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TMI Blog2025 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order dated 30.05.2023 framed under Section 147 of the Act read with Section 144 and 144B of the Act. These abovementioned impugned notices and orders were issued in respect of the assessment year (AY) 2013-14. 2. Mr Sehgal, the learned counsel appearing for the Assessee has confined the challenge to the notices and the orders impugned in this petition on a singular ground - that the order dated 30.07.2022 passed under Section 148A (d) of the Act (hereafter the impugned order) as well as the notice dated 30.07.2022 (hereafter the impugned notice) issued under Section 148 of the Act were beyond the period as stipulated under Section 149 (1) of the Act. 3. Mr Chawla, learned senior counsel appearing for the Revenue stoutly disputed the Assessee's claim that the impugned order and the impugned notice, are barred by limitation. He, however, did not dispute that if the Assessee's contention was accepted and the impugned notice was found to have been issued beyond the period of limitation, further proceedings pursuant to the impugned notice as well as the assessment order dated 30.05.2023, would, as a consequence, be liable to be set aside. 4. In view of the above, the only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance with the said directions, the AO issued another notice dated 30.05.2022 in furtherance of the notice dated 01.06.2021 construing the same as a notice under Section 148A (b) of the Act. The Assessee was called upon to furnish a response to the said notice within a period of two weeks from the said date, that is, on or before 13.06.2022. 11. The petitioner furnished its response to the notice dated 30.05.2022 on 13.06.2022. 12. Thereafter, the AO passed the impugned order dated 30.07.2022 under Section 148A (d) of the Act holding that it was a fit case to re-open the Assessee's assessment for the AY 2013-14. According to the Assessee, the impugned notice was issued beyond the period of limitation as prescribed under Section 149 (1) of the Act as extended by the Supreme Court. 13. Pursuant to the aforesaid notice, the Assessee filed its return of income on 26.08.2022. The said proceedings culminated in the assessment order dated 30.05.2023, whereby the AO held that an entry amounting to Rs. 75 lacs remained unexplained and thus, added the said amount under Section 69 of the Act, to the Assessee's returned income. charged to tax under Section 115BBE of the Act. THE ISSUE 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of the Act as in force prior to 01.04.2021, no notice under Section 148 of the Act could have been issued beyond the period of six years from the end of the relevant assessment year. 18. In view of the above, no notice under Section 148 of the Act could have been issued in this case after 31.03.2020 in respect of AY 2013-14. 19. However, it is the Revenue's case that the impugned notice is within the time as extended by virtue of the TOLA [Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020] and the decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal. The Revenue contends that the impugned notice has been issued within the time as prescribed under Section 149 (1) of the Act computed in accordance with the third and fourth proviso to Section 149 of the Act as was in force at the material time [As in force with effect from 01.04.2021 but prior to 01.04.2023]. The learned counsel for the Revenue contends that the issue is substantially covered by the decision of the Supreme Court in Union of India & Ors. v. Rajeev Bansal 2024 SCC OnLine SC 2693. Whilst the learned counsel for the Revenue contends that it is favour of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by various high courts that it was incumbent upon the AO to follow the procedure as prescribed under Section 148A of the Act after 01.04.2021. The relevant extract of the said decision is set out below: "15. It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act ("the IT Act") by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended Sections 147 to 149 and Section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as: (1) no valid "reason to believe", (2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re provided before notice under Section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per section 148-A(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under section 148-A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. 21. Substituted Section 149 is the provision governing the time-limit for issuance of notice under Section 148 of the IT Act. The substituted Section 149 of the IT Act has reduced the permissible time-limit for issuance of such a notice to three years and only in exceptional cases ten years. It also provides further additional safeguards which were absent under the earlier regime pre-Finance Act, 2021. 22. Thus, the new provisions substit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required. 28.4. The assessing officers shall thereafter pass orders in terms of Section 148-A(d) in respect of each of the assessees concerned; Thereafter after following the procedure as required under Section 148-A may issue notice under Section 148 (as substituted). 28.5. All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the assessees concerned and Revenue under the Finance Act, 2021 and in law shall continue to be available." [emphasis added] 27. The Supreme Court also directed that the aforesaid directions would be applicable PAN India to all notices issued under Section 148 of the Act after 01.04.2021, which were similar to the ones that were impugned before various high courts. 28. It is apparent from the above that while the Supreme Court had dispensed with the inquiry under Section 148A (a) of the Act and had directed that the notices issued under Section 148 of the unamended Act be treated as a notice under Section 148A (b) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not re-opened on the basis of reasons that are unsustainable. The Supreme Court had, thus, enabled the assessee to obtain a copy of the reasons for reopening of the assessments and file objections to the same. The AO was required to consider and decide the same. If the AO accepted the objections, the reassessment proceedings were required to be dropped. 33. The procedure for re-assessment was substantially amended by virtue of the Finance Act, 2021. Section 148A of the Act was introduced, which included the procedure for providing the assessee an opportunity to address any information available with the AO, which was suggestive of the assessee's income escaping assessment for any relevant year. The procedure enabled the AO to take an informed decision whether it was a fit case for issuance of a notice under Section 148 of the Act after considering the material on record including responses furnished by the assessee. 34. It is relevant to refer to the provisions of Section 148, 148A and 149 of the Act as were brought in force with effect from 01.04.2021. The same are set out below: "148. Issue of notice where income has escaped assessment. -Before making the assessment, reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3.-For the purposes of this section, specified authority means the specified authority referred to in section 151." "1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee. Explanation.-For the purposes of this section, specified authority means the specified authority referred to in section 151." "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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 36. It is also relevant to refer to Section 3 of TOLA. The relevant extract of Section 3(1) of the Act is set out below:- "3(1) Where, any time-limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March, 2020 to the 31st day of December, 2020, or such other date after the 31st day of December, 2020, as the Central Government, may, by notification, specify in this behalf, for the completion or compliance of such action as - (a) completion of any proceedings or passing of any order or issuance of any notice, intimation, notification, sanction or approval, or such other action, by whatever name called, by any authority, commission or tribunal, by whatever name called, under the provisions of the specified Act; *** *** *** and where completion or compliance of such action has not been made within such time, then, the time-limit for completion or compliance of such action shall, notwithstanding anything contained in the specified Act, stand extended to the 31st day of March, 2021, or such other date after 31st day of March, 2021, as the Central Government may, by notification, specify in this beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a copy of the notice under Section 148 of the Act along with an order passed under Clause (d) of Section 148A of the Act. As is apparent from the above, the procedure as prescribed under Section 148A of the Act including holding of inquiry as contemplated under Clause (a) of Section 148A of the Act; issuance of a show cause notice under Section 148A (b) of the Act; considering the reply of the assessee under Clause (c) of Section 148A of the Act; and deciding in terms of Clause (d) of Section 148A of the Act, whether it is a fit case for issuance of notice under Section 148 of the Act, is required to be completed prior to issuance of notice under Section 148 of the Act. 44. Section 149 (1) of the Act prohibits issuance of notice beyond the time period as specified. In terms of Clause (a) of Section 149 (1) of the Act, a notice cannot be issued for relevant assessment year if more than three years had elapsed from the end of the relevant assessment unless the case falls under Clause (b) of the said sub-section. 45. In terms of Clause (b) of Section 149 (1) of the Act, the following conditions are required to be satisfied: (i) that the AO has in its possession books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g which proceedings under Section 148A of the Act are stayed by an order or injunction by any court, are required to be excluded. 51. Thus the period of three years or ten years from the end of the relevant assessment year, as the case may be, is required to be computed after excluding the time allowed to an assessee as per the show cause notice issued under Section 148A (b) of the Act or if there is a stay order or injunction passed by any court staying the proceedings under Section 148A of the Act, the period during which the proceedings are so stayed. 52. The fourth proviso to Section 149 (1) of the Act (as existed prior to 01.04.2023) is set out below: 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 section 148A is less than 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. 53. As is apparent from the plain language of the fourth proviso to Section 149 (1) of the Act, it extends the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, the AO would cease to have the jurisdiction to issue such a notice. 55. As noted above, in Union of India & Ors. v. Ashish Aggarwal, also emphasises the requirement of the notice under Section 148 being accompanied by an order under Section 148A (d) of the Act [Paragraph 6.2]. 56. This aforesaid aspect was examined by this court in Raminder Singh v. Assistant Commissioner of Income Tax Circle 52 (1) New Delhi Neutral Citation No.:2023:DHC:6672-DB. In that case, a notice under Section 148A (b) of the Act was issued on 31.03.2023 in respect of AY 2019-20. This was on the last date of limitation as prescribed under Section 149 (1)(a) of the Act. The assessee in that case was granted an opportunity to respond to the said notice on or before 10.04.2023. Thus, it was held that the period between 31.03.2023 and 10.04.2023 was required to be excluded by virtue of the third proviso to Section 149 (1) of the Act. Since the time remaining for the AO to pass an order under Section 148A (d) of the Act and issuance of notice under Section 148 of the Act was less than seven days, the period of limitation as provided under Section 149 (1) of the Act was required to be extended by a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 17. Section 149 (1) of the Act expressly provides the time limit for issuing the notice under Section 148 of the Act. The relevant extract of the Section 149 (1) of the Act is set out below: "149. (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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in Union of India & Ors. v. Ashish Agarwal and Union of India & Others v. Rajeev Bansal. 59. The Supreme Court noted the effect of TOLA and the notifications issued by the Government of India as under:- "9. The effect of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and the notifications issued under the legislation was that: (i) if the time prescribed for passing of any order or issuance of any notice, sanction, or approval fell for completion or compliance from March 20, 2020 to March 31, 2021; and (ii) if the completion or compliance of such action could not be made during the stipulated period, then the time limit for completion or compliance of such action was extended to June 30, 2021." 60. In regard to the applicability of Section 149 (1) of the Act, the Supreme Court concluded as under:- "53. The position of law which can be derived based on the above discussion may be summarized thus: (i) section 149 (1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime. In Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association : (1992) 3 SCC 1, a three-Judge Bench of this court explained the distinction between quashing an order and staying the operation of an order thus: "10. [...] Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence." The reassessment proceedings erroneously initiated by the Revenue under the old regime were not wiped out from existence. Consequently, the Revenue was not required to start the procedure of reassessment afresh after the decision of this Court in Union of India v. Ashish Agarwal (supra). 101. Under Section 148A (b), the Assessing Officer has to comply with two requirements: (i) issuance of a show-cause notice; and (ii) supply of all the relevant information which forms the basis of the show-cause notice. The supply of the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) only if it is supplied along with the relevant information and material by the Assessing Officer. Due to the legal fiction, the Assessing Officers were deemed to have been inhibited from acting in pursuance of the section 148A (b) notice till the relevant material was supplied to the assesses. Therefore, the show-cause notices were deemed to have been stayed until the Assessing Officers provided the relevant information or material to the assesses in terms of the direction issued in Union of India v. Ashish Agarwal (supra). To summarize, the combined effect of the legal fiction and the directions issued by this court in Union of India v. Ashish Agarwal (supra) is that the show-cause notices that were deemed to have been issued during the period between April 1, 2021 and June 30, 2021 were stayed till the date of supply of the relevant information and material by the Assessing Officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show-cause notices. 107. The third proviso to section 149 allows the exclusion of time allowed for the assesses to respond to the show-cause notice unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by Union of India v. Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021. 109. If this court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under Section 148 of the new regime would have to be issued within the time limits extended by Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income Tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. This construction gives full effect to the legal fiction crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Ors. v. Ashish Agarwal, has not been struck off and further notices and orders issued under Section 148 of the Act were in continuance of the proceedings that had commenced on the date of issuance of such notices; (b) the period from the date of issuance of such notices till the date of the decision in the case of Union of India & Ors. v. Ashish Agarwal, that is 04.05.2021, was required to be excluded for the period of calculation of limitation by virtue of the third proviso to Section 149 (1) of the Act. The AO could not continue any proceeding till the Supreme Court rendered its decision to treat the notices issued under Section 148 of the Act as notices issued under Section 148A (b) of the Act; and, (c) the period from the date of the decision in Union of India & Ors. v. Ashish Agarwal, that is 04.05.2022, to the date when the material was supplied by the AO to the Assessee, as was required under Section 148A (b) of the Act, was also required to be excluded. The Supreme Court reasoned that the AO could not proceed further till the said material was supplied. Therefore, the said period is also required to be excluded by virtue of the third proviso to Section 149 (1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The said notice was required to be accompanied by an order under Section 148A (d) of the Act. Thus, the AO was required to pass an order under Section 148A (d) of the Act within the said twenty-nine days notwithstanding the time stipulated under Section 148A (d) of the Act. This period expired on 12.07.2022. 70. Since the period of limitation, as provided under Section 149 (1) of the Act, had expired prior to issuance of the impugned notice on 30.07.2022. The said is squarely beyond the period of limitation. 71. It is contended on behalf of the Revenue that the AO is required to pass an order under Section 148A (d) of the Act by the end of the month following the month on which the reply to the notice under Section 148A (b) of the Act was received. Thus, the order under Section 148A (d) of the Act as well as the notice under Section 148 of the Act (both dated 30.07.2022) are within the prescribed period. This contention is without merit as it does not take into account that proceedings under Section 148A of the Act necessarily required to be completed within the period available for issuing notice under Section 148 of the Act, as prescribed under Section 149 of the Act. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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