2024 (12) TMI 1560 - AT - Income Tax

Reopening of assessment u/s 147 as barred by limitation - Applicability of new and amended provisions of sec 148A - HELD THAT - As per the judgment of Vs. Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) it was held that if any notice u/s. 148 of the Act under the unamended law has been issued after 01.04.2021 then it will be deemed to have been issued u/s. 148A. In the instant case even though the AO was having the period of four years from the end of relevant assessment year for reopening the assessment proceedings but since the notice u/s 148 of the Act was issued after 01.04.2021 the new and amended provisions effective from 01.04.2021 were applicable and in a case where the income escaped is less than Rs. 50.00 lakhs the time limit for issuing notice u/s. 148 of the Act was three years. A perusal of section 148A(d) provides that once the assessee has replied to the letter issued u/s. 148A(b) of the Act then the ld. AO has to decide on the basis of material available on record including reply of the assessee whether or not it is a fit case to issue a notice u/s. 148 by passing an order with the prior approval of specified authority within one month from the end of the month in which the reply referred to in clause (c) of section 148A of the Act is received by him or whether no such reply is furnished within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires. So considering the date of reply filed by the assessee on 15.06.2022 one month from the end of the month June 2022 is 31.07.2022 and this is the last date before which the AO could issue notice u/s.148. Perusal of record indicates that the AO passed the order u/s. 148A(d) of the Act on 29.07.2022 and has also issued notice u/s. 148 on 29.07.2022 i.e. well within the prescribed time limit. These facts indicate that a valid notice u/s. 148 of the Act has been issued for carrying out the reassessment proceedings Thus a valid notice u/s. 148 of the Act has been issued for carrying out the reassessment proceedings. To conclude find that as per the ratio laid down in the case of Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) AO has issued a valid notice u/s. 148 of the Act and therefore the legal ground raised by the assessee in challenging the validity of Notice issued u/s. 148 of the Act is hereby dismissed. Addition u/s 69A - assessee filed a declaration under the Income Declaration Scheme 2017 - mistake committed by the assessee was on account of payment of tax partly in the old PAN Number and partly in the New PAN Number - The Income-tax department did not accept the assessee s application under IDS for shortfall in payment. The assessee has placed copies of both the PAN Numbers and prima-facie it remains an undisputed fact that total tax liability of Rs. 5, 22, 629/- as mentioned in the IDS declaration has been deposited and the assessee is eligible to get the benefit of the IDS. However since the ld. AO had not examined this fact of tax payment under the old PAN number restore the issue to the AO for necessary verification and if it is found in order that the assessee has duly deposited total tax liability for becoming eligible to avail the benefit of IDS then the assessee be given necessary relief and authorities concerned shall issue the certificate to assessee under the IDS. Ground raised by the assessee are allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the reassessment proceedings initiated under section 148 of the Income Tax Act, 1961 (the Act) for the Assessment Year 2017-18 were valid and within the prescribed limitation period, particularly in light of the amendments effective from 01.04.2021 and the judgments of the Hon'ble Supreme Court in Union of India v. Ashish Agrawal and Union of India v. Rajeev Bansal.

(b) Whether the notice issued under section 148 of the Act after the amendments and the application of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) complied with the procedural requirements, including the provisions of section 148A relating to show cause notices and the time limits for issuing reassessment notices.

(c) Whether the addition of Rs. 11,61,395/- made under section 69A of the Act by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) was justified, particularly considering the provisions of section 197(b) of the Income Declaration Scheme, 2016 (IDS) and the facts regarding payment of tax under two PAN numbers by the assessee.

(d) Whether the assessee was granted adequate opportunity of being heard during the appellate proceedings under section 250 of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Validity and Limitation of Reassessment Proceedings under Section 148

Relevant legal framework and precedents: The reassessment provisions under sections 148 to 151 of the Act prescribe the conditions and limitation periods for reopening assessments. The amendments effective from 01.04.2021 introduced new procedural safeguards, including the requirement of a show cause notice under section 148A(b) and a decision under section 148A(d) before issuing a reassessment notice under section 148. The TOLA extended the limitation period for issuing reassessment notices falling between 20.03.2020 and 31.03.2021 to 30.06.2021. The Supreme Court judgments in Union of India v. Ashish Agrawal and Union of India v. Rajeev Bansal clarified the interplay between the old and new regimes, the effect of TOLA, and the computation of limitation periods.

Court's interpretation and reasoning: The Tribunal analyzed the timeline of notices and replies: the original notice under section 148 was issued on 30.06.2021 under the unamended law, the issue letter (show cause notice under section 148A(b)) was issued on 28.05.2022, and the assessee replied on 15.06.2022. Subsequently, the AO passed the order under section 148A(d) and issued the reassessment notice under section 148 on 29.07.2022.

The Tribunal carefully examined the Supreme Court's ruling in Rajeev Bansal, which held that reassessment notices issued under the old regime between 01.04.2021 and 30.06.2021 are to be treated as show cause notices under the new regime, and the limitation period is to be computed by excluding the period during which the notices were stayed (from issuance till supply of relevant information/material) plus the time allowed for the assessee's reply. The Supreme Court further held that the AO has the surviving or balance time (calculated as the number of days between the date of issuance of the deemed notice and 30.06.2021) to complete reassessment proceedings under the new regime.

In the instant case, since the deemed show cause notice was issued on 30.06.2021 itself, the surviving time calculated from that date to 30.06.2021 was zero. However, the Supreme Court's illustration in Rajeev Bansal was distinguished by the Tribunal, noting that the assessee's reply was filed on 15.06.2022 and the AO issued the reassessment notice within the prescribed one-month period from the end of June 2022, as mandated by section 148A(d). Therefore, the reassessment notice dated 29.07.2022 was held to be valid and within limitation.

Key evidence and findings: The timeline of notices and replies, the application of TOLA, and relevant Supreme Court directions were the primary evidentiary and legal materials considered. The Tribunal also noted the procedural compliance by the AO in issuing the show cause notice, considering the stay period, and issuing the reassessment notice within the prescribed time.

Application of law to facts: The Tribunal applied the Supreme Court's jurisprudence to the facts, holding that the reassessment notice was validly issued under the amended provisions and within the extended limitation period provided by TOLA and interpreted in Rajeev Bansal.

Treatment of competing arguments: The assessee's argument that no surviving time was left for the AO to issue the reassessment notice was rejected as a misinterpretation of the Supreme Court's ruling. The Tribunal emphasized that the example in Rajeev Bansal was illustrative and not a binding formula applicable without considering the entire procedural context, including the assessee's reply and the AO's subsequent actions under section 148A(d).

Conclusions: The reassessment proceedings initiated under section 148 of the Act were held valid and not barred by limitation. The legal ground challenging the validity of the notice was dismissed.

(b) Addition under Section 69A and Application of Section 197(b) of IDS

Relevant legal framework and precedents: Section 69A of the Act deals with unexplained investments, allowing the AO to make additions if the assessee fails to satisfactorily explain the source of investments. Section 197(b) of the Income Declaration Scheme, 2016 provides that if tax, surcharge, and penalty are not paid within the specified time, the undisclosed income shall be chargeable to tax in the previous year in which the declaration is made.

Court's interpretation and reasoning: The AO made an addition of Rs. 11,61,395/- under section 69A on the ground that the assessee had not fully paid the tax liability of Rs. 5,22,630/- declared under IDS. The AO alleged that only Rs. 3,91,973/- was paid, with the balance unpaid.

The assessee contended that the full tax amount was paid, but inadvertently on two different PAN numbers - the old PAN (used in the IDS declaration) and the new PAN (regularly used for filing returns). The Tribunal noted that the assessee had deposited the entire tax liability, albeit split between two PANs, and that the AO had not properly examined this fact.

The Tribunal reproduced the relevant provision of section 197(b) of IDS, emphasizing that its applicability depends on non-payment of the tax within the specified time. Since the assessee had made full payment, the condition for invoking section 197(b) was not met.

Key evidence and findings: The payment challans evidencing tax payments under both PAN numbers were crucial. The Tribunal found it undisputed that the total tax liability was paid and that the AO had overlooked the payment under the old PAN.

Application of law to facts: The Tribunal applied the legal provisions to the factual matrix and concluded that the addition under section 69A was not warranted because the tax liability under IDS was fully discharged.

Treatment of competing arguments: The AO's mechanical addition without appreciating the payment details and the provisions of section 197(b) was rejected. The Tribunal restored the issue to the AO for verification and directed relief to the assessee if full payment was confirmed.

Conclusions: The addition under section 69A was set aside for statistical purposes, pending verification of tax payments under both PANs. The assessee was entitled to benefit under IDS if full payment was established.

(c) Opportunity of Being Heard in Appellate Proceedings

Relevant legal framework: Principles of natural justice require that the assessee be given adequate opportunity of hearing before passing an order under section 250 of the Act.

Court's interpretation and reasoning: The assessee contended that the Commissioner of Income Tax (Appeals) passed an ex-parte order without granting sufficient opportunity to be heard. However, the Tribunal did not find any detailed discussion or evidence supporting this claim in the record.

Key evidence and findings: There was no indication in the record that the assessee was denied opportunity to present arguments before the CIT(A).

Application of law to facts: In absence of any proof of denial of hearing, the Tribunal did not uphold this ground.

Conclusions: The ground challenging the ex-parte nature of the appellate order was not adjudicated in detail and was effectively dismissed.

3. SIGNIFICANT HOLDINGS

"The reassessment notice issued under section 148 of the Income Tax Act, 1961, after 01.04.2021, even if originally issued under the old regime between 01.04.2021 and 30.06.2021, shall be deemed to be a show cause notice under section 148A(b) of the amended law. The limitation period for issuance of reassessment notices post such deemed show cause notices shall be computed by excluding the period during which the notices were stayed (from issuance till supply of relevant information/material) and the time allowed for the assessee to respond, as elucidated in Union of India v. Rajeev Bansal."

"The Assessing Officer is required to issue the reassessment notice under section 148 within the surviving time limit available after accounting for the time exclusions mandated by the Supreme Court's directions and TOLA. Failure to do so renders the notice time-barred. However, where the notice is issued within the prescribed time after the assessee's response, the notice is valid."

"The addition under section 69A of the Act cannot be sustained where the assessee has fully discharged the tax liability declared under the Income Declaration Scheme, 2016, even if the payment was inadvertently made under two different PAN numbers. The provisions of section 197(b) of the IDS are attracted only where tax, surcharge, and penalty are not paid within the specified time."

"The Assessing Officer's failure to consider the full tax payment made by the assessee under two PANs and making mechanical additions without proper appreciation of facts is erroneous, and the issue needs to be remanded for verification and appropriate relief to the assessee."

"The procedural safeguards under section 148A, including issuance of show cause notices and consideration of the assessee's reply before issuance of reassessment notices, must be strictly adhered to in reassessment proceedings initiated after 01.04.2021."

"The legal fiction created by the Supreme Court in Ashish Agrawal and Rajeev Bansal judgments must be given full effect, ensuring that both the Revenue and the assessee obtain the benefit of all consequences flowing from such fiction, including the computation of limitation periods and procedural compliance."