TaxTMI 
TaxTMI 
2024 (5) TMI 302
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Commissioner of Income Tax and Jurisdictional Assessing Officer (JAO) of petitioner, respondent no. 2 is the Principal Commissioner of Income Tax, respondent no. 3 is the Principal Chief Commissioner of Income Tax, respondent no. 4 is the Central Board of Direct Taxes and respondent no. 5 is the Union of India. 4. Petitioner filed return of income for Assessment Year 2015-2016 on 28th November 2015 declaring total income of Rs. 204,54,44,990/-. In the return of income, petitioner claimed deduction under Section 10AA of the Act of Rs. 195,94,62,306/- and also claimed deduction under Section 80JJAA of the Act of Rs. 6,54,04,038/-. For claiming such deductions, petitioner filed an audit report in Form No. 56F and Form No. 10DA. Further, the details of deduction claimed under Section 10AA and 80JJAA of the Act was also reported in the Tax Audit report in Form 3CB read with Form 3CD which was submitted to respondent no. 1 also during the course of assessment proceedings. 5. Petitioner's case was selected for scrutiny and notice dated 17th June 2016 under Section 143(2) of the Act came to be issued. Respondent no. 1 also issued a notice dated 22nd August 2017 under Section 142(1) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt in Ashish Agarwal (Supra). It was also stated that the information relied on by respondent no. 1 was embedded in the reasons recorded which is being provided as an attachment to the imputed initial notice. In the reasons, it was alleged as under : (i) Petitioner has claimed deduction under Section 80JJAA of the Act, which allows deduction of an amount equal to 30% of the additional wages paid to the new regular workmen employed by assessee. The basic condition to avail this deduction is to derive profit from manufacture of goods in the factory. This condition has not been fulfilled by petitioner and hence, petitioner is not eligible for deduction under Section 80JJAA of the Act; (ii) The percentage of profit derived by assessee from its undertaking eligible for deduction under Section 10AA of the Act is more than the profit derived from the non-eligible undertaking and, hence, it appears that petitioner has reported higher profits in the units eligible for 100% deduction; (iii) In the computation of income, petitioner has added Rs. 79.49 Crores on account of realized foreign exchange loss (Forex), which was reduced in computation of income in the last....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment Year 2014-2015, i.e., the earlier assessment year. During the relevant financial year, on materialization of the part of Forex contract, the amount of Rs. 79.49 Crores being the actual loss was transferred from hedging reserve account to profit and loss account. However, as the deduction had already been claimed in the earlier year, there was no deduction claimed in this year in the computation of income. The difference of Rs. 6.90 Crores pertains to transactions which did not materialize till 31st March 2015 and hence, the same was not transferred from the hedging reserve to profit and loss account. Further the said amount has been charged to the profit and loss account of subsequent year and has been adjusted in the computation of income of the subsequent years, and therefore, does not reflect in the income chargeable to tax of the current year. Thus, there is no income which has escaped assessment; (g) Calibre Point Business Solutions Ltd., which was a wholly owned subsidiary of petitioner, had merged with petitioner on the appointed date of 1st April 2013 as per order dated 10th October 2014 of the Bombay High Court. Subsequent to the merger, all the transactio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (vi) Transaction of Calibre Point Business Solutions Ltd. has been reported in the income tax return of petitioner and this issue has not resulted in any escapement of income; Respondent no. 1 further did not make any adverse comment with respect to claim of deduction under Section 10AA of the Act and, therefore, in our view, it must be presumed that the said issue has already been dropped by respondent no. 1 while passing the impugned order. 12. Respondent no. 1, thereafter, issued the notice dated 27th August 2022 manually, stating that respondent no. 1 has information in the case of petitioner, which requires action in consequence of the judgment of the Hon'ble Apex Court, which suggests that income chargeable to tax for Assessment Year 2015-2016 has escaped assessment. It is further stated in the notice that it has been issued after taking approval of respondent no. 3. 13. Separately, a communication dated 27th August 2022 was issued where respondent no. 1 stated that DIN No. ITBA/AST/M/148_1/ 2022-23/1044985555(1) has been generated for the issuance of notice dated 26th August, 2022 under Section 148 of the Act. In response, petitioner filed on 23rd Septembe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Finance Act, 2021; (c) The term 'at that time' in the first proviso refers to the date on which notice under Section 148 of the Act is issued by the Assessing Officer. On the said date, if a notice could not have been issued under the erstwhile provision of Section 149(1) (b) of the Act, for any assessment year beginning on or before the 1st day of April 2021, the notice cannot be issued even under the new provisions. Section 149(1) (b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under Section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, sixth year expired on 31st March 2022. The notice under Section 148 of the Act, in the present case, is issued on 27th August 2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said Section. The stand of the Revenue to interpret the first proviso to Section 149 of the Act to be applicable only for Assessment Years 2013-2014 and 2014-2015, i.e., for assessment years where the period of limitation had already expired on 1st April 2021 is not correct becaus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e fifth and sixth provisos are applicable, under the fifth proviso the period to be excluded would be counted from 25th May 2022, i.e., the date on which the show cause notice was issued under Section 148A (b) of the Act by respondent no. 1 subsequent to the decision of the Hon'ble Apex Court in the case of Ashish Agarwal (Supra) and upto 10th June 2022, which is a period of 16 days. The period from 29th June 2022 upto 4th July 2022 cannot be excluded as the same was not based on any extension sought by petitioner but at the behest of respondent no. 1. Even if the same was to be excluded, still that would mean further exclusion of 5 days. Even then the impugned notice dated 27th August 2022 is still beyond limitation; (e) The impugned notice dated 27th August 2022 is invalid and bad in law as the same has been issued without DIN. In the impugned notice dated 27th August 2022 no DIN is mentioned and, hence, in view of the Circular No. 19 of 2019 dated 14th August 2019 issued by CBDT, the notice is invalid. A separate intimation letter dated 27th August 2022 cannot validate the notice because (i) the intimation letter refers to a DIN with respect to notice dated 26th August ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n never represent escapement of income in the form of an asset. This is because the term 'asset' is defined in Explanation to Section 149 of the Act to include immovable property being land or building or both, shares and securities, loans and advances, deposit in bank account. The present case does not fall in any of the types of the assets as mentioned above. The alleged claim of disallowance of deduction also cannot fall under the category of either expenditure in respect of transaction in relation to an event or an entry in the books of account because it is neither a case of expenditure in respect of transaction in relation to an event nor a case of entry in the books of account as no entries are passed in the books of account for claiming a deduction under the provisions of the Act; (h) Respondent no. 1 has no power to review his own assessment when the same information was provided and considered by him during the original assessment proceedings. There cannot be a reopening based on a change of opinion. The claim of deduction under Section 80JJAA of the Act was made by petitioner in the return of income and petitioner had filed Form 10DA being the report of the Char....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ended by Section 3 of the Taxation and Other Laws (Relaxation and Amendment of certain provisions Act), 2020 (TOLA) read with Notification No. 20 of 2021 dated 31st March 2021 and Notification No. 38 of 2021 dated 27th April 2021, until 30th June 2021. The power of reassessment that existed prior to 31st March 2021 continued to exist till the extended period, i.e., till 30th June 2021. The Finance Act, 2021, however, has merely changed the procedure to be followed prior to issuance of notice with effect from 1st April 2021. Subsequently, the Hon'ble Apex Court in Ashish Agarwal (Supra) held that the Section 148 notices issued between 1st April 2021 and 30th June 2021 will be deemed to have been issued under Section 148A of the Act. Any notice issued under Section 148 from 1st April 2021 would be governed only by the timelines specified under the new Section 149 even though it may relate to the past assessment years. Consequently, applying the new Section 149, should any proceedings be initiated by the end of 31st March 2020, the same would get extended because of TOLA upto 30th June 2021. If this is not done then some of the assessment years for the past periods cannot be proceeded....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment order is passed not to the liking of petitioner. 17. Mr. Suresh Kumar and Mr. Sharma, who were present in Court because there were similar petitions where they are concerned on behalf of the Revenue, sought leave of the Court to make submissions in this petition as well to supplement the arguments of Ms Gokhale. They were permitted. 18. Mr. Suresh Kumar submitted as under : (a) In view of the Finance Act, 2021, which came into force from 1st April 2021, for Assessment Year 2015-2016, the Revenue will have upto ten years to issue notice under Section 148 of the Act subject to it complying with the preconditions mentioned in Section 149(1) (b) of the Act; (b) The six years limitation prescribed as it stood immediately before the commencement of the Finance Act, 2021 will not be applicable. 19. Mr. Sharma submitted as under : (a) The expression "at that time" used in the first proviso to Section 149(1) of the Act would mean 1st April 2021 and not the date of the notice under Section 148 of the Act. (b) Mr. Sharma, relying on the notification dated 29th March 2022 [Notification No. 18/2022/F. No. 370142/16/2022-TPL], submitted as und....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rejected. FINDINGS : 20. After hearing all the counsels, the following issues came up for consideration : (1) Whether TOLA is applicable for Assessment Year 2015-2016 and whether any notice issued under Section 148 of the Act after 31st March 2021 will travel back to the original date? (2) Whether the notice dated 27th August 2022 issued under Section 148 of the Act is barred by limitation as per the first proviso to Section 149 of the Act? (3) Whether the impugned notice dated 27th August 2022 is invalid and bad in law as the same has been issued without a DIN? (4) Whether the impugned notice dated 27th August 2022 is invalid and bad in law being issued by the JAO as the same was not in accordance with Section 151A of the Act? (5) Whether the issues raised in the impugned order show an alleged escapement of income represented in the form of an asset or expenditure in respect of transaction in relation to an event or an entry in the books of account as required in Section 149(1) (b) of the Act? (6) Whether respondent no. 1 has proposed to reopen on the basis of change of opinion and if it is permissible? (7) When....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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 the Act for the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. Mr. Sharma clarifies that the Income Tax Officer is only conveying the view of the Principal Commissioner of Income Tax because this letter has been issued on the letterhead of Principal Commissioner of Income Tax. 6. Even for....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the Act for the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. Mr. Sharma clarifies that the Income Tax Officer is only conveying the view of the Principal Commissioner of Income Tax because this letter has been issued on the letterhead of Principal Commissioner of Income Tax. 6. Even for a moment we agree with the view expressed by the Principal Commissioner of Income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding 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 - 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, sanction has been granted by an Additional Commissioner of Income Tax, it is not a valid sanction and therefore, notice issued based on an invalid sanction is also not valid and has to be quashed. ************************** (19) It is also petitioner's case that the approval obtained for issuing notice under section 148 of the Act is not in accordance with the mandate of Section 151 as the said approval is of Additional Commissioner of Income Tax instead of Principal Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h 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 petition." Similarly in Johnson and Johnson v. DCIT, Equitable Financial Consultancy Services Pvt Ltd v. ITO and Asian Paints Ltd. v. ACIT. Therefore, there is no question of Revenue relying on TOLA to justify the impugned notice under Section 148 of the Act as being within the period of limitation. 22. This Court in Tata Communications Transformation Services Ltd. (Supra) as well as in Siemens Financial Services (P.) Ltd. (Supra) has also rejected the argument of Revenue ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 of TOLA, which was only a relaxation provision dealing with time limits under various enactments. The Assessing Officer co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, which is binding on them as well as the well settled principle that the validity of a notice is to be judged on the basis of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rpose 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 survives". 44. As submitted by Mr. Mistri, with whom we agree, Chapter II of Relaxation Act provide for - "Relaxatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 will be apposite to notice that the amendments provided for in Section 4 were made by the Legislature itself in terms of the said S....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 matter of writ petitions before various High Courts shall be deemed to have been issued under Section 148A (b) of the Act and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssary to cite authorities in support of this position. Does the fact that the second proviso says that there is no period of limitation make a difference? xxxxxxxxxx. xxxxxxxxxx In J.P. Jani, Income-tax Officer v. Induprasad Devshanker Bhatt (1969) 72 I.T.R. 595; (1969) 1 S.C.R. 714 (S.C.) this court held that the Income-tax Officer cannot issue a notice under section 148 of the Income Tax Act, 1961, in order to reopen the assessment of an assessee in a case where the right ti reopen the assessment was barred under the 1922 Act at the date when the new Act camne into force. It was held that section 297(2)(d)(ii) of the 1961 Act was applicable only to this cases where the right of the Income-tax Officer to reopen an assessment was not barred under the repealed Act. This decision is broadly in line with the opinion of Das and Kapur JJ. in Prashar's case (1963) 49 I.T.R. (S.C.) 1; (1964) 1 S.C.R. 29 (S.C.) xxxxxxxxxx. For AY 2013-14, the time limit to issue a notice under Section 148 of the Act had already expired on 1st April 2021. On the said date, the assessee had a vested right, which de hors the 1st proviso to the amended Section 149 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2020. Hence, Notification No. 20 of 2021 did not apply to the facts of the present case. Notification No. 38 of 2021 dated 27th April 2021 categorically uses the expression the time limit for completion of such action expires on the 30th day of April 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June 2021. Hence, it is incorrect to say that 31st March 2021 under the Act would mean under the Act, plus, extension by TOLA; (d) The submission that the Hon'ble Supreme Court, while deciding Ashish Agarwal (Supra), was conscious of the limitation of 6 years expiring on 31st March 2021 under the pre-amendment provisions in respect of AY 2013-14 if the Covid period was not excluded, despite which the Apex Court has stated that all notices issued should be read to be issued under Section 148A to prevent the Revenue getting remediless, is unacceptable. This argument clearly fails to appreciate that the effect of Revenue's contention is that despite the substantive defence available to the assessee in Section 149 of the amended Act, as well as the express directions of the Hon'ble Supreme Court allowing the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity...". (e) The contentions that (i) the true meaning of Apex Court order in Ashish Agrawal (Supra) is that the notices issued under Section 148, irrespective of the Assessment Year of the unamended Act, between 1st April 2021 to 30th June 2021 are to be treated as show cause notices without being hit by limitation, if issued on or before 30th March 2021 and (ii) the defence under Section 149 available to the assessee would mean tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpired even under TOLA on 31st March 2021; (h) As regards Salil Gulati (Supra), the Delhi High Court, to reach its conclusion, has merely relied upon its earlier decision in Touchstone Holdings (Supra). It will be relevant to note that following Salil Gulati (Supra), a similar view was taken by the Delhi High Court in Yogita Mohan V/s. Income Tax Officer. Against the judgment, in an SLP preferred by the assessee, the Apex Court has issued notice vide its order dated 20th February 2023. It should also be noted that the Hon'ble Gujarat High Court in Keenara Industries (P.) Ltd. V/s. Income Tax Officer and the Allahabad High Court in Rajeev Bansal V/s. Union of India have taken a view that notices issued for AY 2013-14 were barred by limitation in view of the amended Section 149 of the Act. Subsequently, the Apex Court, in SLPs preferred by the Revenue, has issued notice and stayed both the orders/judgments; (i) We are unable to comprehend the contention raised that if the notice dated 30th May 2022 under Section 148A (b) of the Act is valid in terms of Apex Court order in Ashish Agrawal (Supra), then the notice under Section 148 of the Act cannot be issued on 31st M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: [Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,- (a) a search is initiated under section 132; or b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.] The first proviso to Section 149 of the Act provides that no notice under Section 148 shall be issued at any point of time in a case for a relevant assessment year beginning on or before the 1st day of April 2021, if a notice under Section 148 could not have been issued at that time on account of being beyond the time limit specified under the provision of clause (b) of sub-section (1) of this Section, as it stood immediately before the commencement of the Finance Act, 2021. The term 'at that time' in the first proviso refers to the date on which notice under Section 148 is to be issued by the Assessing Officer. The term 'at that time' has to refer to the term 'at any time' used earlier in the said proviso. The reference to 'at any time' is to the date of the notice to be issued by the Assessing Officer and, therefore, the term 'at that time' would also refer t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for Assessment Years 2013-2014 and 2014-2015 had already been barred by limitation on 1st April 2021. Accordingly, the extended period of ten years as provided in Section 149(1) (b) of the Act would not have been applicable to Assessment Years 2013-2014 and 2014-2015, de hors the proviso. It is a settled principle of law that when limitation has already expired, it cannot be revived by way of a subsequent amendment and, hence, for Assessment Years 2013-2014 and 2014-2015 proviso to Section 149 of the Act was not required. Hence, to give meaning to the proviso it has to be interpreted to be applicable for Assessment Years upto 2021-2022. In Commissioner of Income Tax vs. Onkarmal Meghraj (HUF) (1974) 93 ITR 233 (SC), the Hon'ble Apex Court was dealing with the question whether a proviso could be applied without reference to any period of limitation. It held that "it is a well-settled principle that no action can be commenced where the period within which it can be commenced has expired. It is unnecessary to cite authorities in support of this position. Does the fact that the second proviso says that there is no period of limitation make a difference?" The interpretation canva....
X X X X Extracts X X X X
X X X X Extracts X X X X
....petitioner on 8th April 2021 and as the said notice was issued within the period of six years from the end of the relevant assessment year, which was expiring on 31st March 2022, the reassessment proceedings are within the period of limitation prescribed in Section 149 of the Act. It is not acceptable. Section 149 of the Act sets out, inter alia, the time limit for issuing notice under Section 148 of the Act. Apart from the period of limitation set out in the said Section, the first proviso lays down a further restriction on the issue of a notice under section 148 of the Act. The period of limitation as well as the said further restriction is framed/provided in respect of a notice under 148 of the Act, and not for a notice under section 148A of the Act. The notice dated 8th April 2021, which though originally issued as a notice under section 148 of the Act, (under the provisions of the Act prior to the amendments made by the Finance Act, 2021), has now been treated as a notice issued under section 148A (b) of the Act in accordance with the decision of the Hon'ble Apex Court in Ashish Agarwal (Supra). Once the notice dated 8th April 2021 has been treated as having been issued....
X X X X Extracts X X X X
X X X X Extracts X X X X
....striction as per the first proviso. Hence, if a notice is not within the time prescribed under the first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth proviso and sixth proviso. In Godrej Industries Ltd. (Supra) paragraph 15 reads as under : 15. Based on petitioner's facts, the show cause notice under Section 148A (b) of the Act was issued on 24th May 2022 asking petitioner to furnish a reply by 8th June 2022. Petitioner filed a detailed reply in response to the show cause notice on 8th June 2022 and, therefore, only the period from 24th May 2022 to 8th June 2022 could be excluded by virtue of the first limb of the fifth proviso to Section 149 of the Act. Subsequently, petitioner received another letter dated 28th June 2022 which annexed certain details and provided further time for making detailed submissions upto 8th July 2022. Petitioner replied to the letter and made detailed submissions on 2nd July 2022. Therefore, even assuming this period is to be excluded, the period which could be excluded is only from 24th May 2022 to 8th June 2022. Even after considering the letter dated 28th June 2022 and the reply dated 2nd July 2022, at th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for extension for the period during which the proceeding under Section 148A of the Act is stayed. The original stay granted by this Court was not with respect to the proceeding under Section 148A of the Act, but with respect to the proceeding initiated as per the erstwhile provision of Section 148 of the Act and, hence, such stay would not extend the period of limitation as per the fifth proviso to Section 149 of the Act. The question of applicability of the sixth proviso does not arise on the facts of the present case. We find support for this in Godrej Industries Ltd. (Supra). In view of the aforesaid, the impugned notice dated 27th August 2022 is clearly barred by the law of limitation. 31. As regards issue no. 3, in the notice dated 27th August 2022 impugned in the petition, admittedly there is no DIN mentioned. It is petitioner's case that the notice is invalid and bad in law in view of the Circular No. 19 of 2019 dated 14th August 2019 issued by CBDT. A separate intimation letter also dated 27th August 2022 was issued and the said letter reads as under : निर्धारण वर्ष´/AY : 2015-16 ê....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch communication. The Circular reads as under : CIRCULAR NO. 19/2019 (F. NO. 225/95/2019-ITA. II], DATED 14-8-2019 With the launch of various e-governance Initiatives, Income tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax-administration Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that there have been some instances in which the notice. order, summons, letter and any correspondence (hereinafter referred to a communication" were found to have been issued manually, without maintaining a proper audit trail of such communication. 2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the income-tax Act, 1961 (hereinafter referred to as "the Act"), has decided that no communication shall be issued by any income-tax authority relating to as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....situations specified in para 3-(i), (ii) or (iii) above shall have to be regularised within 15 working days of its issuance, by- i. uploading the manual communication on the System. ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated proforma available on the System. 6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance. 7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the Income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31th October, 2019. Paragraph 3 of the Circular sets out five exceptional circumstances where the aforementioned mandatory requirement may not be adhered to, but requires that if an order/communication is to be issued without a DIN, it can be done only after recording reasons in writing in the file and with the prior writ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under Section 119 of the Act are binding on the revenue. xxxxxxxxxxx 18. The argument advanced on behalf the appellant/revenue, that recourse can be taken to Section 292B of the Act, is untenable, having regard to the phraseology used in paragraph 4 of the 2019 Circular. 19. The object and purpose of the issuance of the 2019 Circular, as indicated hereinabove, inter alia, was to create an audit trail. Therefore, the communication relating to assessments, appeals, orders, etcetera which find mention in paragraph 2 of the 2019 Circular, albeit without DIN, can have no standing in law, having regard to the provisions of paragraph 4 of the 2019 Circular. (c) During the course of hearing, Mr. Suresh Kumar produced an intimation letter dated 13th October 2021 stating that the order dated 28th September 2021 under Section 153C of the Act has a DIN, which is set out therein. Even if this is held to be in compliance with paragraph 5 of the Circular, which deals with regularization of communications without DIN, this can only seek to regularize the failure to generate a DIN, but yet the requirements of paragraph 3 of the Circular will still remain contrav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Government may, for the purpose of giving effect to the scheme made under sub-section (1), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, 2022. (3) Every notification issued under sub-section (1) and sub-section (2) shall, as soon as may be after the notification is issued, be laid before each House of Parliament. Section 151A of the Act gives the power to the Central Board of Direct Taxes ("CBDT") to notify the Scheme for : (i) the purpose of assessment, reassessment or recomputation under Section 147; or (ii) issuance of notice under Section 148; or (iii) conducting of inquiry or issuance of show cause notice or passing of order under Section 148A; or (iv) sanction for issuance of notice under Section 151; so as to impart greater efficiency, transparency and accountability by inter alia eliminating the interface between the Income Tax Authorities and assessee. Sub-section 3 of Section 151A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the Scheme so framed is required to be laid before each House of the Parliament. Therefore, the Scheme dated 29th March 2022 under Section 151A of the Act, which has also been laid before the Parliament, would be binding on the Revenue and the guideline dated 1st August 2022 cannot supersede the Scheme and if it provides anything to the contrary to the said Scheme, then the same is required to be treated as invalid and bad in law. 34. As regards ITBA step-by-step Document No. 2 regarding issuance of notice under Section 148 of the Act, relied upon by Revenue, an internal document cannot depart from the explicit statutory provisions of, or supersede the Scheme framed by the Government under Section 151A of the Act which Scheme is also placed before both the Houses of Parliament as per Section 151A(3) of the Act. This is specially the case when the document does not even consider or even refer to the Scheme. Further the said document is clearly intended to be a manual/guide as to how to use the Income Tax Department's portal, and does not even claim to be a statement of the Revenue's position/stand on the issue in question. Our observations with respect to the guidelines dated....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under Section 148 of the Act being assessment, reassessment or recomputation under Section 147 of the Act and inapplicable to the issuance of notice under Section 148 of the Act. The Scheme is clearly applicable for issuance of notice under Section 148 of the Act and accordingly, it is only the FAO which can issue the notice under Section 148 of the Act and not the JAO. The argument advanced by respondent would render clause 3(b) of the Scheme otiose and to be ignored or contravened, as according to respondent, even though the Scheme specifically provides for issuance of notice under Section 148 of the Act in a faceless manner, no notice is required to be issued under Section 148 of the Act in a faceless manner. In such a situation, not only clause 3(b) but also the first two lines below clause 3(b) would be otiose, as it deals with the aspect of issuance of notice under Section 148 of the Act. Respondents, being an authority subordinate to the CBDT, cannot argu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice. 38. With respect to the Office Memorandum dated 20th February 2023, the said Office Memorandum merely contains the comments of the Revenue issued with the approval of Member (L&S) CBDT and the said Office Memorandum is not in the nature of a guideline or instruction issued under Section 119 of the Act so as to have any binding effect on the Revenue. Moreover, the arguments advanced by the Revenue on the said Office Memorandum dated 20th February 2023 is clearly contrary to the provisions of the Act as well as the Scheme dated 29th March 2022 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'random' is used in clause 2(1)(b) of the said Scheme in the definition of "automated allocation". "Automated allocation" is defined in the said clause to mean "an algorithm for randomised allocation of cases.....". The term 'random', in our view, has been used in the context of assigning the case to a random Assessing Officer, i.e., an Assessing Officer would be randomly chosen by the system to handle a particular case. The term 'random' is not used for selection of case for issuance of notice under Section 148 as has been alleged by the Revenue in the Office Memorandum. Further, in paragraph 3.2 of the Office Memorandum, with respect to the reassessment proceedings, the reference to 'random allocation' has correctly been made as random allocation of cases to the Assessment Units by the National Faceless Assessment Centre. When random allocation is with reference to officer for reassessment then the same would equally apply for issuance of notice under Section 148 of the Act. (iii) The conclusion at the bottom of page 2 in paragraph 3 of the Office Memorandum that "Therefore, as provided in the scheme the notice under section 148 of the Act is issued on automated allocati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ral justice to the assessees as well as completion of required procedure in a reasonable time." In our opinion, there is no such power given to the administration under either Section 151A of the Act or under the said Scheme. The Scheme is clear and categorical that notice under Section 148 of the Act shall be issued through automated allocation and in a faceless manner. Therefore, the argument of the Revenue is clearly contrary to the provisions of the Scheme. (vi) In paragraph 3.3 of the Office Memorandum, it is again erroneously stated that "Here it is pertinent to note that the said notification does not state whether the notices to be issued by the NFAC or the Jurisdictional Assessing Officer ("JAO")......It states that issuance of notice under section 148 of the Act shall be through automated allocation in accordance with the risk management strategy and that the assessment shall be in faceless manner to the extent provided in section 144B of the Act." The Scheme is categoric as stated aforesaid that the notice under Section 148 of the Act shall be issued through automated allocation and in a faceless manner. The Scheme clearly provides that the notice under Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Scheme is not referred to in the order. Therefore, the said judgment cannot be treated as a precedent or relied upon to decide the jurisdiction of the Assessing Officer to issue notice under Section 148 of the Act. The Hon'ble Calcutta High Court has referred to an Office Memorandum dated 20th February 2023 being F No. 370153/7/2023 TPL which has been dealt with above. Therefore, no reliance can be placed on the said Office Memorandum to justify that the JAO has jurisdiction to issue notice under Section 148 of the Act. Further the Hon'ble Telangana High Court in the case of Kankanala Ravindra Reddy vs. Income Tax Officer (2023) 156 taxmann.com 178 (Telangana) has held that in view of the provisions of Section 151A of the Act read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We are also of the same view. 40. As regards issue no. 5, it is petitioner's case that the issues raised in the impugned initial notice and the impugned order pertain to correct claim of deduction/allowances or the expenditure incurred. There is also no allegation regarding income escaping tax on account of any undisclosed asset. In the impugned order, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eduction under Section 80JJAA of the Act was made by petitioner in the return of income and petitioner had filed Form 10DA being the report of the Chartered Accountant. In the said Form, a note has been filed alongwith Form 10DA and it has specifically been submitted by petitioner that software development activity constitutes 'manufacture/ production of article or thing'. The claim of deduction under Section 80JJAA of the Act was also disclosed in the Tax Audit Report filed by petitioner alongwith the return of income. Further, during the assessment proceedings, the Assessing Officer had issued a notice dated 5th October 2017 asking for details of deduction claimed under Chapter VI of the Act. Petitioner vide a letter dated 13th November 2017 gave the details of deduction claimed under Chapter VI of the Act alongwith supporting documents. The Assessing Officer has passed the assessment order dated 30th November, 2017 allowing the claim of deduction under Section 80JJAA of the Act. The claim for deduction under Section 80JJAA of the Act was allowed by the Assessing Officer in the previous years as well. Hence, the present case is clearly a case of change of opinion or review of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount of Rs. 6,41,87,931/- on account of software consumables in the profit and loss account and a detailed break-up of the said expenses were submitted before the Assessing Officer during the course of assessment proceedings vide a letter dated 6th December 2018. It is settled law that proceedings under section 148 cannot be initiated to review the earlier stand adopted by the Assessing Officer. The Assessing Officer cannot initiate reassessment proceedings to have a relook at the documents that were filed and considered by him in the original assessment proceedings as the power to reassess cannot be exercised to review an assessment. In petitioner's case the Assessing Officer having allowed the amount of software consumables as a revenue expenditure now seeks to treat the same as capital expenditure which is a clear change of opinion. Various judicial precedents have held that reassessment proceedings initiated on the basis of a mere change of opinion are invalid and 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in the assessment order dated 13th November 2017, now to disallow the same is based on a clear change of opinion. Reassessment proceedings initiated on the basis of a mere change of opinion is invalid and without jurisdiction. On this ground also the impugned notice issued under Section 148 of the Act has to be quashed and set aside. 44. As regards issue no. 7, sub-section (1) of Section 80JJAA of the Act reads as under: "Deduction in respect of employment of new employees. 80JJAA. (1) Where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-section (1) shall be allowed,- (a) if the business is formed by splitting up, or the reconstruction, of an existing business: Provided that nothing contained i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the business of manufacturing of apparel or footwear or leather products, the provisions of sub-clause (c) shall have effect as if for the words "two hundred and forty days", the words "one hundred and fifty days" had been substituted: Provided further that where an employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly; (iii) "emoluments" means any sum paid or payable to an employee in lieu of his employment by whatever name called, but does not include - (a) any contribution paid or payable by the employer to any pension fund or provident fund or any other fund for the benefit of the employee under any law for the time being in force; and (b) any lump sum payment paid or payable to an employee at the time of termination of his service or superannuation or voluntary retiremen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent Year 2015-2016 is only consequential as the eligibility to claim deduction was in the Assessment Year 2013-2014 and, therefore, there is no question of reopening the assessment for the relevant assessment to disallow the deduction under Section 80JJAA of the Act. 46. As regards issue no. 8, it is submitted by Mr. Mistri that on the facts of the present case, no person properly instructed in law could have granted approval for passing the order under Section 148A (d) of the Act. It is further submitted that the approval granted by respondent no. 3 does not show application of mind by respondent no. 3. Hence, the approval is invalid and bad in law. We are unable to agree with Mr. Mistri to hold, in the facts and circumstances of the case, there was non application of mind by the approving authority. 47. Therefore, the issues are answered as under: Issue no. Issue Answered 01 Whether TOLA is applicable for Assessment Year 2015-2016 and whether any notice issued under Section 148 of the Act after 31st March 2021 will travel back to the original date? No 02 Whether the notice dated 27th August 2022 issued under Section 148 of the Act is barred by limita....