2025 (12) TMI 1425 - AT - Income Tax

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 ... Validity of reopening of assessment - time/surviving period under the Income Tax Act read with TOLA - Notice u/s 148A(b) of New Law as amended by Finance Act, 2021 - scope of TOLA - New regime v/s old regime - HELD THAT:- After 01.04.2021 the Income Tax Act has to be read along with substituted provisions including application of TOLA if action or proceedings specified under the substituted provisions of the Act falls for completion between March, 2020 and 31.03.2021. In the case of the assessee, there is no dispute that the time limit for issuing the notice u/sec.148 was expired within this period. It is specifically concluded by the Hon’ble Supreme Court that the Assessing Officer required to issue re-assessment notice u/sec.148 of the new regime within the time limit surviving under the Act read with TOLA and the notice issued beyond the surviving period is time barred and liable to be set-aside. Therefore, the notice issued beyond the surviving period is time barred and liable to be set-aside. Hon’ble Madras High Court in the case of Thulasidass Prabavathi [2025 (4) TMI 865 - MADRAS HIGH COURT] following Judgment of Union of India vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] has held that notice issued u/sec.148 beyond the surviving period is invalid and liable to be set-aside. In the case in hand, the period of 03 years lapsed on 31.03.2020 and thereafter, getting the benefit of TOLA as well as Judgment of Hon’ble Supreme Court in the case of Ashish Agrawal [2022 (5) TMI 240 - SUPREME COURT] the notice u/sec.148 of the Act was issued on 29.07.2022 by the Assessing Officer beyond the surviving period up-to 14.06.2022 is barred by limitation and liable to be set-aside. Notice issued u/sec.148 for lack of valid approval from the Competent Authority as per the new re-assessment regime - Requirement of obtaining prior approval u/sec.148A(a) and 148A(b) of the Act was waived-off by the Judgment of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] however, the same did not waive-off the requirement of obtaining prior approval for the order u/sec.148A(d) and the re-assessment notice u/sec.148 of the Act. Accordingly, following the Judgment of Union of India vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] and Siemens Financial Services (P.) Ltd. [2023 (9) TMI 552 - BOMBAY HIGH COURT] as well as Iqbal Ali Jaweed, Hyderabad [2025 (6) TMI 1640 - ITAT HYDERABAD] we hold that the notice issued by the Assessing Officer u/sec.148 of the Act in the case of the assessee is not valid for want of a valid approval/ sanction u/sec.151 of the Act and consequently, the same is quashed. Once the notice issued u/sec.148 of the Act is quashed being invalid, the same also vitiates the consequential Order passed by the Assessing Officer u/sec.147 of the Income Tax Act, 1961. Accordingly, the appeal of the Assessee is allowed on this ground alone. Validity of notice u/sec.148 as the same was issued without following National Faceless Assessment Scheme notified by the CBDT - Following the case of M/s. Pitti Holdings Pvt. Ltd., Hyderabad [2025 (11) TMI 1052 - ITAT HYDERABAD] we hold that the notice u/sec.148 issued by JAO without following the procedure as per NFAC Scheme is invalid and liable to be set-aside. We Order accordingly. However, an identical issue is pending adjudication before the Hon'ble Supreme Court and the Hon’ble Jurisdictional High Court in the case of Kotha Kanthaiah [2025 (4) TMI 1727 - TELANGANA HIGH COURT] has also given the liberty to the parties to move an appropriate petition seeking revival of the case in light of Judgement of Hon'ble Supreme Court on this very issue. Therefore, we also grant the liberty to the parties to get this appeal revived, if Judgment of Hon'ble Supreme Court on this issue necessitate to modify this order. Exemption u/sec.54F - Claim disallowed on the ground of verifiable evidentiary proof not produced by the assessee despite repeated opportunities - HELD THAT:- Assessee has made as many as 10 Annexures to the written submissions in support of it’s claim u/sec.54F of the Act. Therefore, it is apparent from the record that the CIT(A) while passing the impugned order has not considered these documents filed by the assessee vide acknowledgment dated 15.03.2024. Thus, the impugned order passed by the CIT(A) without considering the relevant supporting evidences filed by the assessee is not sustainable and liable to be set-aside. Since the record and documentary evidences filed by the assessee are required to be verified and examined therefore, the matter is remanded to the record of the Assessing Officer for fresh adjudication after verification and examination of all the relevant documentary evidences filed by the assessee. Needless say, the Assessing Officer shall provide adequate opportunity of being heard to the assessee before passing the order. Issues: (i) Whether the notice issued under section 148 dated 29.07.2022 (deemed/reissued under the amended regime) is time-barred as being beyond the surviving period available under the Income-tax Act read with TOLA; (ii) Whether the notice under section 148 dated 29.07.2022 is invalid for want of prior approval from the appropriate authority as required by section 151 of the Income-tax Act, 1961; (iii) Whether notices and orders issued by the Jurisdictional Assessing Officer without following the faceless / NFAC scheme are valid; (iv) Whether the disallowance of part of the claim under section 54F is sustainable or requires remand for verification of documentary evidence.Issue (i): Validity of notice under section 148 as being time-barred beyond the surviving period under TOLA.Analysis: The computation of the surviving time limit is governed by the legal fiction created in Ashish Agarwal and the clarifications in Union of India v. Rajeev Bansal, which require exclusion of the period from issuance of the deemed notice up to the date of the Supreme Court decision and the two-week reply period; the fourth proviso to section 149(1) ensures a minimum seven days. Applying these principles to the facts, the deemed notice date left only the minimum surviving period, and the final notice dated 29.07.2022 was issued after the last permissible date.Conclusion: In favour of Assessee. The notice under section 148 dated 29.07.2022 is time-barred and set aside.Issue (ii): Validity of notice under section 148 for want of valid sanction/approval under section 151.Analysis: Section 151 of the amended regime prescribes the specified authority for grant of sanction depending on the time elapsed and the amount involved. The amended law and TOLA as interpreted require prior approval from the appropriate higher authority where reopening is beyond three years. The notice shows approval from an authority lower than that mandated by section 151(ii) for a reopening after three years.Conclusion: In favour of Assessee. The notice issued without sanction from the appropriate authority under section 151 is invalid and set aside, vitiating consequential assessment proceedings.Issue (iii): Validity of notices/orders issued by the Jurisdictional Assessing Officer without following the faceless / NFAC scheme.Analysis: The faceless assessment regime and related notifications require reassessment proceedings and issuance of notices in the prescribed faceless manner where applicable. Coordinate judicial authorities, including the jurisdictional High Court and Tribunal precedents, have held that notices issued without following the faceless procedure are invalid; the issue is also pending before the Supreme Court but is materially decided by binding jurisdictional authority and Tribunal precedents in the same facts.Conclusion: In favour of Assessee. Notices and orders issued by the Jurisdictional Assessing Officer without complying with the faceless/NFAC scheme are invalid and set aside. Parties are granted liberty to seek revival if higher court rulings alter the position.Issue (iv): Disallowance of part of the claim under section 54F for lack of verifiable documentary evidence.Analysis: The assessing and appellate authorities disallowed a portion of the exemption for unverifiable development costs. The assessee filed multiple annexures and supporting documents before the appellate authority which the appellate order did not consider. Verification of those documentary evidences is necessary for a final adjudication.Conclusion: In favour of Assessee for procedural relief. The matter is remanded to the Assessing Officer for verification and fresh adjudication of the section 54F claim after affording opportunity to the assessee; appeal allowed for statistical purposes.Final Conclusion: The reassessment notices and consequential assessment orders for the earlier assessment year are quashed as time-barred and for lack of valid sanction and for non-compliance with the faceless scheme; the subsequent reassessment orders are thereby vitiated. For the later assessment year, the disallowance under section 54F is set aside for fresh verification and the matter is remitted to the assessing authority.Ratio Decidendi: Reassessment notices issued under section 148 that are issued beyond the surviving time limit computed under the Income-tax Act read with TOLA, or issued without prior sanction from the authority specified in section 151 as applicable under the amended regime, or issued in breach of the mandatory faceless assessment procedure where required, are invalid and vitiate consequential reassessment orders.