argument of the assessee is that the original notice under section 148 of the Act is non est since as per the directions of the Hon'ble Supreme, the said notice is to be treated as a notice under section 148A(b) and therefore the notice dated 22.07.2022 is to considered for the purpose of testing the time limit as provided under section 149. We notice that the Hon'ble Jurisdictional High Court in the case of Hexaware Technologies Ltd (supra) has considered a similar issue where it has been held that - 24. As regards issue no. 2, Section 149 of the Act reads as under : 149. Time limit for notice.—(1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); [(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if 28[a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section
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(1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: [Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,— (a) a search is initiated under section 132; or (b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,— (a) a search under section 132 which is initiated; or (b) a search under section 132 for which the last of authorisations is executed; or (c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:] Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of
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section 148A 30[does not exceed seven days], such remaining period shall be extended to seven days and the period of limitation under this sub- section shall be deemed to be extended accordingly. Explanation.—For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. [(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.] The first proviso to Section 149 of the Act provides that no notice under section 148 shall be issued at any point of time in a case for a relevant assessment year beginning on or before the 1st day of April 2021, if a notice under section 148 could not have been issued at that time on account of being beyond the time limit specified under the provision of clause (b) of sub-section (1) of this Section, as it stood immediately before the commencement of the Finance Act, 2021. The term 'at that time' in the first proviso refers to the date on which notice under section 148 is to be issued by the Assessing Officer. The term 'at that time' has to refer to the term 'at any time' used earlier in the said proviso. The reference to 'at any time' is to the date of the notice to be issued by the Assessing Officer and, therefore, the term 'at that time' would also refer to the said date. On the said date, if a notice could not have been issued under the erstwhile provision of Section 149(1)(b) of the Act, for any assessment year beginning on or before the 1st day of April 2021, the notice cannot be issued even under the new provisions. 25. Section 149(1)(b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, 6th year expired on 31st March 2022. The notice under section 148 of the Act, in the present case, is issued on 27th August
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2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said section. This is squarely covered by paragraphs 36 and 37 of New India Assurance (supra) which has been reproduced above in paragraph 23. 26. The purpose of the first proviso to Section 149 of the Act is consistent with the stated object of the government to make prospective amendments in the Act. Accordingly, the proviso provides that up to Assessment Year 2021-2022 (period before the amendment), the period of limitation as prescribed in the erstwhile provisions of Section 149(1)(b) of the Act would be applicable and only from Assessment Year 2022-2023, the period of ten years as provided in Section 149(1)(b) of the Act, would be applicable. The submission of the Revenue to interpret the first proviso to Section 149 of the Act to be applicable only for Assessment Years 2013-2014 and 2014-2015, i.e., for assessment years where the period of limitation had already expired on 1st April 2021 is not sustainable. The interpretation canvassed by the Revenue is clearly contrary to the plain language of the proviso. When the language in the statute is clear, it has to be so interpreted and there is no scope for interpreting the provision on any other basis. The taxing statue should be strictly construed. [Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2017] 81 taxmann.com 111/247 Taxman 361/394 ITR 449 (SC). 27. The interpretation as canvassed by the Revenue would render the first proviso to Section 149 of the Act redundant and otiose. The time limit to issue notice under section 148 of the Act had already expired on 1st April 2021 for Assessment Year 2013-2014 and 2014-2015, when Section 149 of the Act was amended. Therefore, reopening for Assessment Years 2013-2014 and 2014- 2015 had already been barred by limitation on 1st April 2021. Accordingly, the extended period of ten years as provided in Section 149(1)(b) of the Act would not have been applicable to Assessment Years 2013-2014 and 2014- 2015, de hors the proviso. It is a settled principle of law that when limitation has already expired, it cannot be revived by way of a subsequent amendment and, hence, for Assessment Years 2013-2014 and 2014-2015 proviso to Section 149 of the Act was not required. Hence, to give meaning to the proviso it has to be interpreted to be applicable for Assessment Years upto 2021-2022. In CIT v. Onkarmal Meghraj (H.U.F.) [1974] 93 ITR 233 (SC), the Hon'ble Apex Court was dealing with the question whether a proviso could be applied without reference to any period of limitation. It held that "it is a well-settled principle that no action can be commenced where the period within which it can be commenced has expired. It is unnecessary to cite authorities in support of this position. Does the fact that the second proviso says that there is no period of limitation make a difference?"
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The interpretation canvassed by the Revenue would render the following parts of the proviso redundant - ( 'at any time' in the first line of the proviso. i ) ( 'beginning on or before 1st day of April, 2021,' in the second line of i the proviso. i ) ( 'at that time' in the fourth line of the proviso. i i i ) If we have to give effect to the interpretation suggested by the Revenue, then the proviso would have read as under : "Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or Section 153A or Section 153C could not have been issued at that time [on 1st day of April, 2021] on account of being beyond the time limit specified under the provisions of clause (b) of sub- section (1) of this Section or Section 153A or Section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021; OR Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or Section 153A or Section 153C could not have been issued at that time [on 1st day of April, 2021] on account of being beyond the time limit specified under the provisions of clause (b) of sub- section (1) of this Section or Section 153A or Section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021". 28. Section has to be interpreted so as to give meaning to all the words/phrases used in the Section and it should not be interpreted in such a way so as to render any part or phrase in the Section otiose. As stated aforesaid, if the interpretation canvassed by the Revenue is to be accepted then, not only various parts of the Section would be rendered otiose, one would have to also substitute one phrase with another phrase in the said
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Section, which is clearly not permissible in law. Reliance in this regard is placed on the decision of the Hon'ble Apex Court in the case of CIT v. Sham L. Chellaram [2015] 54 taxmann.com 348/373 ITR 292 (Bom.). 29. It was submitted on behalf of Revenue that the period of limitation for the purposes of Section 149 of the Act has to be seen with respect to the original notice under section 148 of the Act, which was issued to petitioner on 8th April 2021 and as the said notice was issued within the period of six years from the end of the relevant assessment year, which was expiring on 31st March 2022, the reassessment proceedings are within the period of limitation prescribed in Section 149 of the Act. It is not acceptable. Section 149 of the Act sets out, inter alia, the time limit for issuing notice under section 148 of the Act. Apart from the period of limitation set out in the said Section, the first proviso lays down a further restriction on the issue of a notice under section 148 of the Act. The period of limitation as well as the said further restriction is framed/provided in respect of a notice under 148 of the Act, and not for a notice under section 148A of the Act. The notice dated 8th April 2021, which though originally issued as a notice under section 148 of the Act, (under the provisions of the Act prior to the amendments made by the Finance Act, 2021), has now been treated as a notice issued under section 148A(b) of the Act in accordance with the decision of the Hon'ble Apex Court in Ashish Agarwal (supra). Once the notice dated 8th April 2021 has been treated as having been issued under section 148A(b) of the Act, the said notice is no longer relevant for the purpose of determining the period of limitation prescribed under section 149 or the restriction as per the first proviso below Section 149 of the Act. Therefore, for considering the restriction on issue of a notice under section 148 of the Act prescribed in the first proviso to Section 149 of the Act, the fresh/presently impugned notice dated 27th August 2022 issued under section 148 of the Act is required to be considered. The said notice is admittedly beyond the erstwhile period of limitation of six years prescribed by the Act prior to its amendment by the Finance Act, 2021. For the Assessment Year 2015-2016, the erstwhile time limit of six years expired on 31st March 2022 and, the impugned notice under section 148 of the Act has been issued on 27th August 2022 and, therefore, the impugned notice dated 27th August 2022 is barred by the restriction of the first proviso to Section 149 of the Act. 30. With respect to applicability of the fifth proviso and the sixth proviso to Section 149(1)(b) of the Act for extension of limitation for issuing the notice under section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed in Section 149(1) of the Act, i.e., three years or ten years, as the case may be. Fifth proviso or sixth
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proviso extend limitation for issuing notice under section 149 of the Act, however, the first proviso is an exception to the period of limitation and provides for a restriction on the notices under section 148 being issued for Assessment Years upto 2021-22 beyond a certain date. Therefore, the way the Section would operate, is first to decide whether a notice issued under section 148 of the Act is within the period of limitation in terms of Section 149(1)(a) or (b) of the Act. To decide whether the notice is within the period of limitation under section 149(1)(a) or (b) of the Act, the extension of time as per the fifth and/or sixth proviso would be considered. Once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said time limit is within the restriction provided in the first proviso or not. If the notice is beyond the restriction period, the notice is invalid. The fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per the first proviso. Hence, if a notice is not within the time prescribed under the first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth proviso and sixth proviso. In Godrej Industries Ltd. (supra) paragraph 15 reads as under : 15. Based on petitioner's facts, the show cause notice under section 148A(b) of the Act was issued on 24th May 2022 asking petitioner to furnish a reply by 8th June 2022. Petitioner filed a detailed reply in response to the show cause notice on 8th June 2022 and, therefore, only the period from 24th May 2022 to 8th June 2022 could be excluded by virtue of the first limb of the fifth proviso to Section 149 of the Act. Subsequently, petitioner received another letter dated 28th June 2022 which annexed certain details and provided further time for making detailed submissions upto 8th July 2022. Petitioner replied to the letter and made detailed submissions on 2nd July 2022. Therefore, even assuming this period is to be excluded, the period which could be excluded is only from 24th May 2022 to 8th June 2022. Even after considering the letter dated 28th June 2022 and the reply dated 2nd July 2022, at the highest a further period from 28th June 2022 to 8th July 2022 could be excluded but the period of time from 8th June 2022 to 28th June 2022 cannot be excluded as per the fifth proviso. This is because petitioner on 8th June 2022 did not request for any further time and furnished its response to the show cause notice under section 148A(b) of the Act. It is the Assessing Officer who has suo moto issued another letter on 28th June 2022 asking petitioner to furnish further details by 8th July 2022. Therefore, even assuming a period of 27 days (i.e., 16 days from 24th May to 8th June and 11 days from 28th June to 8th July) are excluded from the date of the impugned notice under section 148 of the Act issued on 31st July 2022, the impugned notice would yet be barred by limitation and
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could not have been issued by virtue of the first proviso to Section 149 of the Act. Even if the fifth and sixth provisos are held to be applicable, the impugned notice would still be beyond the period of limitation. The fifth proviso extends limitation with respect to the time or extended time allowed to an assessee as per the show cause notice issued under section 148A(b) of the Act or the period, during which the proceeding under section 148A of the Act are stayed by an order of injunction by any Court. Hence, in the present case, in view of the fifth proviso, the period to be excluded would be counted from 25th May 2022, i.e., the date on which the show cause notice was issued under section 148A(b) of the Act by respondent no. 1 subsequent to the decision of the Hon'ble Apex Court in the case of Ashish Agarwal (supra) and upto 10th June 2022, which is a period of 16 days. Further, the time period from 29th June 2022 upto 4th July 2022 cannot be excluded as the same was not based on any extension sought by petitioner, but at the behest of respondent no. 1. Even if the same was to be excluded, still it will mean further exclusion of 5 days. Considering the said excluded period as well, the impugned notice dated 27th August 2022 is still beyond limitation. The fact that the original notice dated 8th April, 2021 issued under section 148 of the Act, was stayed by this Court on 3rd August 2021, and its stay came to an end on 29th March 2022 on account of the decision of this Court, will not be relevant for providing extension as per the fifth proviso. The fifth proviso provides for extension for the period during which the proceeding under section 148A of the Act is stayed. The original stay granted by this Court was not with respect to the proceeding under section 148A of the Act, but with respect to the proceeding initiated as per the erstwhile provision of Section 148 of the Act and, hence, such stay would not extend the period of limitation as per the fifth proviso to Section 149 of the Act. The question of applicability of the sixth proviso does not arise on the facts of the present case. We find support for this in Godrej Industries Ltd. (supra). In view of the aforesaid, the impugned notice dated 27th August 2022 is clearly barred by the law of limitation.
The Hon'ble High Court has held that once the original notice (dated 30.06.2021 in assessee's case) has been treated as having been issued under section 148A(b) of the Act, the said notice is no longer relevant for the purpose of determining the period of limitation prescribed under section 149 or the restriction
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as per the first proviso below Section 149 of the Act and that the impugned notice (dated 22.07.2022 in assessee's case) issued under section 148 of the Act is required to be considered. When we apply the said ratio to the present case we notice that the time limit of six years for issue of notice under section 148 for the Assessment Year 2015-2016, expired on 31.03.2022 and that the impugned notice under section 148 of the Act has been issued beyond the time limit i.e. on 22.07.2022.
Further, it is relevant to note that the Central Board of Direct Taxes vide Instruction No.1/2022 dated 11.05.2022 issued instructions on the implementation of the judgement of the Hon'ble Supreme Court wherein it is mentioned that for A.Y. 2013-14, A.Y. 14-15 and A.Y. 2015-16, fresh notice under section-148 of the act can be issued with previous approval of specified authority only in those cases where the escapement is equal to or more than Rs. 50,00,000/- i.e.only if the case falls under section 149(1)(b) as amended by Finance Act 2021. This would in effect mean that for A.Y.13-14. A.Y.14-15 and A.Y.15-16, if the income escaping assessment is less than Rs.50,00,000/- then those cases will be time barred by the limitation provided as per section 149 of the Act and will not be re-opened/re- assessed under section 148 of the Act. In assessee's case the income escaping assessment is Rs.25,00,000 and therefore as per the above Instructions issued by the CBDT, the notice issued under section 148 is time barred since the income escaping assessment is less than Rs.50,00,000 and does not fall within the provisions of section 149(1)(b). Therefore on that count also in our considered view, the notice under section 148 dated 22.07.2022 is barred by limitation.
In view of these discussions and respectfully following the above decision of the Hon'ble High Court we hold that the impugned notice under section 148 of the
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Act dated 22.07.2022 is barred by limitation under the restriction of the first proviso to Section 149 of the Act and the assessment done based on the said notice is liable to quashed.
Since we have held the order of the AO as invalid on the above premise, the other legal contention with regard to the jurisdiction of the AO and the contentions on merits have become academic.
In the result, the appeal is allowed.
Order pronounced in the open court on 15-07-2024. Sd/- Sd/- (RAJ KUMAR CHAUHAN) (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, (Dy./Asstt. Registrar) ITAT, Mumbai
