Income-tax reassessment reopening notice u/ss147/148: issued after limitation and without s.151 sanction, reassessment quashed; s.54F remanded

Reopening under ss.147/148 after 01.04.2021 was tested against the substituted reassessment regime read with TOLA; since the surviving limitation for issuing notice under s.148 (as extended) expired on 14.06.2022, a notice issued on 29.07.2022 was held time-barred and set aside. Independently, the notice was invalid for want of mandatory sanction under s.151, as the SC dispensation in Ashish Agarwal did not waive approval for s.148A(d) and s.148; the s.148 notice and consequential reassessment order were quashed and the appeal was allowed. The s.54F claim was remanded to the AO because the appellate authority failed to consider filed evidences.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the reassessment notice issued under section 148 dated 29.07.2022 was barred by limitation for want of "surviving period" under the post-01.04.2021 reassessment regime read with TOLA and the principles applied by the Court.

(ii) Whether the reassessment notice/order suffered from lack of valid sanction/approval under section 151 as applicable after 01.04.2021, where more than three years had elapsed from the end of the relevant assessment year.

(iii) Whether reassessment proceedings initiated/continued by the jurisdictional assessing officer, instead of through the faceless/automated scheme, rendered the notices/orders invalid.

(iv) Whether disallowance of part of the exemption claimed under section 54F could be sustained when the appellate authority did not consider documentary evidence stated to have been filed by the assessee, warranting remand for verification.

2. ISSUE-WISE DETAILED ANALYSIS

A. Limitation: validity of notice under section 148 dated 29.07.2022 as being beyond the "surviving period"

Legal framework (as discussed by the Tribunal): The Tribunal applied the post-01.04.2021 substituted reassessment provisions, the impact of TOLA on limitation for issuance of reassessment notice, and the concept of "surviving/balance time" available to the Revenue to complete the remaining steps under the new regime once an earlier notice issued in the interregnum was treated as a deemed show-cause notice under section 148A(b). It treated the two-week response period as excluded time and noted the statutory minimum time of 7 days available to the assessing officer.

Interpretation and reasoning: The Tribunal computed the surviving period by measuring the balance time between the date of issuance of the deemed notice and 30.06.2021. Since the deemed notice date was 30.06.2021, the surviving period was "zero". After excluding the two-week response time and applying the minimum 7-day availability to the assessing officer, the Tribunal held the final reassessment notice under section 148 had to be issued within the resulting surviving time window. On the Tribunal's computation, the last permissible date was 14.06.2022, whereas the notice was issued on 29.07.2022.

Conclusion: The Tribunal held the notice under section 148 dated 29.07.2022 was time-barred (issued beyond the surviving period) and therefore invalid; consequently, the reassessment order was also vitiated and set aside.

B. Sanction under section 151: whether approval from the Principal Commissioner was incompetent after three years

Legal framework (as discussed by the Tribunal): The Tribunal examined that, after 01.04.2021, the "specified authority" for sanction under section 151 depends on the elapsed time from the end of the relevant assessment year. Where the notice is issued after three years, sanction is required from a higher-level authority under the amended regime; sanction is a jurisdictional precondition for issuance of notice under section 148 and for an order under section 148A(d).

Interpretation and reasoning: It was undisputed that the notice under section 148 was issued after expiry of three years from the end of the assessment year. The Tribunal found that approval was obtained from the Principal Commissioner, whereas, under the amended section 151 applicable to cases beyond three years, approval ought to have been from the higher specified authority (as identified by the Tribunal). The Tribunal held the requirement of prior approval for section 148A(d) and section 148 was not waived and non-compliance affected jurisdiction.

Conclusion: The Tribunal held the notice under section 148 was invalid for want of proper approval/sanction under section 151, and quashed the reassessment notice and consequential reassessment order on this additional jurisdictional ground.

C. Faceless reassessment scheme: validity where notices/orders issued by the jurisdictional assessing officer

Legal framework (as discussed by the Tribunal): The Tribunal considered the faceless/automated scheme stated to have come into force for reassessment-related actions, requiring notices under section 148A and issuance of notice under section 148 to be through automated allocation/faceless manner under the notified scheme.

Interpretation and reasoning: The Tribunal noted that the notices under section 148A(b), the order under section 148A(d), and the notice under section 148 were issued by the local jurisdictional assessing officer. It rejected the appellate authority's view that such lapse was merely procedural, holding that this view was contrary to the binding jurisdictional High Court decision relied upon. It therefore treated issuance by the jurisdictional assessing officer (instead of through the faceless/automated mechanism) as rendering the notices invalid. However, it recorded that the issue was pending before the Supreme Court and therefore granted liberty for revival depending on the Supreme Court's outcome.

Conclusion: The Tribunal held the reassessment notices issued by the jurisdictional assessing officer without following the faceless scheme were invalid and liable to be set aside, while granting liberty for revival contingent on the Supreme Court's decision on the issue.

D. Section 54F disallowance (A.Y. 2020-2021): effect of non-consideration of filed evidence by the appellate authority

Legal framework (as discussed by the Tribunal): The Tribunal proceeded on the basis that exemption under section 54F requires substantiation of the cost claimed (including development cost) by supporting documentary evidence and that such evidence must be examined/verified.

Interpretation and reasoning: The appellate authority upheld disallowance of development cost on the premise that documentary proof was not produced despite opportunities. The Tribunal, however, found from the record that the assessee had filed written submissions with multiple annexures/documents before the appellate authority (acknowledged on 15.03.2024). Since the impugned appellate order did not consider those documents, the Tribunal held the order was not sustainable. Given that the documents required verification/examination, it directed a remand.

Conclusion: The Tribunal set aside the appellate order on the section 54F disallowance issue and remanded the matter to the assessing officer for fresh adjudication after verification of the documentary evidence and after providing adequate opportunity of hearing.

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