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TaxTMI 
TaxTMI 
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2025 (4) TMI 1082
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....he "Act"), dated 30.05.2023 for Assessment Years 2014-15 and 2015-16. 2. Grounds taken by the Revenue in A.Y.2014-15 are reproduced as under: "1. On the facts and circumstances of the case, the Ld. CIT(A) erred in holding that notice issued u/s 148 of the Act dated 28.07.2022 as invalid ignoring the fact that the original notice u/s 148 of the Act was issued on 30.06.2021 i.e. within the extended time limit by TOLA, 2021. 2. On the facts and circumstances of the case, the Ld. CIT(A) erred in holding that notice issued 148 of the Act as invalid without appreciating the fact that the notice was issued following the decision of the Hon'ble Supreme Court in the case of Ashish Agrawal. 3. On the facts and circumstances of the case, the Ld. CIT(A) erred in allowing the expense of Rs. 3,28,17,678/- paid as sub contracting charges to Alia Construction without appreciating the fact that the assessee did not file any documentary evidence in support of expense. 4. On the facts and circumstances of the case, the Ld CIT(A) erred in allowing the expense of Rs. 3,28,17,678/- paid as sub contracting charges to Alia Construction without appreciating the fa....
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.... on account of improper gratification ignoring the fact that Shri Asuri Narayanan, financial controller at M/s Cognizant Solutions India Pvt. Ltd., in his statement recorded under oath has specifically stated that improper gratification were paid by L & T and these payments were reimbursed by CTS. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 13,47,00,000/- on account of improper gratification ignoring the fact that enquiry conducted by Security and Exchange Commission, USA has held that L & T had made payment of improper gratification and same were reimbursed in form of variation bill raised by L & T." 2.2. Grounds of objections raised by the assessee in its Cross Objection No.282/Mum/2024 for A.Y.2015-16 are reproduced hereunder:- "1. On the facts and circumstances of the case and for various propositions in law, the Ld. Commissioner of Income-tax (Appeals)-53 erred in upholding the reopening u/s 147 of the Income-tax Act, 1961 ("the Act") and passing the reassessment order u/s 148 of the Act, 2. The Cross objector prays that the reopening u/s. 148 and the reassessment order passed u/s.....
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....ed without following the law applicable u/s.148A, which is effective from 01.04.2021 and hence the proceedings so initiated are bad in law. According to the assessee, said notice issued on 30.06.2021 is barred by limitation, taking into consideration the amended provisions of Section 149 of the Act. 3.2. Ld. Assessing Officer, while dismissing the objections raised by the assessee observed that impugned notice was issued within the powers of the Department owing to time extended for the operation of old provisions of section 148 of the Act, till 30.06.2021. According to him, this was done by the Ministry of Finance by way of conditional legislation in the peculiar circumstances which arose during the pandemic and lock down for Covid-19. He thus, held the impugned notice as valid and legal. 3.3. To delve on the issue in hand before us, let us take note of the litigation journey so far and then adjudicate upon the same taking into consideration the amendments brought into the statute by the Finance Act, 2021 relating to re-assessment procedures, judgements of the Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal [2022] 138 taxmann.com 64 (SC) dated 04.0....
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.... at any time in a case for the relevant Assessment Year beginning on or before 1st day of April, 2021, if 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 specified under the provisions 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" 3.6. This proviso to section 149 provided a defence and limitation on issuance of notices under the new regime of re-assessment relating to the Assessment Years covered by the old regime. Thus, first proviso to section 149 under the new regime limits the retrospective operation to protect the interest of assessees. In the present case for A.Y. 2014-15, under the old regime as per section 149(1)(b), no notice u/s 148 could have been issued beyond 31.03.2021, considering limitation of six years. TOLA read with the Act, extended the time for issuing re- assessment notices u/s.148 which fell for completion from 20.03.2020 to 31.03.2021 till 30.06.2021. 3.7. TOLA on one hand extending the time limits as specified therein and on the o....
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....c interest. In order to strike a balance, Hon'ble Court exercised its discretionary jurisdiction under Article 142 of the Constitution of India so as to balance the interest of, both the Revenue and the assessee since, according to the Hon'ble Court, Revenue cannot be made remediless and so also not to frustrate the object and purpose of reassessment proceedings. Thus, showing some leeway, it was directed that re-assessment notices issued under the old regime shall be deemed to have been issued u/s.148A(b) of the Act (new regime), thereby, upholding the validity of notices issued on or after 01.04.2021, following the unamended provisions for re-opening of assessment. Accordingly, impugned notices issued to the assessees under unamended section 148 of the Act were deemed to be show cause notices in terms of section 148A(b) of the Act. Even though notices issued under the unamended section were deemed to be issued under the new regime, yet, Revenue was permitted to proceed for reassessment proceedings subject to compliance of procedural requirements and defences available to the assessee under the new regime and Finance Act, 2021. For this purpose, it modified certain procedu....
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....sessing Officer granted the adjournment to the assessee till 23.06.2022 and asked to furnish the reply by 24.06.2022, failing which proceedings u/s.148A(d) will be completed on merits of the case. Ld. Assessing Officer granted the adjournment by issuing letter dated 09.06.2022, content of which are extracted below: "In response to your adjournment letter filed by you on 09.06.2022 in the case of Larsen & Tubro Limited having PAN AAACL0140P, you are hereby given adjournment, till 23.06.2020 and you are requested to submit your reply by 24.06.2022. In case you fail to submit the reply within given time, the proceedings u/s 148A(d) will be completed on merit of the case. 3.13. Pursuant to aforesaid adjournment granted by ld. Assessing Officer, assessee filed its response on 28.06.2022. Ld. Assessing Officer passed order u/s. 148A(d) on 28.07.2022, considering the submissions of the assessee. Thereafter, notice u/s.148 of the Act was also issued on 28.07.2022. 3.14. Ld. Counsel for the assessee submitted a chart of events by listing the facts relevant to contentions raised on the legality of the re-assessment notice and impugned reassessment order thereon passed by the l....
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....e of the Section 148A(b) notice till the relevant material was supplied to the assesses. Therefore, the show cause notices were deemed to have been stayed until the assessing officers provided the relevant information or material to the assesses in terms of the direction issued in Ashish Agarwal (supra). To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices. 107. The third proviso to Section 149 allows the exclusion of time allowed for the assesses to respond to the show cause notice under section 149A(b) to compute the period of limitation. The third proviso excludes "the time or extended time allowed to the assessee." Resultantly, the entire time allowed to the assessee to respond to the show cause notice has to be exclud....
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....ed notice and 30 June 2021. 109. If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. A P Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom."] 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is ....
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.... 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred. G. Conclusions 114. In view of the above discussion, we conclude that: a. After 1 April 2021, the Income-tax Act has to be read along with the substituted provisions; b. TOLA will continue to apply to the Income-tax Act after 1 April 2021 if any action or proceeding....
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....sessee, time begins to run for the assessee to respond to the show cause notice. While analysing third proviso to section 149, Hon'ble Court noted that it excludes the time allowed for the assessee to respond to the show cause notice u/s. 148A(b) for computing the period of limitation. It is very categorically noted in para 107 of judgement in Rajeev Bansal (supra) that two weeks were provided to the assessee to reply to the show cause notice which is also liable to be excluded from the computation of limitation given in the third proviso to section 149. According to the decision of Rajeev Bansal (supra), notice u/s 148 to be issued in pursuance to the deemed notices had to be within the time limit surviving under the Act read with TOLA so as to give full effect to the legal fiction created by the judgment of Ashish Agarwal (supra). According to the Hon'ble Court, this would enable, both the assessees and the Revenue to obtain the benefit of all the consequences flowing from the fiction so created. 5.3. Hon'ble Court pin-pointedly noted that creation of legal fiction stopped the clock of limitation with effect from the date of notices issued u/s 148 under the old reg....
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....ed by the ld. Assessing Officer by granting extension of time limit up to 24.06.2022. Assessee filed its reply on 28.06.2022 which is beyond the period of two weeks as prescribed by the Hon'ble Apex Court and therefore according to the ld. CIT DR, assessee cannot claim relief provided in the judgement of Rajeev Bansal (supra). 6.1. According to ld. CIT DR, reply by the assessee is not within the permissible period of two weeks as provided by the aforesaid judgements and therefore provisions of section 148A(d) which provides for a period of 30 days is to be taken into account for passing the order u/s.148A(d) and issuing notice u/s. 148. Thus, applying the provisions of section 148A(d), the ld. Assessing Officer had time till 30.07.2022 and therefore impugned notice dated 28.07.2022 is well within the time allowed as per the provisions of section 148A r.w.s. 149 of the Act. 7. In the light of these arguments, let us first take note of specific observations made by the Hon'ble Apex Court in its judgment of Rajeev Bansal (supra) explaining the purpose of creating the legal fiction, supplementing the existing legal framework of procedure of reassessment and exercising its....
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.... para-108 that "...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." Thus, to give logical effect to the legal fiction and modified procedure, it brought out the concept of 'exclusion period' and 'surviving time limit'. 7.2. At this juncture, it is important to note that legal framework of procedure for reassessment under Act created by the Hon'ble Supreme Court through its judgments in Ashish Agarwal and Rajeev Bansal (supra), is a fiction by deeming the notice issued u/s 148 of the old regime as a show cause notice u/s 148A(b) of the new regime on which modified procedure is to be applied to give it a logical effect. Hence, the modified procedure is to be applied strictly for the purpose to be achieved, as already stated and extracted above. It is a well-established principle of interpretation that the courts must give full effect to a legal fiction by having due regard to the purpose for which the legal fiction is created. A legal fiction is created for a definite purpose and it should be limited to the purpose for which it is enacted or applied. 8. On the c....
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....ing effect to the new regime of legislative scheme of reassessment. 10. Ld. Assessing Officer was given 30 days from the date of judgment in Ashish Agarwal (supra), i.e. from 04.05.2022 to provide respective assessees, information and material relied upon, for reply by the assessee thereon. In the present case, ld. Assessing Officer complied with this direction by issuing the letter of proceedings (show cause notice) on 26.05.2022. Similarly, Hon'ble Court provided two weeks to the assessees to reply to the aforesaid show cause notices as noted in para 107 of Rajeev Bansal (supra). Hon'ble Court while fixing the time limit of two weeks for the assessee to respond to the show cause notice, nowhere, in both the judgments of Ashish Agarwal and Rajeev Bansal (supra) considered any extension of time limit which can be granted by the Assessing Officer at the instance of the assessee. 10.1. By taking the date of 26.05.2022 from the show cause notice in the present case, period of two weeks ended on 09.06.2022 for the assessee to furnish its reply. On this very date, when time limit of two weeks expires, assessee moved an application before the ld. Assessing Officer, seeking ....
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....148 shall be deemed to have been issued u/s. 148A as substituted by the Finance Act, 2021 and construed or treated to be the show cause notice in terms of section 148A(b). In view of this direction, the said notice u/s. 148, dated 30.06.2021 was deemed to be a show cause notice u/s. 148A(b) for which another one was issued on 26.05.2022, complying with the direction given in the case of Ashish Agarwal (supra). 12.1. Thereafter, provisions of section 148A(d) were complied with by passing an order, dated 28.07.2022 and issuing a notice u/s.148 of the same date (under the new regime). Assessee has contested by raising a ground of cross objection that the notice so issued is bad in law, invalid, void ab initio, to be quashed. Ld. Counsel strongly submitted that it is barred by limitation making the impugned reassessment proceedings and resultant reassessment order bad in law. 12.2. At the outset, we find that this issue has been settled in the case of Rajeev Bansal (supra) wherein reference is made to the submissions made on behalf of the Revenue vide para 19 which is relevant and the same is reproduced hereunder:- "19. Mr N Venkataraman, learned Additional Solicitor Gen....
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.....2024 TOLA not applicable f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; g. Section 2 of TOLA defines "specified Act" to mean and include the Income Tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income Tax Act. Therefore, TOLA continues to apply to the Income Tax Act even after 1 April 2021; and h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under Section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income Tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra). 12.3. Thus, it can be seen that Revenue conceded before the Hon'ble Supreme Court in para 19(f) for dropping all the notices ....