TaxTMI 
TaxTMI 
2025 (2) TMI 55
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....d under Section 148A (d) of the Act; iv) a notice dated 30.07.2022 issued under Section 148 of the Act; and (v) an assessment order dated 30.05.2023 framed under Section 147 of the Act read with Section 144 and 144B of the Act. These abovementioned impugned notices and orders were issued in respect of the assessment year (AY) 2013-14. 2. Mr Sehgal, the learned counsel appearing for the Assessee has confined the challenge to the notices and the orders impugned in this petition on a singular ground - that the order dated 30.07.2022 passed under Section 148A (d) of the Act (hereafter the impugned order) as well as the notice dated 30.07.2022 (hereafter the impugned notice) issued under Section 148 of the Act were beyond the period as stipulated under Section 149 (1) of the Act. 3. Mr Chawla, learned senior counsel appearing for the Revenue stoutly disputed the Assessee's claim that the impugned order and the impugned notice, are barred by limitation. He, however, did not dispute that if the Assessee's contention was accepted and the impugned notice was found to have been issued beyond the period of limitation, further proceedings pursuant to the impugned notice....
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....t. The AOs were also directed to furnish such material to the assessees, as was required on the basis of which such notices were premised. 10. In compliance with the said directions, the AO issued another notice dated 30.05.2022 in furtherance of the notice dated 01.06.2021 construing the same as a notice under Section 148A (b) of the Act. The Assessee was called upon to furnish a response to the said notice within a period of two weeks from the said date, that is, on or before 13.06.2022. 11. The petitioner furnished its response to the notice dated 30.05.2022 on 13.06.2022. 12. Thereafter, the AO passed the impugned order dated 30.07.2022 under Section 148A (d) of the Act holding that it was a fit case to re-open the Assessee's assessment for the AY 2013-14. According to the Assessee, the impugned notice was issued beyond the period of limitation as prescribed under Section 149 (1) of the Act as extended by the Supreme Court. 13. Pursuant to the aforesaid notice, the Assessee filed its return of income on 26.08.2022. The said proceedings culminated in the assessment order dated 30.05.2023, whereby the AO held that an entry amounting to Rs. 75 lacs remained unexplained....
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....ion that the Assessee's income that had escaped assessment in respect of AY 2013-14 was in relation to any asset located outside India. Thus, in terms of Section 149 (1)(b) of the Act as in force prior to 01.04.2021, no notice under Section 148 of the Act could have been issued beyond the period of six years from the end of the relevant assessment year. 18. In view of the above, no notice under Section 148 of the Act could have been issued in this case after 31.03.2020 in respect of AY 2013-14. 19. However, it is the Revenue's case that the impugned notice is within the time as extended by virtue of the TOLA [Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020] and the decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal. The Revenue contends that the impugned notice has been issued within the time as prescribed under Section 149 (1) of the Act computed in accordance with the third and fourth proviso to Section 149 of the Act as was in force at the material time [As in force with effect from 01.04.2021 but prior to 01.04.2023]. The learned counsel for the Revenue contends that the issue is substantially covered by the decisio....
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....d the said decisions before the Supreme Court. 25. The Supreme Court examined the amendments introduced in the Act relating to re-assessment of income and concurred with the views expressed by various high courts that it was incumbent upon the AO to follow the procedure as prescribed under Section 148A of the Act after 01.04.2021. The relevant extract of the said decision is set out below: "15. It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act ("the IT Act") by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended Sections 147 to 149 and Section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as: (1) no valid "reason to believe", (2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance ....
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....the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under section 148 of the IT Act: and (v) the AO is required to pass a specific order within the time stipulated. 20. Therefore, all safeguards are provided before notice under Section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per section 148-A(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under section 148-A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. 21. Substituted Section 149 is the provision governing the time-limit for issuance of notice under Section 148 of the IT Act. The substituted Se....
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....der Section 148-A(a) is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. 28.3. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required. 28.4. The assessing officers shall thereafter pass orders in terms of Section 148-A(d) in respect of each of the assessees concerned; Thereafter after following the procedure as required under Section 148-A may issue notice under Section 148 (as substituted). 28.5. All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the assessees concerned and Revenue under the Finance Act, 2021 and in law shall continue to be available." [emphasis added] 27. The Supreme Court also directed that the aforesaid directions would be applicable PAN India to all notices issued under Section 148 of the Act ....
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....ncome had escaped assessment. The reason to believe was not construed expansively. It was necessarily required to be based on tangible material having nexus with the view that an assessee's income had escaped assessment. 32. In GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 1 SCC 72, the Supreme Court upheld the procedure evolved to ensure that the assessments are not re-opened on the basis of reasons that are unsustainable. The Supreme Court had, thus, enabled the assessee to obtain a copy of the reasons for reopening of the assessments and file objections to the same. The AO was required to consider and decide the same. If the AO accepted the objections, the reassessment proceedings were required to be dropped. 33. The procedure for re-assessment was substantially amended by virtue of the Finance Act, 2021. Section 148A of the Act was introduced, which included the procedure for providing the assessee an opportunity to address any information available with the AO, which was suggestive of the assessee's income escaping assessment for any relevant year. The procedure enabled the AO to take an informed decision whether it was a fit case for issuance of a notice under Secti....
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....the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized 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 for the three assessment years immediately preceding the assessment year relevant to the previous ....
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.... the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under 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. Explanation.-For the purposes of this section, specified 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 ....
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.... in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151." 35. Subsequent to the Finance Act, 2021, the Finance Act, 2023 was brought into force with effect from 01.04.2023, wherein two additional provisos were added before the third and fourth proviso to Section 149 (1) of the Act, making the existing third and fourth provisos to fifth and sixth. In addition, by the Finance Act, 2023, the words "is less than seven days" were replaced by the words "does not exceed seven days" in the sixth proviso to Section 149 (1) of the Act. 36. It is also relevant to refer to Section 3 of TOLA. The relevant extract of Section 3(1) of the Act is set out below:- "3(1) Where, any time-limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March, 2020 to the 31st day of December, 2020, or such other date after the 31st day of December, 2020, as the Central Government, may, by notification, specify in this behalf, for the completion or compliance of such action as - (a) completion of any proceedings or passing of any or....
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....on 148A of the Act requires the AO to decide on the basis of the material on record, including the response furnished by the assessee to the notice issued under Section 148A (b) of the Act, whether it is a fit case for issuance of notice under Section 148 of the Act. The said clause also stipulates that such a decision is required to be made within one month from the end of the month in which a reply referred to Clause (c) is received by the AO or in case where no reply is furnished by the assessee, within one month from the end of the month in which time or extended time to furnish the reply expires. 43. Section 148 of the Act requires the AO to serve a copy of the notice under Section 148 of the Act along with an order passed under Clause (d) of Section 148A of the Act. As is apparent from the above, the procedure as prescribed under Section 148A of the Act including holding of inquiry as contemplated under Clause (a) of Section 148A of the Act; issuance of a show cause notice under Section 148A (b) of the Act; considering the reply of the assessee under Clause (c) of Section 148A of the Act; and deciding in terms of Clause (d) of Section 148A of the Act, whether it is a fit c....
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....prior to 01.04.2023) reads as under: Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: 50. As is apparent from the above, third proviso to Section 149 (1), provides for exclusion of time in computing of the limitation period to the aforesaid extent: (i) the time or extended time allowed to the assessee in the show cause notice issued under Section 148A (b) of the Act; and (ii) the period during which proceedings under Section 148A of the Act are stayed by an order or injunction by any court, are required to be excluded. 51. Thus the period of three years or ten years from the end of the relevant assessment year, as the case may be, is required to be computed after excluding the time allowed to an assessee as per the show cause notice issued under Section 148A (b) of the Act or if there is a stay order or injunction passed by any court staying the proceedings under....
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....od of ten years (after excluding the time provided to the assessee to respond to the notice under Section 148A (b) of the Act) and seven days as the case may be. 54. It is obvious, that in such a case, the AO would not have a time for passing an order under Section 148A (d) of the Act as stipulated under the said Clause, that is, one month from the end of the month in which the assessee furnishes a reply to the notices issued under Section 148A (b) of the Act. As noted above, the AO is required to complete the entire procedure for issuance of notice under Section 148 of the Act within the period as prescribed under Section 149 of the Act. Plainly, if the AO is unable to complete such procedure within the period of limitation, the AO would cease to have the jurisdiction to issue such a notice. 55. As noted above, in Union of India & Ors. v. Ashish Aggarwal, also emphasises the requirement of the notice under Section 148 being accompanied by an order under Section 148A (d) of the Act [Paragraph 6.2]. 56. This aforesaid aspect was examined by this court in Raminder Singh v. Assistant Commissioner of Income Tax Circle 52 (1) New Delhi Neutral Citation No.:2023:DHC:6672-DB. In ....
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....s apparent that an order under clause (d) of Section 148A of the Act must precede the issuance of notice under Section 148 of the Act. It follows that although in terms of clause (d) of Section 148A of the Act, the time available to the Assessing Officer to make an order under the said clause is one month from the end of the month in which the time provided to the assessee to respond to a notice under clause (b) of Section 148A of the Act expires; the said order is required to be necessarily passed within the time period available for issuing a notice under Section 148 of the Act. This is so because in terms of Section 148 of the Act, the order under clause (d) of Section 148A of the Act is required to accompany the notice under Section 148 of the Act. 17. Section 149 (1) of the Act expressly provides the time limit for issuing the notice under Section 148 of the Act. The relevant extract of the Section 149 (1) of the Act is set out below: "149. (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....
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....e Act for issuance of a notice under Section 148 of the Act. This is because a notice under Section 148 of the Act which is not accompanied with the order under Clause (d) of Section 148 of the Act would be non-compliant with the Act. And, no such notice can be issued beyond the period as specified under Section 149 (1) of the Act." UNION OF INDIA & OTHERS V. RAJEEV BANSAL. 57. The question arose as to the applicability of the TOLA to the notices issued for reassessment after 01.04.2021; as to the validity of the notices issued under Section 148 of the Act; and the Finance Act, 2021 which fell for consideration of the Supreme Court in the case of Union of India & Ors. v. Rajeev Bansal. 58. The question whether the impugned notices were issued within the time is, thus, required to be addressed by referring to the decision rendered by the Supreme Court in Union of India & Ors. v. Ashish Agarwal and Union of India & Others v. Rajeev Bansal. 59. The Supreme Court noted the effect of TOLA and the notifications issued by the Government of India as under:- "9. The effect of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and the noti....
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.... as show-cause notices under Section 148A (b) of the new regime. The purpose of the legal fiction was to enable the Revenue "to proceed further with the reassessment proceedings as per the substituted provisions" of the Income-tax Act. Accordingly, all the reassessment notices issued under the old regime were deemed to always have been show-cause notices issued under section 148A (b) of the new regime. The fiction replaced section 148 notices with section 148A (b) notices with effect from the date when the notices under section 148 of the old regime were issued between April 1, 2021 and June 30, 2021, as the case may be. This ensured the continuance of the reassessment process initiated by the Revenue from April 1, 2021 to June 30, 2021 under the old regime. 100. Importantly, this Court in Union of India v. Ashish Agarwal (supra) did not quash the reassessment notices issued under section 148 of the old regime. In Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association : (1992) 3 SCC 1, a three-Judge Bench of this court explained the distinction between quashing an order and staying the operation of an order thus: "10. [...] Quashing of an order resu....
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....riod during which the proceedings under Section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under section 148A (b) and the date of the decision of this Court in Union of India v. Ashish Agarwal (supra), the Assessing Officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show-cause notices were deemed to have been stayed by order of this Court from the date of their issuance (somewhere from April 1, 2021 till June 30, 2021) till the date of decision in Union of India v. Ashish Agarwal (supra), that is, May 4, 2022. 106. In Union of India v. Ashish Agarwal (supra), this court directed the Assessing Officers to provide relevant information and materials relied upon by the Revenue to the assesses within thirty days from the date of the judgment. A show-cause notice is effectively issued in terms of section 148A (b) only if it is supplied along with the relevant information and material by the Assessing Officer. Due to the legal fiction, the Assessing Officers were deemed to have been inhibited from acting in pur....
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....arch 20, 2020 to March 31, 2021, till June 30, 2021. All the reassessment notices under challenge in the present appeals were issued from April 1, 2021 to June 30, 2021 under the old regime. Union of India v. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show-cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. [East End Dwellings Co. Ltd. v. Finsbury Borough Council, [1952] AC 109. (Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] Therefore, the logical effect of the creation of the legal fiction by Union of India v. Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certai....
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....ceived the response of the assesses to the show-causes notices. After the receipt of the reply, the Assessing Officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the Assessing Officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, was available to the Assessing Officers to issue the reassessment notices under section 148 of the new regime." 63. It is clear from the above that the Supreme Court had in unambiguous terms held that (a) the date of notices issued under Section 148 of the Act, under the old regime which was subject matter of challenge in Union of India & Ors. v. Ashish Agarwal, has not been struck off and further notices and orders issued under Section 148 of the Act we....
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....f providing material, as required to the accompanied with a notice under Section 148A (b) of the Act, is required to be excluded. Thus, the period between 04.05.2022 to 30.05.2022, the date on which the AO had issued the notice under Section 148A (b) of the Act in furtherance of his earlier notice dated 01.06.2021, is also required to be excluded by virtue of the third proviso to Section 149 (1) of the Act as held by the Supreme Court in Union of India & Ors. v. Rajeev Bansal4. 68. In addition to the above, the time granted to the petitioner to respond to the notice dated 30.05.2022 - the period of two weeks -is also required to be excluded by virtue of the third proviso to Section 149 (1) of the Act. The petitioner had furnished its response to the notice under Section 148A (b) of the Act on 13.06.2022. Thus, the period of limitation began running from that date. 69. As noted above, by virtue of TOLA, the AO had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings, which began on 01.06.2021, to issue a notice under Section 148 of the Act. The said notice was required to be accompanied by an order under Section 148A (d) of the....