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2025 (5) TMI 322 - AT - Income TaxValidity of reopening of assessment beyond period of limitation - contentions of revenue that the period of 14 days to be considered from the date of letter / email communication issued HELD THAT - Apropos the contentions of revenue that the period of 14 days to be considered from the date of letter / email communication issued on 08.06.2022 attached therewith the copy of SCN u/s 148A(b) dated 26.05.2022 was only a reminder letter/ communication and the same cannot substitute or extend the date for issuance of SCN u/s 148A(b). Further the revenue was not permitted to allow the assessee to respond within two weeks time from the date of such reminder communication which in accordance with the judgment of Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT was to be calculated from the date of SCN u/s 148A(b) (issued within 30 days from 04.05.2022). In view of such observations it is incomprehensible to concur with the contention placed before us by the revenue as per report of the Ld. AO dated 07.02.2025 we thus find no substance in such argument by the revenue accordingly the same stands rejected. Thus issue is squarely covered by the decision of this tribunal in the case of Kachrulal Jitendra Kumar 2025 (2) TMI 865 - ITAT RAIPUR in terms of our decision and findings in the said case. In this case presently as the order u/s 148A(d) of the Act was issued on 26.07.2022 and the notice u/s 148 (new regime) of the Act was issued on 29.07.2022 much beyond the period of limitation as was available with him up to 14.06.2022 therefore the contentions raised by Ld. AR found to be of substance that the order u/s 148A(d) as well as the notice u/s 148 (new regime) are barred by limitation accordingly the assessment order passed by the Ld. AO u/s 147 r.w.s. 144B of the Act dated 30.05.2023 dehors a valid notice issued u/s 148 of the Act cannot be sustained liable to be quashed and we do so. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are: (a) Whether the reopening of the assessment for Assessment Year (AY) 2015-16 under sections 147/148 of the Income Tax Act, 1961 (the Act) was valid or barred by limitation, particularly in light of the substituted provisions introduced by the Finance Act, 2021, and the impact of judicial pronouncements including the Supreme Court decisions in Union of India vs. Ashish Agrawal and Union of India vs. Rajeev Bansal? (b) Whether the notice under section 148 dated 29.07.2022 was validly issued by the jurisdictional Assessing Officer (ITO-1(1), Raipur) or whether it ought to have been issued by the faceless AO as per the scheme framed under section 151A and CBDT Notification No. 18 dated 29.03.2022? (c) Whether the addition of Rs. 2,29,87,000 on account of alleged bogus purchases was justified, given that the assessee is a trader in goods and corresponding sales were accepted by the AO? (d) Whether the disallowance of business expenditure on purchases of goods resulting in the said addition was justified, considering the acceptance of books of account and the gross profit margins? (e) Whether the addition treated as unexplained business income was sustainable without adequate material or evidence? Note: Grounds relating to issues (c), (d), and (e) were withdrawn by the appellant during proceedings and thus not pressed before the Tribunal. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a): Validity and Limitation of Reopening under Sections 147/148 Relevant Legal Framework and Precedents: The Finance Act, 2021, effective from 01.04.2021, substituted sections 147 to 151 of the Income Tax Act, introducing a new regime for reassessment proceedings. Key changes include the requirement of prior approval from specified authorities under section 151, issuance of show-cause notices under section 148A(b), and a reduced limitation period under section 149 from four to three years, with an exception allowing reopening within ten years if escaped income exceeds Rs. 50 lakhs. The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance Act, 2020 (TOLA) extended limitation periods due to COVID-19 disruptions, with the time for completion of certain actions extended till 30.06.2021. Supreme Court judgments in Union of India & Ors vs. Ashish Agrawal (2022) and Union of India & Ors vs. Rajeev Bansal (2024) clarified the application of the new reassessment regime, the treatment of notices issued under the old regime post 01.04.2021, and the computation of limitation periods including exclusions for periods of stay and response time granted to assessees. Court's Interpretation and Reasoning: The Tribunal analyzed the timeline of notices and orders issued in the case:
The Tribunal applied the limitation provisions, considering the effect of TOLA and the Supreme Court directions excluding the period from issuance of deemed notice till supply of material and two weeks allowed for response. It was found that the Assessing Officer had only a surviving period of one day (extended to seven days under the fourth proviso to section 149/148A) to issue the notice under section 148. Since the notice was issued well beyond this extended limitation period (on 29.07.2022 instead of by mid-June 2022), the Tribunal held the reopening as barred by limitation and invalid. Key Evidence and Findings: Documentary evidence included the dates of notices, show-cause notices, replies filed by the assessee, and the order under section 148A(d). The Tribunal also relied on the report submitted by the AO explaining the procedural steps taken and approvals obtained. Application of Law to Facts: The Tribunal meticulously applied the amended statutory provisions and judicial precedents to the factual timeline, concluding that the Assessing Officer failed to issue the reassessment notice within the permissible limitation period, rendering the reopening invalid. Treatment of Competing Arguments: The Revenue contended that the order and notice were issued within time, relying on the approval of the specified authority and compliance with Supreme Court directions. However, the Tribunal rejected the contention that the reminder notice of 08.06.2022 could reset the limitation clock, holding that the two-week period for response must be counted from the original show-cause notice dated 26.05.2022. The Tribunal also rejected the Revenue's argument that the limitation period for the order under section 148A(d) could extend beyond the period available for issuing the notice under section 148. Conclusions: The reopening of assessment for AY 2015-16 was held to be barred by limitation as per the amended provisions and judicial pronouncements, and the assessment order passed without a valid notice under section 148 was quashed. Issue (b): Validity of Notice under Section 148 Issued by Jurisdictional AO Instead of Faceless AO Relevant Legal Framework and Precedents: CBDT Notification No. 18 dated 29.03.2022 and section 151A of the Income Tax Act prescribe that reassessment notices post 01.04.2021 should be issued by the faceless AO under the new scheme of faceless assessments. Court's Interpretation and Reasoning: The assessee contended that the notice under section 148 dated 29.07.2022 was invalid as it was issued by the jurisdictional AO instead of the faceless AO, violating the scheme under section 151A and CBDT Notification No. 18. The Revenue submitted that the notice was issued with prior approval of the specified authority and in compliance with the directions of the Supreme Court in Ashish Agrawal, and thus was valid. The Tribunal, however, did not explicitly decide this issue on merits as the assessment was quashed on the ground of limitation, rendering further examination unnecessary. Conclusions: The issue was left open due to the quashing of the assessment on limitation grounds. Issues (c), (d), and (e): Legitimacy of Addition of Rs. 2,29,87,000 as Bogus Purchases and Unexplained Income Relevant Legal Framework and Precedents: The assessee challenged the addition on the basis that he was a trader in goods, corresponding sales were accepted, books of account were accepted, and the gross profit margin did not justify the addition. Reliance was placed on precedents such as Nitin Ramdeoji Lohia (2022) and Smt Sudha Loyalka (2018). Court's Interpretation and Reasoning: During the course of the appeal, the appellant withdrew these grounds and did not press them before the Tribunal. Conclusions: These grounds were dismissed as not pressed and left open. 3. SIGNIFICANT HOLDINGS "As the order u/s 148A(d) of the Act was issued on 26.07.2022 and the notice u/s 148 (new regime) of the Act was issued on 29.07.2022, much beyond the period of limitation as was available with him up to 14.06.2022, therefore, the contentions raised by Ld. AR found to be of substance that the order u/s 148A(d) as well as the notice u/s 148 (new regime) are barred by limitation, accordingly, the assessment order passed by the Ld. AO u/s 147 r.w.s. 144B of the Act dated 30.05.2023, dehors a valid notice issued u/s 148 of the Act cannot be sustained, liable to be quashed, and we do so." Core principles established include:
Final determination on the principal issue was that the reopening of assessment was barred by limitation and the assessment order passed without a valid notice under section 148 was quashed. Other issues relating to the validity of the notice issuance authority and merits of addition were left open due to the quashing of the assessment.
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