2025 (1) TMI 364 - AT - Income Tax

Validity of reopening of assessment - notices issued under the old section 148 - as argued notice u/s 148 was issued on 30.06.2021 when this section was no more applicable, because w.e.f. 1st April, 2021, a new scheme of reassessment was introduced in the shape of section 148(A) - HELD THAT - 1st Appellate Authority ought to have recorded a categorical finding on the merits of assessment orders impugned before it i.e. sustainability assessment orders dated 31.03.2022 passed vide notice issued on 30.06.2021 under section 148. CIT(Appeals) in a deeming manner assumed that subsequent proceeding taken by AO is a legal one, therefore, he can simply observe that these assessment orders are non-est and appeals become infructuous. It is pertinent to note that once reassessment order is passed by theAO (in the present appeal, such orders were passed on a notice issued under section 148, i.e. old provisions), then, whether an AO himself can suo motu treat those orders as non-est and start fresh re-assessment proceeding is a debatable point. It cannot be considered by the CIT(Appeals) in the manner as is done in the impugned order. The legal status of both the re-assessment orders are to be determined independently without getting influenced by the action of the AO initiated under section 148(a). Suo motu it cannot be construed by AO that earlier assessments passed on 31.03.2022 on a notice issued under section 148 would automatically obliterate or extinguish by the guidelines issued by the Hon ble Supreme Court in the case of Ashish Agarwa 2022 (5) TMI 240 - SUPREME COURT The Hon ble Delhi High Court 2024 (4) TMI 96 - DELHI HIGH COURT has held that those orders would remain unaffected and their status is to be decided on the basis of their own merits. It cannot be a case that they would automatically extinguish and AO will be enable to pass the fresh assessment u/s 148(a) of the Income Tax Act. Therefore, ideally ld. CIT(Appeals) should have not assumed, as if subsequent proceeding initiated by the ld. Assessing Officer under section 148(a) and assessment orders passed thereon are valid and, therefore, earlier assessment orders deserve to be just ignored. This understanding of the ld. CIT(Appeals) is not in accordance with law. Old assessments have been passed on the strength of a notice issued under section 148, which was not in existence on the day of its issuance, which was not inexistence on the day when notice was issued on 30.06.2021. Therefore, on this very foundation, no assessment orders could be passed. These assessment orders ought to have been quashed by the ld. CIT(Appeals). The assessment orders passed u/s 143(3) read with section 147 are invalid assessments - Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the delay of 14 days in filing the appeals by the assessee should be condoned.
• Whether the assessment orders passed on 31.03.2022 under section 143(3) read with section 147, based on notices issued under the old section 148, are valid.
• Whether the subsequent assessment orders passed on 16.11.2023 under the new provisions of section 148A are legally sustainable.
• Whether the judgment of the Supreme Court in the case of Union of India vs Ashish Agarwal applies to the present case, particularly regarding the validity of reassessment notices and orders.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay

• Relevant Legal Framework and Precedents: The Tribunal considered sub-section 5 of Section 253 of the Income Tax Act, which allows for the condonation of delay if sufficient cause is shown. The court referenced the liberal interpretation of "sufficient cause" as established in the case of Collector Land Acquisition Vs. Mst. Katiji & Others.
• Court's Interpretation and Reasoning: The Tribunal emphasized that the judiciary should prioritize substantial justice over technicalities and that there is no presumption of deliberate delay.
• Key Evidence and Findings: The assessee claimed the delay was due to a misunderstanding of legal provisions and subsequent advice from senior counsel.
• Application of Law to Facts: The Tribunal found the reasons for the delay to be bona fide and not deliberate.
• Treatment of Competing Arguments: The Revenue argued against condonation, claiming no prejudice to the assessee. The Tribunal disagreed, finding potential prejudice due to the non-est nature of the assessment orders.
• Conclusions: The Tribunal condoned the 14-day delay, allowing the appeals to be heard on their merits.

Issue 2: Validity of Assessment Orders Dated 31.03.2022

• Relevant Legal Framework and Precedents: The Tribunal examined the applicability of the old section 148 and the new section 148A, referencing the Supreme Court's judgment in Union of India vs Ashish Agarwal.
• Court's Interpretation and Reasoning: The Tribunal noted that the CIT(Appeals) had deemed the orders non-est due to the issuance of new assessment orders under section 148A.
• Key Evidence and Findings: The original notices under section 148 were issued after the introduction of section 148A, raising questions about their validity.
• Application of Law to Facts: The Tribunal found that the original orders were based on provisions no longer applicable at the time of issuance.
• Treatment of Competing Arguments: The assessee argued for quashing the orders due to procedural invalidity, while the Revenue maintained the orders were redundant due to subsequent proceedings.
• Conclusions: The Tribunal quashed the assessment orders dated 31.03.2022 as invalid.

Issue 3: Applicability of Ashish Agarwal Judgment

• Relevant Legal Framework and Precedents: The Tribunal considered the Supreme Court's directions in Ashish Agarwal and subsequent interpretations by various High Courts, including Delhi High Court's decision in Anindita Sengupta vs ACIT.
• Court's Interpretation and Reasoning: The Tribunal found that the Ashish Agarwal judgment did not apply to cases where assessments had already been completed under the old provisions.
• Key Evidence and Findings: The Tribunal referenced the Delhi High Court's interpretation that completed assessments should not be reopened based on Ashish Agarwal.
• Application of Law to Facts: The Tribunal concluded that the old assessments were not automatically nullified by the Ashish Agarwal judgment.
• Treatment of Competing Arguments: The Revenue argued for the applicability of Ashish Agarwal, while the assessee cited High Court decisions to the contrary.
• Conclusions: The Tribunal held that the Ashish Agarwal judgment did not mandate reopening completed assessments.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The Hon'ble High Court has propounded that direction in the case of Ashish Agarwal under Article 142 would not be applicable in those cases where assessments have been passed on the basis of a notice issued under section148 of the Income Tax Act."
• Core Principles Established: The Tribunal reaffirmed the liberal interpretation of "sufficient cause" for condonation of delay and clarified the non-applicability of Ashish Agarwal to completed assessments.
• Final Determinations on Each Issue: The Tribunal condoned the delay, quashed the assessment orders dated 31.03.2022, and held that the Ashish Agarwal judgment did not apply to the present case.