AI Drafter 
TaxTMI 
TaxTMI 
2025 (8) TMI 751
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....sions of section 148A(b) of the Act vide notice dt. 23-03-2022 wherein the assessee was asked to show cause as to why notice u/s. 148 of the Act should not be issued and to furnish necessary explanation along with supporting documentation on or before the 18-04-2022. The notice was issued and served through ITBA portal and also sent through speed post to the last mentioned address of the assessee. In response to the show cause, no reply was furnished by the assessee till the date. Thereafter the AO basis material available on record, recorded his findings, stating that in absence of any explanation or reply submitted by the assessee, it is clear that the assessee does not have any explanation and, therefore, it is a fit case for issuance of notice u/s. 148 of the Act and an order u/s. 148A(d) of the Act was passed on 23-04-2022, after seeking prior approval of the Commissioner of Income Tax (IT)-4, Mumbai, dt. 21-04-2022. Separately, notice u/s. 148 of the Act dt. 23-04-2022 was issued with the prior approval of the CIT(IT)-4, Mumbai, dt. 21-04-2022. In response to the 148 notice, the assessee filed his return of income on 30-12-2022, declaring NIL income. 3. Thereafter, notices....
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....ed in Mrs. Cecilia Rozario's case and the AO was also directed to intimate these directions to the AO of Mrs. Cecilia Rozario. Regarding the addition made by the AO, invoking the provisions of section 56(2)(x) of the Act, the assessee's objections were disposed off as not maintainable and addition made by the AO was held to be good in law. 6. Following the aforesaid directions of the DRP, the AO passed the final assessment order u/s. 147 r.w.s. 144C(13) of the Act, vide order dt. 30-12- 2024; wherein the unexplained investment of Rs 4,47,74,410/- was brought to tax on protective basis u/s. 69 of the Act and income from other sources of Rs 1,03,53,786/- was also brought to tax as originally done in the draft assessment order as so confirmed by the Ld.DRP and thereafter, the income was assessed at Rs. 5,51,28,196/-. Against the said final assessment order, the assessee is in appeal before us. 7. In his appeal, the assessee has taken various grounds of appeal, however, during the course of hearing, the arguments are advanced by both the parties only on the Ground No. 1 so taken by the assessee wherein the assessee has challenged the issuance of notice u/s. 148 dt. 23-04-2022 as ....
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.... of the specified authority, or without a proper sanction with application of mind, the jurisdictional conditions would be breached, which would result in rendering the reassessment proceedings to be completely without jurisdiction. It was submitted that grant of proper sanction is not just a procedural issue, but a jurisdictional issue as held by the Hon'ble Supreme Court. 10. Further reference was drawn to the first proviso to section 148, as it then stood at the relevant time, which requires a notice u/s. 148 of the Act to be issued with the prior approval of specified authority. It was further submitted that as per the Explanation 3 to section 148, specified authority means specified authority referred to in section 151 of the Act. It was submitted that the specified authority as per law as amended by the Finance Act, 2021 is as under: Specified Authority for issue of notice/orders Time limit (calculated from the end of the relevant assessment year) Principal Commissioner/Principal Director/Commissioner/Director Upto 3 years [S.151(i)] i.Principal Chief Commissioner/ Principal Director General More than 3 years [S.151(ii)] ii. Only if the above referred ....
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....he purposes of clause (i) shall be computed after taking into account the period of limitation as excluded by the third or fourth or fifth provisos or extended by the sixth proviso to sub-section (1) of section 149. It was submitted that even though both amendments are stated to be with effect from 01-04-2023, however, in the interest of justice and in the context of the Memorandum explaining the provisions in the Finance Bill, 2023 (the Memorandum) the said amendments should be considered to be retrospective i.e with effect from 01-04-2021. In support of his argument, the Ld. DR drawn our attention to the relevant clauses of the Memorandum. It was submitted that adverting to clauses 69, 70 and 71 of the Finance Bill, 2023, the Memorandum has explained the amendments in section 151 in the following words: "7. Section 151 of the Act contains provisions relating to the specified authority who con grant approval for the purposes of sections 148 and 148A of the Act. The said section provided that the authority would be the Principal Chief Commissioner and where there is no Principal Chief Commissioner, the Chief Commissioner shall give approvals beyond a period of three years.....
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....e regarded as retrospectively applicable w.e.f. 01-04-2021, it was submitted that there are various judicial precedents wherein, the provisions of the Income Tax Act, have been held to be retrospective in their application even though, indicated otherwise in the Finance Act. 17. In this regard, reliance was placed on the judgment of Hon'ble Supreme Court in the case of Commissioner of Income-tax, Ahmedabad vs. Gold Coin Health Food (P.) Ltd [2008] 172 Taxman 386 (SC). The issue before the Hon'ble Supreme Court was whether the amendments to Explanation 4 to Section 271(1)(c) made applicable from 01-04-2003 by Finance Act had retrospective applicability or not. The Hon'ble Apex Court held that the said amendments are clarificatory and applicable even retrospectively. The said judgment has been rendered by a larger Division Bench comprising of 3 Judges of the Supreme Court and it has reversed the earlier judgement of another Division Bench in the case of Virtual Soft Systems Ltd. (159 Taxmann 155) in which Revenue's arguments placing reliance on Notes to Clauses relating to the amendment (supra) to submit that the amendment was clarificatory in nature and consequent....
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.... drawn from this judgment of the Hon'ble Supreme Court is that any interpretation which may frustrate the very object and purpose of the Act/Statute shall be avoided by the Court. In the context of the present case, it was submitted that this principle needs to be applied, as otherwise, if the proviso to section 151 is not considered as retrospective by this Bench, it will frustrate and defeat the very object of the said proviso which is to clarify calculation of the extended time limit for sanction of PCIT to pass order u/s 148A(d) and enable issuance of notice u/s 148 for assessment/re-assessment of escaped income in cases which are reopened within 3 years from end of the assessment year. 20. It was further submitted that the ld AR has relied upon the case of Holiday Developers Pvt. Ltd. Vs. ITO, Ward-5(1)(1), Mumbai wherein by Judgement dated 29-01-2024 and in the case of KPMG LLP VS. ACIT(IT), Circle-2(1)(2), Delhi & Ors., wherein by judgment dated 21-02-2024, the Hon'ble Bombay High Court has quashed and set aside reopening notices for AY. 2018-19 on the ground that sanction granted by PCIT in these cases after the end of 3 years from end of the assessment year is invalid a....
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.... b. Section 70 of Finance Act, 2023 amended section 140A(4) which is applicable w.e.f. 01-04-2022: c. Section 100 of Finance Act, 2023 substituted clause (iv) in sub- section 9 which is applicable w.e.f. 01-02-2021; and d. Section 121 of Finance Act, 2023 inserted a proviso to section 274 which is applicable w.e.f. 01-04-2022 Thus, the Legislature has consciously not inserted the proviso to section 151 with retrospective effect. 23. It was further submitted that proviso to section 151 cannot resuscitate an approval which was illegal when it was granted. As already submitted earlier, approval of a specified authority is a jurisdictional requirement. It is a mandatory requirement. It is to protect an assessee from any unnecessary harassment of going through a reassessment proceeding which are not validly initiated. Without a valid approval, entire reassessment proceeding gets vitiated. Moreover, it is well settled, that an assessment creates a vested right [CED v. M.A. Merchant 1989 Supp (1) SCC 499; [2014] CIT vs. Vatika Township (P.) Ltd.367 ITR 466(SC)]. A notice/ order, which is not validly sanctioned, cannot be deemed to be validly sanctioned by ....
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....3 referred to as the relevant assessment year). Explanation. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.". 148. Issue of notice where income has escaped assessment- Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and set- ting forth such other particulars as may be prescribed; and the provisions of this Act sh....
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....levant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3- For the purposes of this section, specified authority means the specified authority referred to in section 151." "148A. Conducting inquiry, providing opportunity before issue of notice under section 148. The Assessing Officer shall, before issuing any notice under section 148,-(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him ....
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....ee years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice 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, 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 f....
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....levant assessment year and the AO has obtained prior approval of the specified authority to issue such notice. The specified authority has further been defined by way of Explanation 3 as the authority referred to in section 151 of the Act. 28. Thereafter if we look at the provisions of section 148A of the Act, it talks about conducting an enquiry by the AO with the prior approval of the specified authority with respect to information which suggests that the income chargeable to tax has escaped assessment. It further provides that an opportunity of being heard has to be provided to the assessee with the prior approval of specified authority by serving upon him a notice u/s 148A(b) to show cause within such time as may be specified in the notice not being less than seven days, but not exceeding thirty days from the date on which such notice is issued as to why the notice u/s. 148 should not be issued on the basis of information which suggest that income chargeable to tax has escaped assessment for the relevant assessment year. Thereafter, considering the reply so furnished by the assessee in response to the show cause, decide whether it is a fit case for issuing notice u/s. 148 by....
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.... 30. Section 151 of the Act talks about the specified authority for the purposes of Section 148 and 148A. It provides that the specified authority shall be Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; or Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. 31. As evident from the aforesaid reading of the provisions as amended by the Finance Act 2021, all the provisions have been inter-linked and therefore have to be read harmoniously to arrive at any conclusion in the instant case as to the period of limitation u/s. 149 and issuance of notice u/s. 148 as to whether issued within three years or beyond three years from the end of relevant assessment year and as to whether there is breach or a violation of the said provisions and there is any action on the part of the Assessing officer which defeat the provisions so laid down in the statute in terms....
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....ection 148A has to be excluded. Therefore, in the instant case, the period starting from 23rd March, 2022 till 18th April, 2022 has to be excluded by the AO for the purposes of computing the period of limitation under sub- section (1) to section 149 for the purpose of issuance of notice u/s. 148 of the Act. Where the said period is excluded in the instant case, three years period from end of the relevant AY. 2018-19 expires on 26-04-2022. Therefore, in the instant case, the matter falls under clause (a) to sub- section (1) to section 149 as the notice has been issued on 23-04-2022 i.e, prior to expiry of three years from the end of the relevant assessment year. Therefore, the contention of the ld AR that the notice u/s 148 has been issued beyond the period of three years from the end of the relevant assessment year 2018-19 cannot be accepted. 35. Further, in terms of 4th proviso to section 149, as noted above, where immediately after exclusion of the period referred to 3rd proviso, the period of limitation available to the AO for passing an order under clause (d) of section 148A is less than seven days such remaining period shall be extended to seven days and period of limitatio....
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.... discretion as such which has been provided to the AO to exclude the said period allowed to the assessee to respond or for that matter, no liberty has been provided to the assessee to claim non-applicability of the said proviso for the reason that he chooses to remain silent and didn‟t respond to the show-cause issued under 148A(b). In either case, period allowed to the assessee to respond to the show-cause has to be excluded. Once the period of limitation is so determined by the AO, thereafter, it is for the AO to reach out to the specified authority and for the purposes, he has to identify the specified authority as so defined in section 151 of the Act. The applicability of section 151 in terms of determining the specified authority to seek necessary approval will therefore arise once the period of limitation is determined and crystallised by the AO u/s 149 of the Act. We, therefore, find that in the instant case, the notice u/s. 148 has been issued to the assessee within a period of three years from the end of the relevant assessment year after obtaining approval of the specified authority as so provided under the statute. 38. Coming to the decisions of the Hon'ble Bomb....
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....'ble Bombay High Court has also referred to proviso to section 151 of the Act and has held that the same has been inserted only w.e.f. 1st April, 2023 and shall not be applicable in the facts of the said case. However, as we have noted above, there have been no contentions which have been advanced in terms of determining the period of limitation in terms of section 149 and it was taken as a given and an admitted and undisputed fact that the notice has been issued beyond the period of three years and the sanction so obtained by the AO was held to be invalid and notice u/s. 148 was set aside. 40. We also refer to the decision of the Co-ordinate Bench of the Tribunal in the case of Arihant Engineers vs. ITO, ITA No. 3660/Mum/2024, dt. 01- 10-2024 relied upon by the ld AR and again, we find that the Co-ordinate Bench of the Tribunal has referred to the decision of the Hon'ble Bombay High Court in the case of Siemens Financial Services (P.) Ltd., vs. DCIT (supra) and has decided the matter holding that the notice u/s. 148 has been issued in contravention of the provisions of section 151. There also, we find that there has been no contentions which have been raised or advanced by eith....
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....48A(d) of the Act has to be passed with the prior approval of the specified authority. The Explanation to section 148A of the Act also incorporates the meaning of 'specified authority' as provided for in section 151 of the Act. 24. As per section 151 of the Act, the 'specified authority' who has to grant his sanction for the purposes of section 148 and section 148A is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. The present petition relates to the AY 2016-17, and as the impugned order and impugned notice are issued beyond the period of three years which elapsed on 31st March, 2020 the approval as contemplated in section 151(ii) of the Act would have to be obtained which has not been done by the Assessing Officer. The impugned notice mentions that the prior approval has been taken of the 'Principal Commissioner of Income-tax 8' ('PCIT-8') which is bad in law as the approval should have been obtained in terms of section 1....
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....ars have elapsed on 31/03/2020 and the AO should have sought approval and complied with section 151(ii) and not section 151(i) of the Act. In light of the same, there was no occasion for the Hon'ble Bombay High Court to consider the provisions of section 149 of the Act and it was therefore, taken as an undisputed fact that the notice u/s. 148 has been issued beyond the period of three years and consequentially the specified authority as contemplated u/s. 151(ii) of the Act was held applicable instead of the specified authority as so defined in section 151(i) of the Act, from whom the AO has sought the necessary approval and it was accordingly held that such an approval obtained u/s 151(i) would be bad in law. 43. We, therefore, find that in none of the aforesaid decisions, the provisions of section 149 have been contended and examined by the Hon'ble High Court and the Coordinate Benches and, therefore, all these decisions does not support the case of the assessee as in the instant case, we have discussed supra, that as per 3rd proviso to section 149, notice u/s. 148 has been issued within the period of three years from the end of the relevant assessment year and for the purposes....