TaxTMI 
TaxTMI 
2025 (9) TMI 894
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....oner of Income Tax (Appeals) ought to have quashed the notice issued u/s 148 of the Act as barred by limitation, inasmuch as the notice was issued beyond three years from the end of A.Y. 2018-19, and the Assessing Officer did not have information suggesting that income of the appellant had escaped assessment for more than Rs. 50 lakhs. 3. Without prejudice to Ground No.2 above, the learned Commissioner of Income Tax (Appeals) ought to have quashed the notice issued u/s 148 of the Act as invalid, and consequently ought to have quashed the reassessment proceedings as void ab initio, inasmuch as there was no nexus between the information available and the belief formed. 4. The learned Commissioner of Income Tax (Appeals) ought to have held that since the Assessing Officer had not made any addition with respect to the reasons recorded in the order u/s 148A(d), he was precluded from making other additions. 5. Without prejudice to Grounds No.2 to 4 above, the learned Commissioner of Income Tax (Appeals) is not justified in upholding the action of the Assessing Officer in rejecting the books of account. 6. Without prejudice to the above, the learned Com....
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....income for A.Y. 2018-19 on 22.02.2025, declaring an income of Rs. 4,30,450/ -. 5. During the course of assessment proceedings, the assessee, inter alia, objected to the initiation of the assessment proceedings u/s 148A r.w.s 151 of the Act. Also, the assessee objected to the proposed variation as was sought to be made by the A.O. to his returned income. 6. Thereafter, the A.O. vide his Show-Cause Notice ("SCN") dated 20.11.2023, inter alia, called upon the assessee to put forth an explanation as to why his financials, being unreliable as per the observation of the auditor in his report published in "Form No. 3CD", wherein he had specifically stated that neither the cash balance nor the details of the sundry creditors/debtors or quantitative stocks, etc. were made available to him, thus, may not be rejected u/s 145(3) of the Act. Accordingly, the A.O. called upon the assessee to explain as to why his net profit may not be determined @ 8% of his declared turnover of Rs. 4,38,65,617/-, resulting to an addition of Rs. 35,09,250/ -. 7. Thereafter, the A.O. in the absence of any plausible explanation filed by the assessee, rejected his books of accounts u/s 145(3) of the Act, an....
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..../s 139(1) of the Act. Thus, the Appellant formed a reasonable belief that income of the Appellant has escaped assessment. The AO, thereafter, followed due process of law as provided u/s 148A of the Act. Since, the AO was not satisfied with the explanation given by the Appellant u/s 148A(b), he passed order u/s 148A(b) after obtaining approval from the competent authority. In this regard, the Appellant has raised legal issue that since amount escaping assessment was less than Rs. 50,00,000/-, the AO could not have issued beyond the period of 03 years. However, in the case of the Appellant, the AO has asked the Appellant to explain the nature of cash deposits exceeding Rs. 5,00,00,000/ -. Thus, its quite obvious that income escaping assessment exceeded Rs. 50,00,000/. As regards contention of the Appellant that cash deposits, per se, do not constitute income, the same is not correct in view of section 69A of the Act. As per the said section unexplained cash deposits in the bank account is deemed to be income of the assessee, if certain conditions are met. Further, the Appellant has not furnished any evidence that approval for issue of notice u/s 148 was not obtained from the competen....
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.... facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. This is evident from Explanation 3 to section 147 of the Act. It is not necessary that the Income Tax Officer should hold a quasi-judicial inquiry before acting under Section 147. It is enough if he on the information received believes in good faith that the assessee's profits have escaped assessment or have been assessed at a low rate. It is a settled issue that the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act. As discussed above, the 'Reasons for Reopening for reopening' Appellant's assessment for the relevant year meets the above criteria. With regards to the these observations, reliance is placed on the decision of Hon'ble Jurisdictional Gujrat High Court in the case of Kantibhai Dharamshibhai Narola Vs. ACIT, C/SCA/19549/2018, dated 06/01/2021 wherein, the Hon'ble High Court h....
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....argin declared by the assessee. The AO, in his wisdom, based on the details available on record, has worked out the net profit @8% of the turnover of the Appellant. The Appellant has not pointed any specific flaw as to how and why the AO has erred in taking the profit margin @8% of the turnover. Further, even in cases of whole sale distribution business, there is no thumb rule that the profit margin cannot exceed 2% of the turnover. Each case has to be assessed on the basis of its peculiar facts. In view of the same, I uphold the action of the AO in making an addition of Rs. 35,09,250/ -. Ground is, thus, dismissed. 5.5. As regards Ground 6, since the Appellant has not added, altered and substituted any of the grounds of appeal, the ground is dismissed as not pressed. 9. The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us. 10. The learned Authorized Representative (for short "Ld.AR") for the assessee, at the threshold of hearing of the appeal, submitted that the A.O. had grossly erred in law and on facts of the case in assuming jurisdiction and framing the impugned assessment vide his order passed u/s 147 r.w.s 144 r....
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....the validity of the jurisdiction assumed by the A.O. for issuance of notice u/s 148 dated 04.04.2022, i.e., without obtaining any approval from any of the authorities specified u/s 151 of the Act (as was applicable at the relevant point of time), therefore, we shall first deal with the same. 14. Admittedly, it is a matter of fact discernible from the record that the notice u/s 148 of the Act, dated 04.04.2022, had been issued by the ITO, Ward-2(1), Rajahmundry, after obtaining the prior approval of the Pr. CIT, Visakhapatnam-1, dated 02.04.2022 vide reference No.100000029868259. For the sake of clarity, we deem it fit to cull out the notice u/s 148 dated 04.04.2022. 15. At this stage, we may herein observe that nothing has been placed on our record by the Ld. DR to rebut the aforesaid factual position as has been brought to our notice. 16. Apropos the challenge thrown by the Ld. AR regarding the validity of the jurisdiction assumed by the A.O. for initiating proceedings u/s. 147 of the Act, i.e., without obtaining the approval of the specified authority u/s. 151 (ii) of the Act, we find substance in the same. Admittedly, the reassessment proceedings u/s. 147 of the Act had....
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....mation with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,- (i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act. Explanation 2 .- For the purposes of this section, where,- (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under subsection (2A) or subsection (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 valu....
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....tice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,- (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after 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 assesse....
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.... 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 is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this subsection shall be deemed to be extended accordingly. Explanation .- For the purposes of clause (b) of this subsection, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of subsection (1) as to the issue of notice shall be subject to the provisions of section 151.' Sanction for issue of notice- "151. Specified authority for the purposes of section 148 and section 148A shall be- (i) 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; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Direct....
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....rder passed under section 148A of the IT Act. section 148A of the IT Act is a new provision which is in the nature of a condition precedent. Introduction of section 148A of the IT Act can thus be said to be a game changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation. 6.3 But prior to pre-Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in the case of GKN Driveshafts (India) Ltd. (supra). 6.4 However, by way of section 148A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under section 148, the assessing officer shall (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if an....
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....annot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a Bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced w.e.f. 01.04.2021, under the unamended section 148. In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021. There appears to be genuine nonapplication of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the n....
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....lf of the respective assessees. We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. Therefore, we have proposed to pass the present order with a view avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA. 10. In view....
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....foresaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge. 12. The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only. All these appeals are accordingly partly allowed to the aforesaid extent. In the facts of the case, there shall be no order as to costs." (emphasis supplied by us) 18. Apart from that, we find that the CBDT vide Instruction No.01/2022 while directing implementation of the judgment of the Hon'ble Sup....