2025 (1) TMI 326 - AT - Income Tax

Validity of reassessment proceedings - non-compliance of taking prior approval by the specified authority required u/s. 151 - Scope of by whom in procedural compliance for issuance of notice u/s.148 - amended provisions under the Act read with TOLA - notice u/s.148 has been issued beyond three years - HELD THAT - In the present case, the relevant Assessment Year is 2017-18 and the time limit of three years lapsed on 31.03.2021 which falls between 20.03.2020 and 31.03.2021 during which provisions of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) would apply. Accordingly, the amended provisions under the Act read with TOLA extended the time limit for granting of approval till 30.06.2021 by the specified authority. Thus, in the present case, since the notice u/s. 148 and order u/s. 148A(b) have been issued beyond the period of three years from the end of the relevant Assessment Year, case of the assessee falls within the provisions of section 151(ii) of the amended law whereby the specified authority for grant of approval is specified as Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Contrary to this requirement, the approval obtained is by Principal Commissioner of Income Tax-17, Mumbai. Accordingly, since a proper sanction by the specified authority had not been obtained for issue of notice u/s.148 under the applicable provisions of law, said notice is invalid and bad in law. Referring to judicial precedent in the case of Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT and Rajiv Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) we hold that sanction by specified authority has not been obtained by the Assessing Officer in accordance with the provisions contained in section 151 of the Act under the new regime, since notice u/s.148 has been issued beyond three years from the end of the relevant Assessment Year. Accordingly, the said notice issued is invalid and thus quashed. Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

Whether the notice issued under Section 148 of the Income-tax Act, 1961, was valid, considering the procedural requirements for obtaining prior approval from the specified authority under the amended Section 151.
Whether the jurisdiction to issue the notice under Section 148 lay with the Jurisdictional Assessing Officer (JAO) or the Faceless Assessing Officer (FAO) under the faceless regime.
Whether the reassessment proceedings initiated and the subsequent order passed were valid, given the alleged procedural lapses in obtaining the necessary approvals.
Whether the disallowance of purchases by the CIT(A) was justified, considering the allegations of bogus purchases and cash transactions in the grey market.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Notice under Section 148

Relevant Legal Framework and Precedents: The case refers to the amended provisions of Section 148 and Section 151 of the Income-tax Act, as well as the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The Supreme Court's decisions in Ashish Agrawal and Rajeev Bansal provide guidance on the procedural requirements for issuing notices and obtaining approvals.
Court's Interpretation and Reasoning: The court emphasized the procedural necessity of obtaining prior approval from the specified authority under Section 151 of the new regime. It highlighted that the Principal Chief Commissioner or equivalent authority's approval was required when more than three years had elapsed since the end of the relevant assessment year.
Key Evidence and Findings: The notice under Section 148 was issued beyond the three-year period, and the approval was obtained from the Principal Commissioner instead of the higher authority required by law.
Application of Law to Facts: Based on the facts, the court found that the notice was issued without the proper approval, rendering it invalid and bad in law.
Treatment of Competing Arguments: The court rejected the Revenue's argument that the approval obtained was sufficient under the amended provisions, emphasizing the hierarchical requirement for approval.
Conclusions: The notice under Section 148 was quashed due to the lack of proper sanction from the specified authority, as required by the amended legal framework.

Issue 2: Jurisdiction to Issue Notice

Relevant Legal Framework and Precedents: The faceless regime under Section 144B and the requirements for issuing notices under the amended Section 148 were considered.
Court's Interpretation and Reasoning: The court noted the procedural error in issuing the notice by the Jurisdictional Assessing Officer instead of the Faceless Assessing Officer, as mandated under the faceless regime.
Key Evidence and Findings: The notice was manually signed by the Jurisdictional Assessing Officer, contrary to the faceless regime's requirements.
Application of Law to Facts: The court found that the notice was issued by an authority lacking jurisdiction, further invalidating the notice.
Treatment of Competing Arguments: The court did not find merit in the Revenue's justification for the jurisdictional error.
Conclusions: The notice was invalid due to jurisdictional errors, reinforcing the decision to quash the notice.

Issue 3: Validity of Reassessment Proceedings and Order

Relevant Legal Framework and Precedents: The procedural compliance requirements under Sections 148A and 151 were central to this issue.
Court's Interpretation and Reasoning: The court reiterated the necessity of obtaining valid approval before proceeding with reassessment, which was not adhered to in this case.
Key Evidence and Findings: The reassessment order was based on an invalid notice, lacking the required approval.
Application of Law to Facts: The court applied the legal framework to conclude that the reassessment proceedings and order were void ab initio.
Treatment of Competing Arguments: The court dismissed the Revenue's arguments regarding the merits of the reassessment, focusing on the procedural lapses.
Conclusions: The reassessment proceedings and order were quashed due to procedural non-compliance.

Issue 4: Disallowance of Purchases

Relevant Legal Framework and Precedents: The provisions of Section 40A(3) concerning cash transactions and the treatment of bogus purchases were relevant.
Court's Interpretation and Reasoning: The court did not delve into the merits of the disallowance due to the procedural quashing of the reassessment order.
Key Evidence and Findings: The CIT(A) had limited the disallowance to 1%, but the court did not address this due to the procedural focus.
Application of Law to Facts: The procedural invalidity of the notice precluded the need to address this issue substantively.
Treatment of Competing Arguments: The court did not engage with arguments on the merits of the disallowance, given the procedural outcome.
Conclusions: The issue became academic due to the quashing of the reassessment proceedings.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime."
Core Principles Established: The necessity of obtaining proper sanction from the specified authority under the amended Section 151 is crucial for the validity of notices under Section 148.
Final Determinations on Each Issue: The notice under Section 148 was quashed due to procedural non-compliance, rendering the reassessment proceedings and subsequent order invalid. The appeal of the Revenue was dismissed, and the cross-objection of the assessee was allowed.

← Previous Next →