2022 (9) TMI 1384 - HC - Income Tax

Reopening of assessment u/s 147 - date of the issuance of the Notices - validity of the Notices issued u/s 148 as it stood prior to its amendment on 01st April, 2021, by the Finance Act, 2021 - Whether the JAO s act of generating Notice in the ITBA portal on 31st March, 2021, without despatching the Notice meets the test of the expression shall be issued in Section 149 and saves the Notices from being time barred? - HELD THAT - There is no dispute in the present cases and it has been conceded during rejoinder arguments that the Notices have been despatched on or after 1st April, 2021, unlike in the case of Rajesh Sunderdas Vaswani 2016 (6) TMI 701 - GUJARAT HIGH COURT where the date of despatch was seriously disputed. This Court has only been called upon to determine the legal effect of the despatch of 1st April 2021 and thereafter, on the validity of the notices dated 31st March, 2021. It would be useful to note that, the impugned Notice was classified in category C . However, during the pendency of the proceedings, the JAO on 30th July 2022 determined that the said Notice though generated and signed on 31st March 2021 was issued through e-mail by the ITBA servers on 6th April, 2021. It has been brought to this Court s attention that the JAO has now self-determined that the same shall be governed by the judgment of the Supreme Court in Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT and JAO has accordingly proceeded to treat the Notice dated 31st March 2021 as notice under Section 148A(b). The aforesaid acts of the JAO belie the submissions of the counsel for the Department that the generation of the Notice on the ITBA screen constitutes issuance. It further substantiates the contention of the petitioners that the date and time of issue of the emails by the ITBA servers are readily available with the Department and therefore there is no disputed issue of facts. We therefore answer question no. (I) in negative against the Department and hold that the impugned Notices dated 31st March, 2021, which were despatched on 1st April, 2021, or thereafter, would not meet the test of issued under Section 149 of the Act of 1961 and would be time barred, unless saved by the judgment of the Supreme Court in Ashish Aggarwal (Supra). Determination of the time of despatch of the impugned Notices issued through e-mail - Whether despatch as per Section 13 of the Act of 2000 is sine qua non for issuance of Notice through electronic mail for the purpose of Section 149 of the Act of 1961? - It would also be relevant to note that the time taken by the ITBA e-mail software system on 31st March, 2021, to despatch the emails was not due to any software glitch. The time taken by the software system was as per the programming of the system, as admitted in the Compliance Affidavit. The programming to despatch the Notices in a controlled manner and batch mode was a pre-existing fact and to the knowledge of the Department. The time taken in despatch of the e-mail on 31st March, 2021, was therefore as per the controls set in the ITBA system. We are in respectful agreement with the law laid down by the various High Courts in Daujee Abhushan 2022 (3) TMI 784 - ALLAHABAD HIGH COURT , Santosh Krishna HUF 2022 (5) TMI 420 - ALLAHABAD HIGH COURT , Mohan Lal Santwani 2022 (5) TMI 421 - ALLAHABAD HIGH COURT , Advance Infradevelopers (P) Ltd. 2021 (6) TMI 6 - MADRAS HIGH COURT and Yuvraj v. Income Tax Officer 2022 (3) TMI 536 - MADHYA PRADESH HIGH COURT , that for determining when Notices were issued, the date and time of when the ITBA e-mail software system is triggered and the Notices leave the last ITBA server would be considered. We therefore answer question no. (II) in affirmative and hold that despatch as per Section 13 of the Act of 2000, is a sine qua non and happens when the electronic mail message leaves the ITBA s servers. Whether the time taken by the ITBA s e-mail software system on 31st March, 2021, in despatching the e-mails to the assessee is not attributable to the JAOs and the notices will be deemed to have been issued on 31st March, 2021? - We answer question no. (III) against the Department and hold that the time taken by the ITBA s e-mail software system in triggering the e-mail and transmitting the said e-mails from the ITBA servers is attributable to the Department and therefore for the e-mails despatched on 1st April 2021 or thereafter, the Notices are held not to have been issued on 31st March 2021. Department from May, 2022, for Notices issued on or after 1st April 2021, has considered the date and time of despatch of the notices as recorded by the ITBA portal as the date of issuance and disregarded the date of generation of notice i.e. 31.03.2021. For notices despatched on or after 1st April 2021, the Department, following the Supreme Court s order in Ashish Agarwal (Supra) considered the notices as issued under Section 148A of the Act of 1961. This shows that the Department itself acknowledges and admits that the date of generation is distinct from date of issuance and the Department considers the despatch by ITBA Portal as the date of issue for the purpose of Section 149 of the Act of 1961. Authentication of notices and other documents - Whether the Section 148 Notices sent as an attachment through e-mails, from the designated e-mail addresses of the JAOs, which do not bear the respective JAO s digital signature are valid under Section 282A the Act of 1961 read with Rule 127A of the IT Rules? - As per the Compliance Affidavit, the ITBA portal was itself developed for the Department in such a way that it makes the affixation of DSC optional. The notice upon generation may or may not be affixed with DSC, it would, regardless of whether DSC is attached or not, be sent through the ITBA e-mail system once it has been generated. From a combined reading of the relevant provisions, the explanation to the Finance Bill, 2016 and the abovementioned note, it becomes evident that the affixation of DSC in notices issued under Section 148 of the Act of 1961 has not been made mandatory. As long as the requirements of Section 282A of the Act of 1961 and Rule 127A of the IT Rules, are followed the notices would be considered to be authenticated. In the present case, the Notices were sent from the designated e-mail ID of the respective JAOs, fulfilling all requirements of authentication as per the relevant provisions. There was no doubt in the mind of the assessees that the Notices were sent by the Department. Therefore, the Notices falling under category B would not be invalid simply because DSCs were not appended to the Notices. JAO is therefore directed to determine time of despatch as recorded by the ITBA portal for each of these Notices and the date and time of despatch as determined by the JAO will be considered to be the date of issuance. Notice dated 31st March 2021, which was not digitally signed and was received on 16th April 2021, the JAO is directed to determine the date and time of despatch as recorded by ITBA portal and consider the same as the date of issuance. Whether upload of the Section 148 Notice on the My Account of the assessee on the E-filing portal is valid transmission under the Act of 1961? - We hold that, in order for this mode of transmission i.e. uploading of the Notices in the E-filing portal of the assessees, to be considered valid service, the Department should have issued a real time alert as provisioned in the aforementioned Section 144(B)(6)(ii)(a) of the Act of 1961. Since, the prescribed mode of service is not followed it is akin to no due despatch of Notices, therefore it cannot be said that the Notices were validly issued. However, since the assessees in the present case did become aware of the Notices later and the assessment proceedings in their cases are still pending, we are not inclined to quash these Notices.It has come on record that the ITBA records the time and date when the E-filing portal is accessed by the assessee, so the first date on which the Notices were accessed by the assessees is duly available. This date will be considered by the JAOs as the date of issuance of Notices by the JAOs. Illustratively, in W.P the Notice was never served on the assessee, instead the assessee claims that he became aware of the same on 23rd November, 2021 while checking his E-filing portal, the JAO is directed to verify the date on which the Notice was first viewed by the assessee, and consider the same as the date of issuance. Disposal of these Writ Petitions with the following directions Category A The Notices falling under category A , which were digitally signed on or after 1st of April, 2021, are held to bear the date on which the said Notices were digitally signed and not 31st March 2021. The said petitions are disposed of with the direction that the said Notices are to be considered as show-cause-notices under Section 148A (b) of the Act as per the directions of the apex Court in the Ashish Agarwal (Supra) judgment. Category B The Notices falling under category B which were sent through the registered e-mail ID of the respective JAOs, though not digitally signed are held to be valid. The said petitions are disposed of with the direction to the JAOs to verify and determine the date and time of its despatch as recorded in the ITBA portal in accordance with the law laid down in this judgment as the date of issuance. If the date and time of despatch recorded is on or after 1st of April, 2021, the Notices are to be considered as show-cause-notices under Section 148A (b) as per the directions of the apex Court in the Ashish Agarwal (Supra) judgment. Category C The petitions challenging Notices falling under category C which were digitally signed on 31st of March 2021, are disposed of with the direction to the JAOs to verify and determine the date and time of despatch as recorded in the ITBA portal in accordance with the law laid down in this judgment as the date of issuance. If the date and time of despatch recorded is on or after 1st of April, 2021, the Notices are to be considered as show-cause-notices under Section 148A (b) as per the directions of the apex Court in the Ashish Agarwal (Supra) judgment. Category D The petitions challenging Notices falling under category D which were only uploaded in the E-filing portal of the assessees without any real time alert, are disposed of with the direction to the JAOs to determine the date and time when the assessees viewed the Notices in the E-filing portal, as recorded in the ITBA portal and conclude such date as the date of issuance in accordance with the law laid down in this judgment. If such date of issuance is determined to be on or after 1st of April 2021, the Notices will be construed as issued under Section 148A (b) of the Act of 1961 as per the Ashish Agarwal (Supra) judgment. Category E The petitions challenging Notices falling under category E which were manually despatched, are disposed of with the direction to the JAOs to determine in accordance with the law laid down in this judgment, the date and time when the Notices were delivered to the post office for despatch and consider the same as date of issuance. If the date and time of despatch recorded is on or after 1st of April, 2021, the Notices are to be construed as show-cause-notices under Section 148A (b) as per the directions of the apex Court in the Ashish Agarwal (Supra) judgment. Notices sent to unrelated e-mail addresses The petitions challenging Notices which were sent to unrelated e-mail addresses are disposed of with the direction the JAOs to verify the date on which the Notice was first viewed by the assessee on the E-filing portal and consider the same as the date of issuance. If such date of issuance is determined to be on or after 01st April, 2021, the Notices will be construed as issued under Section 148A (b) of the Act of 1961 as per judgment in Ashish Agarwal (Supra). The Notices which in accordance with the law laid down in this judgment has been verified by the JAOs to have been issued on or after 01st April 2021 and until 30th June, 2021 shall be deemed to have been issued under Section 148A of the Act of 1961 as substituted by the Finance Act, 2021 and construed to be show-cause notices in terms of Section 148A(b) as per the judgment of the apex Court in Ashish Agarwal (Supra) and the JAOs shall thereafter follow the procedure set down by the Supreme Court in the said judgment.

Summary

Issues Involved:
1. Validity of Notices issued under Section 148 of the Income Tax Act, 1961, prior to its amendment on 01st April, 2021.
2. Whether the act of generating a Notice on the ITBA portal without despatching it meets the test of "shall be issued" under Section 149 of the Income Tax Act, 1961.
3. Whether "despatch" as per Section 13 of the Information Technology Act, 2000, is a sine qua non for issuance of Notice through electronic mail for the purpose of Section 149 of the Income Tax Act, 1961.
4. Whether the time taken by the ITBA's e-mail software system on 31st March, 2021, in despatching the e-mails to the assessees is not attributable to the JAOs.
5. Validity of Section 148 Notices sent as an attachment through e-mails, which do not bear the respective JAO's digital signature, under Section 282A of the Income Tax Act, 1961, read with Rule 127A of the IT Rules.
6. Whether the upload of the Section 148 Notice on the "My Account" of the assessee on the E-filing portal is valid transmission under the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148 of the Income Tax Act, 1961:
The Court was called upon to decide the validity of Notices issued under Section 148 of the Income Tax Act, 1961, prior to its amendment on 01st April, 2021. The Notices were generated on 31st March, 2021, but despatched on or after 01st April, 2021. The Court held that for a Notice to be considered as "issued" under Section 149, it must be despatched within the time limit prescribed. The Court emphasized that mere generation of a Notice on the ITBA portal does not satisfy the requirement of "issued" without proving that the same has been despatched within the time barring period.

2. Whether the Act of Generating a Notice Meets the Test of "Shall be Issued":
The Court answered this in the negative, stating that the act of generating a Notice on the ITBA portal on 31st March, 2021, without despatching it, does not meet the test of "shall be issued" under Section 149. The Court cited several judgments, including *Delhi Development Authority v. H.C. Khurana* and *R.K. Upadhyaya v. Shanabhai P. Patel*, to support the view that despatch is an essential condition to complete the act of issuance.

3. Whether "Despatch" as per Section 13 of the IT Act, 2000, is Sine Qua Non:
The Court answered this in the affirmative, holding that "despatch" as per Section 13 of the IT Act, 2000, is a sine qua non for issuance of Notice through electronic mail for the purpose of Section 149. The Court referred to the notifications issued by the Principal Director General of Income Tax (Systems) and concluded that the time and place of despatch and receipt of electronic communication shall have the same meaning as provided in Section 13 of the IT Act, 2000.

4. Time Taken by ITBA's E-mail Software System:
The Court answered this in the negative, stating that the time taken by the ITBA's e-mail software system on 31st March, 2021, in despatching the e-mails to the assessees is attributable to the Department. The Court held that the Notices despatched on 1st April, 2021, or thereafter, cannot be deemed to have been issued on 31st March, 2021.

5. Validity of Section 148 Notices Sent as an Attachment through E-mails:
The Court answered this in the affirmative, stating that the Notices sent as an attachment through e-mails, which do not bear the respective JAO's digital signature, are valid under Section 282A of the Income Tax Act, 1961, read with Rule 127A of the IT Rules. The Court held that affixation of DSC is not mandatory for Section 148 notices, as long as the name and office of the designated income-tax authority are printed, stamped, or otherwise written thereon.

6. Upload of Section 148 Notice on the "My Account" of the Assessee:
The Court answered this in the negative, holding that the upload of the Section 148 Notice on the "My Account" of the assessee on the E-filing portal is not valid transmission under the Income Tax Act, 1961. The Court emphasized that for this mode of transmission to be considered valid, the Department should have issued a real-time alert, which was not done in this case.

Conclusion:
The Court concluded that the impugned Notices dated 31st March, 2021, which were despatched on or after 1st April, 2021, would not meet the test of "issued" under Section 149 of the Income Tax Act, 1961, and would be time-barred unless saved by the judgment of the Supreme Court in *Union of India v. Ashish Agarwal*. The Court directed the JAOs to verify and determine the date and time of despatch of the Notices as recorded in the ITBA portal and consider the same as the date of issuance.