TaxTMI 
TaxTMI 
2023 (9) TMI 552
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....rn of income was selected for scrutiny and a notice dated 5th September 2018 under Section 143(2) of the Income Tax Act 1961 (the Act) was issued. This was followed by notice dated 5th December 2018 under Section 142(1) of the Act. Petitioner responded by its letter dated 6th December 2018 and submitted the transaction wise summary on expenditure on software consumables. Respondent no. 1 passed an assessment order dated 23rd December 2018 under Section 143(3) of the Act without making any adjustments to the total income as reported by petitioner in its revised return of income. 3. Almost three years later, petitioner received notice dated 25th June 2021 under Section 148 of the Act, stating that there was reason to believe, petitioner's income chargeable to tax for A.Y. 2016-2017 has escaped assessment within the meaning of Section 147 of the Act. The impugned notice mentioned that necessary satisfaction of Range 8(2), Mumbai has been obtained. Petitioner was also provided with the reasons recorded for reopening the assessment in response to the request made by petitioner. 4. Petitioner by its letter dated 22nd July 2021 replied to the notice issued under Section 148 of the A....
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....hould be disallowed and added back to the business income of petitioner. b) Respondent no. 1 alleged that it resulted in under assessment of income of Rs. 2,56,75,172/-. The reasons recorded relied on the finding of respondent no. 1 to form the basis for reason to believe that income chargeable to tax of Rs. 2,56,75,172/- has escaped assessment within the meaning of section 147 of the Act. c) The reasons recorded alleged that the requisite material facts were embedded in such a manner that material evidence could not be discovered by respondent no. 1 and the issues were never examined by respondent no. 1 during the course of regular assessment. The reasons alleged that petitioner has failed to disclose fully and truly all material facts necessary for its assessment and therefore, it is a fit case for reopening the assessment within the meaning of section 147 of the Act. d) Respondent no. 1 alleged that CBDT vide Notification No. 20/2021 has revised the due date relating to issuing the notice under section 148 of the Act as per the time limit specified in section 149 or sanction under section 151 of the Act if it expires on March 31, 2021 to April 30, 2021....
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....ed beyond a period of three years and upto a period of ten years from the end of the relevant assessment year only if the Assessing Officer has in his possession books of account or other documents or evidence which reveal that income chargeable to tax represented in the form of an asset which has escaped assessment amounts to or is more than Rs. 50 lakhs. b) There is no income chargeable to tax which is represented in the form of an "asset" which has escaped assessment as expenditure on computer software consumables cannot be the asset as per Section 149 of the Act. Hence, the extended period of time limits specified in Section 149 (1)(b) cannot apply to petitioner and hence notice issued on 31st July 2022 is bad-in-law. c) As per section 151 of the Act, the specified authority who has to grant his sanction for the purposes of section 148 and section 148A is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. d) For A.Y.-2016-2017, three y....
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....ue says that will still give arbitrary powers to the Assessing Officer to reopen the assessments on the basis of mere change of opinion which cannot be per se reason to reopen. There is a conceptual difference between power to review and power to reassess. If we accept revenue's submissions then in the garb of re-opening the assessment review would take place. The concept of change of opinion is an in-built test to check abuse of power by the Assessing Officer, as held in the judgment of the Apex Court in CIT Vs. Kelvinator of India Ltd 320 ITR 561 (SC). j) Even the recent judgment of Learned Single Judge of Madras High Court in Dr. Mathew Cherian Vs. Assistant Commissioner of Income Tax (2023) 151 taxmann.com 154 (Madras), the court has held that whether under old or new regime of reassessment, it is settled position that the issues decided categorically by judicial precedent should not be revisited in the guise of reassessment. 12. Mr. Suresh Kumar for revenue, at the outset, submitted that sanction of the authority has been taken in view of the instructions given by the Central Board of Direct Taxes on 11th May 2022. Mr. Suresh Kumar submitted that the instructions r....
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.... apply. c) If petitioner's submissions are accepted, it would apply to a hybrid view in the sense that petitioner seeks to partly apply unamended law and partly the amended law. As held by the Apex Court in Ashish Agarwal (Supra), the notice issued by the Department after 1st April, 2021 is deemed to be a Notice under the amended Section 148A(b). This would mean that on 31st March 2020 the time period of 3 years would have expired and hence, TOLA would be and is squarely applicable. d) The judgments prior to TOLA are not applicable because the amended provisions were not considered at that stage. e) Under TOLA, time for issuing notice stood extended and hence the notice issued under Section 149(1)(b) was within time. The same principle would apply to a notice issued under Section 148A(d) or notice issued under Section 148 alongwith order passed under Section 148A(d). The main thrust, however, was on instructions dated 11th May 2022. 14. On the change of opinion, Mr. Suresh Kumar submitted:- a) In view of the change in the language of amended Section 147 of the Act, it would not be applicable. b) In any event, the material furnished....
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....rved that TOLA is not applicable to A.Y.-2015-2016 or any subsequent years and, therefore, reliance on TOLA would be of no assistance. In Ashish Agarwal (Supra), the Apex Court did not interfere with this view expressed by the Bombay High Court. c) This court in J. M. Financial & Investment Consultancy Services Pvt Ltd. Vs. Assistant Commissioner of Income Tax, Circle 3(2)(1) & ors (Order passed in Writ Petition No. 1050 of 2022 dated 4-4-2022) has held that for A.Y. 2015-2016, the six years limitation was expiring on 31st March 2022, TOLA will not be applicable and in any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. Mr. Pardiwalla emphasised on paragraphs 6 and 7 of the order in J.M. Financial (Supra) which read as under: 6. Even for a moment we agree with the view expressed by the Principal Commissioner of Income Tax, still it applies to only cases where the limitation was expiring on 31 st March 2020. In the case at hand, the assessment year is 2015-2016 and, therefore, the six years limitation will expire only on 31 st March 2022. Certainly, therefore, the Relaxa....
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....provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specif....
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....d 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 where 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. 148A. Conducting inquiry, providing opportunity before issue of notice under section 148.-The Assessing Officer shall, before issuing any notice under section 148,- (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide....
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....fied 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 section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specif....
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....which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: 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 does not exceed 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. Explanation.-For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (1A) Notwithstanding anything contained in sub-section(1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section(1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years....
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....ne month from the end of the month .....................". The explanation below Section 148A says - for the purposes of this Section, specified authority means the specified authority referred to in Section 151. 19. Under Section 149(1)(a), no notice under Section 148 shall be issued for the relevant assessment year if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b). Clause (b) of Section 149(1), provides 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 chargable to tax, represented in the form of an asset, (as relevant to this case) which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year. Explanation below 4th proviso says that for the purposes of clause (b) of this sub section, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. 20. Under Section 151 "specified authority" for the purposes of Sect....
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....e approval as contemplated in section 151(ii) of the Act would have to be obtained which has not been done by the Assessing Officer. The impugned notice mentions that the prior approval has been taken of the 'Principal Commissioner of Income-tax - 8' ('PCIT-8') which is bad in law as the approval should have been obtained in terms of section 151(ii) and not section 151(i) of the Act and the PCIT-8 cannot be the specified authority as per section 151 of the Act. Further, even in the affidavit-in-reply, the department has accepted that the approval obtained is of the 'Principal Commissioner of Income-tax - 8' and, hence, such an approval would be bad in law. 25. TOLA, enacted on 29th September 2020 and came into force on 31st March 2020. It inter alia, provided for a relaxation of certain provisions of the Income-tax Act, 1961. Where any time limit for completion or compliance of an action such as completion of any proceedings or passing of any order or issuance of any notice fell between the period 20th March 2020 to 31st December 2020, the time limit for completion of such action stood extended to 31st March 2021. Thus, TOLA only seeks to extend the period of limitation and does....
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....aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so." (c) J.M. Financial (supra) - paragraphs 5 to 7 read as under: "5. Respondents have relied upon a letter dated 18th March 2021 issued by one Income Tax Officer, who has given an opinion to the Additional Commissioner of Income Tax that in view of the Taxation and other Laws (Relaxation of Certain Provisions) Act, 2020 (Relaxation Act), limitation, inter alia, under provisions of Section 151(1) and Section 151(2), which were originally expiring on 31st March 2020 stand extended to 31st March 2021. According to the Income Tax Officer, in view of the above, Assessment Year 2015-2016 which falls under the category within four years as on 31st March 2020, the statutory approval for issuance of notice under Section 148 of th....
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.... ought to have been accorded by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax and not by the Additional Commissioner of Income Tax. The Court also held that the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ('Relaxation Act') may have extended the time to issue a notice under section 148 of the Act but did not have the effect of amending the provisions of section 151 of the Act. This Court held : "5 Respondents have relied upon a letter dated 18th March 2021 issued by one Income Tax Officer, who has given an opinion to the Additional Commissioner of Income Tax that in view of the Taxation and other Laws (Relaxation of Certain Provisions) Act, 2020 (Relaxation Act), limitation, inter alia, under provisions of Section 151(1) and Section 151(2), which were originally expiring on 31st March 2020 stand extended to 31st March 2021. According to the Income Tax Officer, in view of the above, Assessment Year 2015-2016 which falls under the category within four years as on 31st March 2020, the statutory approval for issuance of notice under Section 148 of ....
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....ecorded by the A.O., that it was a ft case for the issue of such a notice. In the present case, it is clear that assessment year under consideration was 2015-16 and, therefore, the notice impugned dated 29th March, 2021 was admittedly beyond the four years period for which the approval ought to have been granted by any one of the aforementioned four authorities and not by the Joint Commissioner. It is clear that, the A.O. fell in error in holding that the case at hand fell within the four years period, from the end of the assessment year under consideration, which on the face of it appears to be erroneous." (g) Voltas Limited v. ACIT (WP No. 1180 of 2022 dated 5-4-2022) - paragraphs 6, 19 to 24 read as under: "(6) In the petition, petitioner has also raised an objection that the sanction obtained under section 151 of the Act was not a valid sanction since the proposed reopening is more than 4 years after expiry of relevant assessment year. As provided under sub-section (1) of section 151 of the Act only a Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner could grant the sanction. Since in this case, admittedly, s....
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....rding to the Income Tax Officer, the statutory approval for issuance of notice under Section 148 of the Act for the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. (23) Even for a moment, we agree with the view expressed by respondents, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at hand, the assessment year is 2015-16 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions will not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. (24) In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31.03.2021 issued under Section 148 of the Act, which is impugned in this pe....
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....ch, 2021 such that the provision as existing on such date will be applicable to notices issued relying on the provision of TOLA. The court held that Section 3(1) of TOLA merely extends the limitation provided in the specified Acts including Income-tax Act for doing certain Acts but such Acts must be performed in accordance with the provisions of the specified Acts. The court had also recorded that the Delhi High Court had considered and rejected the contention of the Revenue that the notice issued after 1st April 2021 relates back to an earlier period. The Delhi High Court had considered and rejected the argument of the Revenue that TOLA creates a legal fiction such that the notices issued under Section 148 of the Act are deemed to be issued on 31st March, 2021. TOLA only granted power to the Central Government to notify the period during which actions are required to be taken that can fall within the ambit of TOLA, and the power to extend the time limit within which those actions are to be taken. There was no amendment to the provisions of Sections 147 to 151 of the Act. The court also observed that amendments to the substantive provisions of the Act were envisaged under Section 3....
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....t, after 31st March 2021 will relate back to the original date or that the clock is stopped on 31st March, 2021 such that the provision as existing on such date will be applicable to notices issued relying on the provision of Relaxation Act. A plain reading of Relaxation Act, as Mr. Mistri rightly submitted, makes it clear that Section 3(1) of Relaxation Act merely extends the limitation provided in the specified Acts (including Income-tax Act) for doing certain Acts but such Acts must be performed in accordance with the provisions of the specified Acts. Therefore, if there is an amendment in the specified Act, the amended provision of the specified Act would apply to such actions of the Revenue. The Delhi High Court has considered and rejected the contention of the Revenue that the notice issued after 1st April 2021 relates back to an earlier period. 38. The Delhi High Court has considered and rejected this argument of the Revenue that Relaxation Act creates a legal fiction such that the notices issued under Section 148 of the Act are deemed to be issued on 31st March, 2021. The so-called legal fiction is directly contrary to the Revenue's own Circular No. 549 of 1989, wh....
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....3(1) of Relaxation Act is to extend limitation periods as provided in a specified Act (including the Income-tax Act). The purpose of Section 3(1) of Relaxation Act is not to postpone the applicability of amended provisions of a Specified Act. Though Relaxation Act was in existence when the Finance Act, 2021 was passed, the Parliament has specifically enacted the new, (amended) provisions of Section 147 to 151 of the Act and made them applicable with effect form 1st April, 2021. Therefore, it is clear that amendment is to be applied from 1st April, 2021. Further, when there is no ambiguity on the applicability of the provision, there is no question of resorting to purpose test. 43. As regards liberty granted by the Allahabad High Court, certainly, if the law permits issuance of notices under Section 148 of the Act (as amended), afresh, then no liberty is required to be granted by the Court, and it would be within the Assessing Officer's powers to initiate proceedings as per the amended law. The Madras High Court has considered this very plea and granted liberty to initiate reassessment proceedings in accordance with the provisions of the amended Act, "if limitation for it s....
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.... was to give it effect from 1^st July, 2021, a similar savings clause could have been inserted, which has not been done. 46. Mr. Pardiwalla submitted that only Section 4 of Relaxation Act which amended the Act and no such amendments to the substantive provisions of the Act were envisaged under Section 3 of Relaxation Act, which was only a relaxation provision dealing with time limits under various enactments. 47. As noted earlier, it is Revenue's case that Section 3 of Relaxation Act enabled the Central Government to issue notifications which would permit the Assessing Officers to issue notices under Section 148 of the Act after 1st April, 2021 in terms of the erstwhile provisions of Sections 147 to section 151, even though the said provisions were repealed with effect from 1st April, 2021 by the Finance Act, 2021. It is, however, pertinent to note that Section 3 of Relaxation Act falls in Chapter II of the said Act, which is titled 'Relaxation of Certain Provisions of Specified Act'. In contradistinction, Section 4 of Relaxation Act which does amend several provisions of the Act falls in Chapter III, which is titled 'Amendments to the Income Tax Act, 1961'. It wi....
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....0 and 38. The Explanations seek to extend the applicability of erstwhile Sections 148, 149 and 151. They do not cover Section 147, which empowers revenue to reopen subject to Section 148 to 153, which includes Section 148A. Thus, even if Explanation are valid, procedure of Section 148A is not followed and hence, notices are invalid. (c) In any case, Relaxation Act is not applicable for Assessment Years 2015-2016 or any subsequent year and, hence, the question of applicability of the Notification Nos. 20 and 38 of 2021 does not arise. The time limit to issue notice under Section 148 of the Act for the Assessment Years 2015-2016 onwards was not expiring within the period for which Section 3(1) of Relaxation Act was applicable and, hence, Relaxation Act could never apply for these assessment years. As a consequence, there can be no question of extending the period of limitation for such assessment years. These findings of the Bombay High Court have not been disturbed by the Apex Court in Ashish Agarwal (Supra). The Apex Court only modified the orders passed by the respective High Courts to the effect that the notices issued under Section 148 of the Act which were subject m....
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....that Apex Court's findings in Ashish Agarwal (Supra) read with time extension provided by TOLA will allow extended reassessment notices to travel back to their original date when such notices were issued and then new Section 149 of the Act is to be applied at that time, the extended reassessment notices are defined under the instructions to be notice issued between 1st April 2021 and ending with 30th June 2021. Therefore, the instructions would not help respondents' case at all. 33. As held by this court in J. M. Financials (Supra), Sidhmicro Equities (P) Ltd. (Supra) and confirmed by the Apex Court that any notice issued without the sanction of the correct sanctioning authority will be invalid. This court in Godrej Industries Limited v. DCIT (2015) 377 ITR 1 (Bom) has held that an assessment can be reopened under section 147 and 148 of the Act only on the jurisdictional preconditions being satisfied strictly. This Court held that sanction of a superior officer to the reasons recorded in terms of section 151 should be obtained before issuing the notice under section 148 of the Act and all jurisdictional requirements are required to be satisfied cumulatively and even if one of th....
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....vide for deduction for any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession under the head "Profit and gain of business or profession". Hence capital expenditure incurred for acquisition of an intangible asset should have been disallowed and added back the total income after allowing depreciation at the applicable rate of 60%, which resulted into underassessment of income of Rs. 2,56,75,172/-. 5. Finding of the AO: In this case, an amount of Rs. 6,41,87,931/- had been debited in P&L A/c. on account of Software consumable. As expenses on acquiring computer software consumable is a capital expenditure, the same is not allowable as per the provision of section 37 of Income Tax Act, 1961. Hence capital expenditure incurred for acquisition of an intangible asset should have been disallowed and added back the total income after allowing depreciation at the applicable rate of 60%, which resulted into underassessment of income of Rs. 2,56,75,172/-. 6. Basis of for....
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....sion Bench of this court in Aroni Commercials Ltd. (supra) held it is not necessary that the assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Paragraph 14 of Aroni Commercials Ltd. (supra) read as under: "14. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessm....
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.... without jurisdiction. 38. The Apex Court in Kelvinator of India Ltd.(Supra) emphasised on the difference between a power to review and the power to reassess. The Apex Court held that the Assessing Officer has no power to review but has only the power to reassess. The concept of 'change of opinion' must be treated as an in-built test to check abuse of power by the Assessing Officer. The relevant extract of the judgement is reproduced as under:- ".......However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept ....
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....ese questions ourselves with the aid of statutory provisions and law laid down in various decisions cited before us we may summarise certain principles applicable in the field of taxation and which principles would be invoked in the course of the judgment:- (i) A taxing statute must be interpreted strictly. Equity has no place in taxation nor while interpreting taxing statute intendment would have any place. In case of State of W.B. Vs. Kesoram Industries Ltd. And Ors., (2004) 10 SCC 201, referring to Article 265 of the Constitution which provides that no tax shall be levied or collected except by authority of law, it was observed that in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted by any presumption or assumption. A taxing statute has to be interpreted in light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency. Before taxing any person it must be shown that he falls within the ambit of charging section by clear words used in the section and if the words are ambiguous and open to two interpretati....