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2025 (8) TMI 916
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.... JUDGMENT ( Per : Chief Justice ) 1. Petitioner impugns the legality and validity of notice dated 31st March 2024 issued under Section 148A(b) of the Income Tax Act, 1961 (for short, 'the Act'), reassessment notice dated 1st May 2024 issued under Section 148 of the Act and order dated 1st May, 2024 passed under Section 148A(d) of the Act. According to petitioner, these are all invalid, illegal, barred by limitation and issued wholly without jurisdiction. 2. Petitioner is engaged in the business of manufacturing and sale of cement. Petitioner, (hereinafter referred to as assessee), filed its return of income on 31st November 2017 for Assessment Year 2017-18 declaring total income of Rs. 4,53,70,36,160/-. Assessee declared gross total income of Rs. 17,00,70,85,867/- and after claiming deduction of Rs. 12,47,00,49,710/- arrived at declared total income of Rs. 4,53,70,36,160/-. This return was later revised on 31st March 2019 with a returned income of Rs. 2,87,91,24,160/- by declaring gross total income of Rs. 16,33,35,78,814/-, in which a deduction of Rs. 13,45,44,54,657/- was claimed. 3. An assessment under Section 143(3) of the Act was completed on 12th August 2021 by....
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....pondent No. 1 alleged that he was in possession of information suggesting that income chargeable to tax had escaped assessment. 7. By a communication dated 25th April 2024, petitioner filed a detailed response to impugned notice dated 31st March 2024 and showed cause as to why petitioner was entitled to deduction claimed under Section 80IA of the Act. In the reply, petitioner submitted, inter alia, that (a) impugned notice seeking to invoke provisions under Section 148 of the Act was barred by limitation; (b) deduction claimed under Section 80IA of the Act had been subjected to detailed scrutiny during original assessment proceedings and thus, proceedings were based on change of opinion; (c) since the notice was issued beyond the period of three years from the end of relevant assessment year, satisfaction of the conditions of Section 149(1)(b) of the Act was necessary and mere information was not sufficient; (d) deduction under Section 80IA of the Act would not fall within any of the terms prescribed in Section 149(1)(b) of the Act, i.e., possession of books of accounts or other documents or evidence which revealed that income chargeable to ta....
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.... barred by limitation. That question came to be answered by the Court in Paragraph Nos. 24 to 30 thereof. It is also settled law that validity of notice under Section 148 of the Act must be judged on the basis of law existing on the date on which such notice is issued. Paragraph Nos. 24 to 30 of the decision of Hexaware Technologies Ltd. (supra) read as under: "24. As regards issue no. 2, Section 149 of the Act reads as under: 149. Time limit for notice.-(1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); [(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of- (i) an asset; ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amou....
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....otice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:] 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: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A 30[does not exceed seven days], such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.-For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. [(1A) Notwithstanding anything contained in sub-secti....
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.... the said section. This is squarely covered by paragraphs 36 and 37 of New India Assurance (supra) which has been reproduced above in paragraph 23. 26. The purpose of the first proviso to Section 149 of the Act is consistent with the stated object of the government to make prospective amendments in the Act. Accordingly, the proviso provides that up to Assessment Year 2021-2022 (period before the amendment), the period of limitation as prescribed in the erstwhile provisions of Section 149(1)(b) of the Act would be applicable and only from Assessment Year 2022-2023, the period of ten years as provided in Section 149(1)(b) of the Act, would be applicable. The submission 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 sustainable. The interpretation canvassed by the Revenue is clearly contrary to the plain language of the proviso. When the language in the statute is clear, it has to be so interpreted and there is no scope for interpreting the provision on any other basis. The taxing st....
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....1st day of April, 2021] 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; OR 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 a notice under section 148 or Section 153A or Section 153C could not have been issued at that time [on 1st day of April, 2021] 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". 28. Section has to be interpreted so as to give meaning to all the words/phrases used in the Section and it should not be interpreted in such a way so as to render any part or phrase in the Section otiose. As stated aforesaid, if the interpretation canvassed by the Revenue is to be accepted then, not only various parts of the Section would be rendered otiose....
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....sessment Year 2015-2016, the erstwhile time limit of six years expired on 31st March 2022 and, the impugned notice under section 148 of the Act has been issued on 27th August 2022 and, therefore, the impugned notice dated 27th August 2022 is barred by the restriction of the first proviso to Section 149 of the Act. 30. With respect to applicability of the fifth proviso and the sixth proviso to Section 149(1)(b) of the Act for extension of limitation for issuing the notice under section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed in Section 149(1) of the Act, i.e., three years or ten years, as the case may be. Fifth proviso or sixth proviso extend limitation for issuing notice under section 149 of the Act, however, the first proviso is an exception to the period of limitation and provides for a restriction on the notices under section 148 being issued for Assessment Years upto 2021-22 beyond a certain date. Therefore, the way the Section would operate, is first to decide whether a notice issued under section 148 of the Act is within the period of limitation in terms of Section 149(1)(a) or (b) of the Act. T....
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.... notice under section 148 of the Act issued on 31st July 2022, the impugned notice would yet be barred by limitation and could not have been issued by virtue of the first proviso to Section 149 of the Act. Even if the fifth and sixth provisos are held to be applicable, the impugned notice would still be beyond the period of limitation. The fifth proviso extends limitation with respect to the time or extended time allowed to an assessee as per the show cause notice issued under section 148A(b) of the Act or the period, during which the proceeding under section 148A of the Act are stayed by an order of injunction by any Court. Hence, in the present case, in view of 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. Further, the time 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 responde....
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.... of the Act being issued for assessment years up to 2021-22 (in this case, it is Assessment Year 2017-18) beyond a certain date. Therefore, the way the section would operate, is to first decide whether a notice issued under Section 148 of the Act is within the period of limitation under Section 149(1)(a) or (b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the extension of time as prescribed in fifth and/or sixth proviso would be considered. The Court further held once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said limit is within the prescribed restriction provided in first proviso or not. If the notice is beyond the restriction period, the notice is invalid, and the fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per first proviso. Hence, if a notice is not within the time prescribed under first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth or sixth proviso. In Hexaware Technologies Ltd. (supra), the Court had relied upon another judgment of Bombay High Court in Godrej I....
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....ty by- (a) eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a team-based assessment, reassessment, recomputation or issuance or sanction of notice with dynamic jurisdiction. (2) The Central 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....
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....ding filed by an assessee. The Court held that guidelines are subordinate to the principal Act or Rules, it cannot restrict or override the application of specific provisions enacted by legislature. The guidelines cannot travel beyond the scope of the powers conferred by the Act or the Rules. The guidelines do not deal with or even refer to the Scheme dated 29th March 2022 framed by the Government under section 151A of the Act. Section 151A(3) of the Act provides that 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 15....
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....that the Scheme so framed is applicable only 'to the extent' provided in Section 144B of the Act and Section 144B of the Act does not refer to issuance of notice under section 148 of the Act and hence, the notice cannot be issued by the FAO as per the said Scheme, we express our view as follows:- Section 151A of the Act itself contemplates formulation of Scheme for both assessment, reassessment or recomputation under section 147 as well as for issuance of notice under section 148 of the Act. 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....
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....ed in Section 144B of the Act" would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub-section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme. 37. When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and 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 ....
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....selection can be based on certain well- defined criteria. Hence, the argument of respondents is clearly unsustainable. If the case of respondent is that the applicability of Section 148 of the Act is on random basis, then the provision of Section 148 itself would become contrary to Article 14 of the Constitution of India as being arbitrary and unreasonable. Randomly selecting cases for reopening without there being any basis or criteria would mean that the section is applied by the Revenue in an arbitrary and unreasonable manner. The word '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, w....
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....8 of the Act, the term "flagged" has been deleted by the Finance Act, 2022, with effect from 1st April 2022. In any case, whether only cases which are flagged can be reopened or not is not relevant to decide the scope of the Scheme framed under section 151A of the Act, which required the notice under section 148 of the Act to be issued on the basis of random allocation and in a faceless manner. (v) The Revenue has wrongly contended in paragraph 3.1 of the Office Memorandum that "Therefore, whether JAO or NFAC should issue such notice is decided by administration keeping in mind the end result of natural 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 ....
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.... is without appreciating that one of the main principles laid down in the Scheme is that the notice under section 148 of the Act is required to be issued through automated allocation and in a faceless manner. There is no leeway given on the said aspect and, therefore, there is no question of the administration to device and modify procedures with respect to the issuance of notice. 39. With reference to the decision of the Hon'ble Calcutta High Court in Triton Overseas (P.) Ltd. (supra), the Hon'ble Calcutta High Court has passed the order without considering the Scheme dated 29th March 2022 as the said 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 Cour....