TaxTMI 
TaxTMI 
2026 (9) TMI 115
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....aid amount was not allowable under section 43B of the Act and that income chargeable to tax had escaped assessment. The proceedings ultimately culminated in the issuance of notice under section 148 dated 28.07.2022, stated to have been issued pursuant to the order under section 148A(d) with the approval of the competent authority. 3. The assessee had explained during the proceedings that, on account of a dispute with the Excise Department, instead of making direct payment of the licence fee, an FDR-backed bank guarantee of Rs. 2,19,02,893/- was furnished on 23.01.2017 in favour of the Excise Department and that, after disposal of the dispute by the Hon'ble High Court, the Excise Department realised the amount by encashing the bank guarantee. The Assessing Officer did not accept the explanation, principally on the ground that the assessee had not furnished documentary evidence substantiating the alleged dispute, the furnishing of the bank guarantee or compliance with section 43B. 4. Assessee filed the appeal before the Ld. CIT(A), the learned CIT(A), however, did not adjudicate the challenge to the validity of the reassessment proceedings on the basis of any independent ex....
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....d of the relevant assessment year expired on 31.03.2021. The notice under section 148, however, was issued only on 28.07.2022, i.e. much beyond the expiry of three years. 9. It was contended that, by virtue of the substituted provisions of section 151, applicable to the reassessment proceedings under the new regime, where more than three years had elapsed from the end of the relevant assessment year, the specified authority was the Principal Chief Commissioner or Principal Director General or, where there was no such authority, the Chief Commissioner or Director General. The Principal Commissioner of Income Tax was the specified authority only where three years or fewer had elapsed. 10. The learned AR accordingly submitted that approval granted by the Principal Commissioner of Income Tax could not satisfy the mandatory requirement of section 151(ii). The defect was not a mere procedural irregularity but went to the root of the Assessing Officer's jurisdiction to issue the notice under section 148. Consequently, the notice issued without sanction from the prescribed specified authority, as well as the reassessment proceedings and the consequential assessment order, were co....
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....1 Brief factual background The reassessment proceedings in the present case did not originate from the notice issued after passing the order under section 148A(d). Rather, the proceedings commenced with the issuance of notice under section 148 of the Income-tax Act on 22.04.2021 (Copy enclosed) under the unamended provisions after obtaining approval from the competent authority then prescribed under law. Subsequently, the Hon'ble Supreme Court in Union of India vs. Ashish Agarwal directed that all notices issued between 01.04.2021 and 30.06.2021 under the erstwhile provision", shall be deemed to be notices issued under section 148A(b) and that the Assessing Officer shall thereafter provide the relied upon material, consider the assessee's submission, pass an order under section 148A(d), and thereafter issue notice under section 148, wherever required. The order under section 148A(d) in the present case specifically records that the original notice dated 22.04.2021 stood covered by the Supreme Court judgment and that the consequential procedure was undertaken accordingly. In compliance with the above directions, the information relied upon was furn....
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.... limitation wherever the prescribed period falls during the TOLA period and has to be read harmoniously with section 149 of the substituted law The Supreme Court has specifically held that: • TOLA does not become inoperative after 01.04.2021 merely because the reassessment provisions were substituted; • the limitation under section 149 has to be read together with the extensions granted by TOLA; and • while computing limitation, the period during which the Assessing Officer was disabled from proceeding pursuant to the judgment in Ashish Agarwal and the period granted to the assessee for filing objections are to be excluded. Accordingly, the plea of limitation raised by the assessee is contrary to the law declared by the Hon'ble Supreme Court. 2.4 Competent authority under section 151 The assessee has further contended that approval ought to have been obtained from the Principal Chief Commissioner under section 151(ii). This contention is equally misconceived. The Supreme Court has now clarified that TOLA extends not only the limitation for issuance of notice but also the statutory timel....
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.... the Hon'ble Supreme Court and the period granted to the assessee for filing objections are liable to be excluded while computing limitation. Consequently, the limitation cannot be examined merely with reference to the date of the consequential notice issued after passing the order under section l48A(d). Ground No.4 The assessee contends that approval ought to have been obtained from the Principal Chief Commissioner. The contention overlooks the legal effect of TOLA and the judgment in Ashish Agarwal The Hon'ble Supreme Court has clarified that TOLA also governs the question of sanction under section 151 and that the specified authority has to be determined after giving effect to the statutory extensions granted thereunder. Therefore, the approval obtained from the Principal Commissioner of Income-tax before passing the order under section 148A(d) cannot be held to be invalid merely because the consequential notice was issued after completion of the section 148A procedure. Ground regarding reliance on the Mumbai ITAT decision The assessee has relied upon the decision of the Mumbai Bench of the Tribunal in Nickson Morris ....
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.... the period of three years contemplated under section 151 (i) stood expired. 22.04.2021 The Assessing Officer initially issued a notice under section 148 on the ground that licence fee of Rs. 2,19,02,893/- had remained unpaid before the due date of filing the return under section 139(1). 01.04.2021 onwards Consequent upon the judgment of the Hon'ble Supreme Court and the substitution of the reassessment provisions by the Finance Act, 2021, the notice issued under the erstwhile provisions was treated/deemed to be a notice under section 148A(b). 02.06.2022 The information/material relied upon for reopening the assessment was supplied to the assessee, and the assessee was called upon to respond pursuant to the directions of the Hon'ble Supreme Court. 28.07.2022 After considering the assessee's explanation, the Assessing Officer recorded that income chargeable to tax had escaped assessment and passed the order under section 148A(d). On the same date, notice under section 148 was issued. The assessment order records that the notice was issued with the approval of the competent authority. 28.07.2022 The notice under section 148 was accordingly se....
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....6.2022, the objections of the assessee were considered, and the order under section 148A(d) was passed on 28.07.2022, after obtaining prior approval of the Principal Commissioner of Income-tax-1, Ludhiana, followed by issuance of the notice under section 148. 17. The significance of section 151 has been explained by the Hon'ble Supreme Court in Union of India v. Rajeev Bansal, wherein the Court recognised that the specified authority under section 151 is directly correlated with the time at which the notice is issued. The statutory distinction between section 151(i) and section 151(ii) is, therefore, not ornamental. Parliament has consciously prescribed a higher level of scrutiny where the Revenue seeks to disturb a completed assessment after the longer period contemplated by the statute. 18. In the present case, more than three years had elapsed from the end of A.Y. 2017-18 by the time the consequential notice under section 148 was issued on 28.07.2022. The Revenue's own submission establishes that the approval for the order under section 148A(d) and the consequential notice under section 148 was obtained from the Principal Commissioner of Income-tax-1, Ludhiana. Thu....
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....ded to constitute a meaningful safeguard against arbitrary or mechanical disturbance of a completed assessment. 22. The reasoning of the Hon'ble Calcutta High Court in Kamla Properties is particularly instructive in the present context. The Court rejected the notion that sanction under section 151 was merely a departmental formality. It held that where the decision of the sanctioning authority is likely to affect the assessee and produce adverse civil consequences, the authority must exercise the power with due application of mind. 23. We are conscious that Kamla Properties was rendered under the earlier statutory framework and that the present controversy arises under the substituted reassessment regime. We are not, therefore, applying the decision mechanically. We rely upon it for the fundamental principle concerning the nature and purpose of statutory sanction under section 151. That principle remains relevant irrespective of the changes subsequently made in the statutory language. 24. The same principle also explains why Parliament has prescribed different authorities in section 151 depending upon the period elapsed from the end of the relevant assessment year. The....
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.... otiose. If an approval obtained at the stage of the original notice could automatically be carried forward to validate a subsequent notice under section 148, the requirement of obtaining approval from the specified higher authority at the later stage would become meaningless. 28. The Revenue cannot, on the one hand, rely upon Ashish Agarwal to contend that the original notice dated 22.04.2021 was transformed into a deemed notice under section 148A(b), and, on the other hand, contend that the approval obtained from the Principal Commissioner was sufficient for the subsequent exercise under sections 148A(d) and 148. The two stages have distinct statutory consequences and must satisfy the requirements applicable to the respective stages. Both the approaches of the revenue are mutually exclusive. 29. We are conscious of the Revenue's reliance upon TOLA and the judgment in Rajeev Bansal. We also take note of the position explained by the Hon'ble Supreme Court that TOLA may have an impact upon the computation of the period within which sanction could be obtained. However, that proposition cannot be converted into a licence to disregard the identity of the specified authori....
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....ed under section 148 dated 28.07.2022, having been issued pursuant to an approval granted by an authority not competent under section 151(ii), is without valid jurisdiction. The notice under section 148 and the reassessment proceedings initiated in pursuance thereof are accordingly quashed. Consequently, the assessment order passed under section 147 read with section 144/144B is also quashed. The additions made pursuant to such reassessment proceedings do not survive for independent adjudication. The remaining grounds raised by the assessee, therefore, become academic. 32. Accordingly, the additional ground challenging the validity of the sanction under section 151 is allowed. 33. In view of the foregoing discussion, and particularly in view of the admitted position emerging from the Revenue's own submission that the approval preceding the order under section 148A(d) and the consequential notice under section 148 dated 28.07.2022 was granted by the Principal Commissioner of Income-tax-1, Ludhiana, we hold that such approval was not the approval contemplated under section 151(ii) for the notice issued after more than three years from the end of A.Y. 2017-18. The consequent....