2024 (12) TMI 1606 - AT - Income Tax

Reassessment Notice Under Section 148 Invalid Due to Delay and Improper Sanction in AY 2017-18

The ITAT Mumbai held that the reassessment notice issued under section 148 for AY 2017-18 was invalid as it was issued beyond the three-year limitation ... Validity of reassessment proceedings - approval by specified authority which is to be obtained before issuing notice u/s. 148 as per section 151 - “by whom” approval ought to have been issued - time limit of three years - hierarchical escalation vis-à-vis obtaining approval for issuing notice u/s.148 as per new regime - TOLA effect 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. Thus, the amended provisions under the Income-Tax 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, three years had lapsed from the end of the Assessment Year when the order u/s.148A(d) and notice u/s.148 was issued on 31.07.2022. 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 in this respect 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, such notice is invalid and bad in law. As relying on 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 AO 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. Assessee appeal allowed. ISSUES: Whether the notice issued under section 148 of the Income-tax Act was validly issued with proper approval from the specified authority as required under section 151, particularly considering the amended provisions under the new regime and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)?Whether the notice under section 148 issued by the jurisdictional Assessing Officer instead of the Faceless Assessing Officer is valid under the faceless assessment regime'Whether the notice under section 148 was issued without mentioning the mandatory Document Identification Number (DIN) as required by CBDT Circular No. 19/2019, and if such omission affects the validity of the notice'Whether the addition made under section 56(2)(vii)(b) of the Act, based on the difference between actual purchase consideration and stamp duty valuation of immovable property, is justified'Whether interest under sections 234B and 234C of the Act is leviable in the facts of the case? RULINGS / HOLDINGS: The notice issued under section 148 was invalid and bad in law as the approval for issuance was obtained from an inappropriate authority (Principal Commissioner of Income Tax) instead of the specified authority required under section 151(ii) of the new regime, since the notice was issued beyond three years from the end of the relevant Assessment Year; hence, the notice and consequent reassessment order are quashed.The jurisdictional Assessing Officer lacked jurisdiction to issue the notice under section 148, as the faceless assessment regime mandates issuance by the Faceless Assessing Officer; therefore, the notice issued by the jurisdictional AO is invalid.The notice under section 148 was issued without mentioning the mandatory DIN as mandated by CBDT Circular No. 19/2019, rendering the notice defective and liable to be quashed.The addition under section 56(2)(vii)(b) was not adjudicated upon as the reassessment proceedings were quashed on the legal ground of invalid notice; thus, the issue is rendered academic.The liability to pay interest under sections 234B and 234C was not adjudicated due to quashing of reassessment proceedings and is therefore not leviable. RATIONALE: The Court applied the statutory framework of sections 148, 149, 151, 144B of the Income-tax Act, 1961, as amended by the Finance Act, 2021, and the temporal relaxation provisions under TOLA, which extended the time limits for issuance of notices and grant of approval during the COVID-19 pandemic period.The Court relied on the Supreme Court decisions in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal, which clarified that the prior approval for issuance of reassessment notices under section 148 must be obtained from the specified authority as per the new regime, with TOLA providing temporal extension but not altering hierarchical authority requirements.The Court emphasized that section 151(ii) of the new regime prescribes that if more than three years have elapsed from the end of the relevant Assessment Year, the specified authority for sanction is the Principal Chief Commissioner or equivalent higher authority, and approval from a lower authority (Principal Commissioner) is invalid.The Court noted that TOLA's extension of time applies only to the temporal aspect of granting sanction and does not permit deviation from the specified hierarchical authority for approval under section 151.The Court held that issuance of notice by the jurisdictional Assessing Officer, rather than the Faceless Assessing Officer, contravenes the faceless assessment scheme, and failure to mention mandatory DIN as per CBDT Circular No. 19/2019 further vitiates the notice.Due to the invalidity of the notice under section 148, the reassessment proceedings and consequent additions were quashed without need for further adjudication.