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2025 (6) TMI 1641 - AT - Income TaxReopening of assessment - mandation of prior approval of the specified authority according to section 151 of the new regime before passing an order u/s. 148A(d) or issuing a notice u/s. 148 - Addition u/s 56(2)(viia) - HELD THAT - In the present case since the notice u/s. 148 has been issued beyond the period of three years from the end of the relevant Assessment Year case of the assessee falls within the provisions of section 151(ii) of the amended law whereby the specified authority for grant of approval is specified as Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Contrary to this requirement the approval obtained is by Principal Commissioner of Income Tax-17 Mumbai. Accordingly since a proper sanction by the specified authority had not been obtained for issue of notice u/s. 148 under the applicable provisions of law said notice is invalid and bad in law. Thus the sanction by specified authority has not been obtained by the Id. AO in accordance with the provisions contained in section 151 of the Act under the new regime since notice u/s. 148 has been issued beyond three years from the end of the relevant Assessment Year in violation of sec 149(1) and 151 of the Act. Accordingly the said notice issued is invalid liable to be quashed. As relying on case of Ashish Agrawal 2022 (5) TMI 240 - SUPREME COURT and Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) the notice issued dated 31.07.2022 for Assessment Year 2017-18 under the new regime is invalid and thus quashed. Resultantly the impugned reopening proceeding so initiated and the impugned re-assessment order passed thereafter are also quashed. Addition u/s 56(2)(viia) - assessee had purchased an immovable property for which AO took note of difference in the actual consideration and stamp duty valuation - HELD THAT - We note that as against the stated consideration of Rs. 3, 65, 00, 000/- the valuation of the property arrived at by ld. DVO is Rs. 3, 95, 19, 000/- resulting into difference of Rs. 30, 19, 000/- which come to about 8.27% of the stated purchase consideration. The difference between the stated consideration vis- -vis the stamp duty valuation arrived at by ld. DVO is admittedly less than 10% in the present case we find that provisions of section 56(2)(viia) will have no application in the matter. Accordingly the addition so as made by the AO stands deleted considering the merits of the case. Thus assessee succeeds both on the legal as well as merits of the case. Assessee appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal are: (a) Whether the reassessment proceedings initiated under section 147 read with section 148 of the Income-tax Act, 1961 (the Act), for Assessment Year 2017-18, are valid and within jurisdiction, particularly focusing on the compliance with the procedural requirements under the new reassessment regime effective from 01.04.2021, including the necessity of obtaining prior approval under section 151 of the Act from the specified authority. (b) Whether the issuance of the notice under section 148 dated 31.07.2022 is valid, given that it was issued beyond the three-year period from the end of the relevant assessment year and without proper sanction from the appropriate authority as mandated by the amended provisions. (c) Whether the reassessment order making an addition of Rs. 1,10,39,000/- under section 56(2)(viia) of the Act, on account of the difference between the consideration paid for immovable property and its stamp duty valuation, is justified. (d) Whether the procedural safeguards under sections 147, 148, 148A, 149, 151, and related provisions of the Act, as interpreted by the Supreme Court in landmark decisions, have been duly complied with by the Revenue. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Reassessment Proceedings and Jurisdictional Compliance under Sections 147, 148, 149, and 151 of the Act Relevant Legal Framework and Precedents: The reassessment regime underwent significant amendments effective from 01.04.2021, introducing stricter procedural safeguards. Sections 147 to 151 of the Act prescribe the conditions and authorities from whom prior approval must be obtained before issuance of notices under section 148. The Supreme Court judgments in Ashish Agarwal and Rajeev Bansal are pivotal, clarifying the applicability of the new regime retrospectively and emphasizing the necessity of compliance with the new procedural requirements, including the approval under section 151 from the specified authorities. The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA) and its notifications also play a crucial role in extending time limits for compliance falling between 20.03.2020 and 31.03.2021. Court's Interpretation and Reasoning: The Tribunal examined the timeline of notices issued. The first notice under section 148 was dated 15.04.2021, issued within the old regime, with approval from the Range Head (Range 17(1), Mumbai). The second notice under section 148, dated 31.07.2022, was issued under the new regime, beyond the three-year period from the end of the Assessment Year 2017-18 (which expired on 31.03.2021, with extension under TOLA up to 30.06.2021). The Tribunal noted that the second notice was issued after the extended period, i.e., on 31.07.2022, which is beyond the permissible time limit under section 149(1)(b) of the new regime. Under section 151(1)(ii), for issuance of notice beyond three years, prior approval must be obtained from higher authorities such as the Principal Chief Commissioner or Principal Director General, or Chief Commissioner or Director General. However, in the present case, the approval was accorded by the Principal Commissioner of Income Tax-17, Mumbai, which does not fall within the specified authorities under the new regime for issuance of notice beyond three years. This non-compliance with the mandatory approval requirement vitiates the jurisdiction of the Assessing Officer to issue the notice under section 148. The Tribunal relied heavily on the Supreme Court's ruling in Rajeev Bansal, which clarified that the new reassessment regime applies retrospectively, and the prior approval under section 151 must be obtained from the specified authorities based on the time elapsed since the end of the relevant assessment year. The Court emphasized that the sanction by the appropriate authority is a precondition for the Assessing Officer to assume jurisdiction. Additionally, the Tribunal noted that the Supreme Court in Ashish Agarwal directed compliance with the procedure under section 148A(d) and section 148, including obtaining prior approval under section 151, which was not fulfilled in the present case. Key Evidence and Findings: The notice dated 31.07.2022 was issued without the requisite approval from the higher specified authority under section 151(1)(ii). The approval obtained was from the Principal Commissioner, which is insufficient under the new regime for notices issued beyond three years. Moreover, the notice was issued beyond the extended time limit of 30.06.2021 under TOLA, rendering it time-barred. Application of Law to Facts: Given the issuance of the notice beyond the three-year period and the lack of proper sanction from the specified authority, the reassessment proceedings initiated under section 147 and 148 are invalid and without jurisdiction. Treatment of Competing Arguments: The Revenue contended that the notice was issued following the Supreme Court's directions in Ashish Agarwal and that the necessary approvals were obtained. However, the Tribunal found that the approval was from an incorrect authority and that the notice was issued beyond the permissible time limit, contrary to the statutory provisions and judicial pronouncements. Conclusions: The reassessment notice dated 31.07.2022 is invalid and liable to be quashed for non-compliance with sections 149 and 151 of the Act under the new regime. Consequently, the reassessment order passed pursuant to this notice is also quashed. Issue 2: Addition under Section 56(2)(viia) on Difference Between Consideration and Stamp Duty Valuation Relevant Legal Framework and Precedents: Section 56(2)(viia) of the Act applies to cases where an individual or entity receives immovable property for a consideration less than the stamp duty value, leading to the difference being treated as income from other sources. The valuation report of the Departmental Valuation Officer (DVO) is a key aspect in determining the fair market value for this purpose. Court's Interpretation and Reasoning: The Assessing Officer made an addition of Rs. 1,10,39,000/- based on the difference between the consideration paid (Rs. 3,65,00,000/-) and the stamp duty valuation (Rs. 4,79,39,000/-). The assessee requested a reference to the DVO, which was acknowledged but not acted upon before completion of the assessment due to time constraints. The DVO's valuation report, submitted subsequently, valued the property at Rs. 3,95,19,000/-, which is only about 8.27% higher than the consideration paid. The CIT(A) directed the Assessing Officer to restrict the addition to the difference between the DVO's valuation and the consideration paid. The Tribunal noted that the difference between the DVO valuation and the purchase price is less than 10%, which is a threshold below which section 56(2)(viia) does not apply. Key Evidence and Findings: The DVO valuation report dated 30.01.2024 was placed on record, establishing the fair market value at Rs. 3,95,19,000/-. The difference between this valuation and the consideration paid is Rs. 30,19,000/-. Application of Law to Facts: Since the difference is less than 10%, the addition under section 56(2)(viia) is not warranted. The Assessing Officer's addition of Rs. 1,10,39,000/- based on the stamp duty valuation is thus not sustainable. Treatment of Competing Arguments: The Revenue relied on the stamp duty valuation to justify the addition, while the assessee emphasized the DVO's valuation and the statutory threshold of 10%. The Tribunal accepted the assessee's argument in line with the valuation report and legal provisions. Conclusions: The addition under section 56(2)(viia) is deleted, and the assessee is entitled to relief on merits. 3. SIGNIFICANT HOLDINGS The Tribunal held: "The sanction by the specified authority has not been obtained by the ld. Assessing Officer in accordance with the provisions contained in section 151 of the Act under the new regime, since notice u/s. 148 has been issued beyond three years from the end of the relevant Assessment Year in violation of sec 149(1) and 151 of the Act. Accordingly, the said notice issued is invalid liable to be quashed." "The notice issued dated 31.07.2022 for Assessment Year 2017-18 under the new regime is invalid and thus quashed. Resultantly, the impugned reopening proceeding so initiated and the impugned re-assessment order passed thereafter are also quashed." "Considering the valuation report from ld. DVO, the difference between the stated consideration vis-`a-vis the valuation is less than 10% in the present case, we find that provisions of section 56(2)(viia) will have no application in the matter. Accordingly, the addition so as made by the ld. Assessing Officer stands deleted considering the merits of the case." Core principles established include: (i) The new reassessment regime under sections 147 to 151 applies retrospectively, and strict compliance with procedural safeguards, including prior approval under section 151 from the appropriate authority, is mandatory for validity of reassessment notices issued after 01.04.2021. (ii) The time limits for issuance of reassessment notices are governed by the amended provisions and the TOLA extensions, and notices issued beyond these limits without appropriate sanction are invalid. (iii) The valuation for section 56(2)(viia) additions must be based on the fair market value as determined by the DVO, and if the difference between consideration and valuation is less than 10%, no addition is warranted. Final determinations: The reassessment notice dated 31.07.2022 and consequent reassessment order are quashed for lack of jurisdiction and procedural non-compliance. The addition under section 56(2)(viia) is deleted on merits based on the DVO valuation report.
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