9911796707
TMI Blog2024 (5) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal Commissioner of Income Tax, respondent no. 3 is the Principal Chief Commissioner of Income Tax, respondent no. 4 is the Central Board of Direct Taxes and respondent no. 5 is the Union of India. 4. Petitioner filed return of income for Assessment Year 2015-2016 on 28th November 2015 declaring total income of Rs. 204,54,44,990/-. In the return of income, petitioner claimed deduction under Section 10AA of the Act of Rs. 195,94,62,306/- and also claimed deduction under Section 80JJAA of the Act of Rs. 6,54,04,038/-. For claiming such deductions, petitioner filed an audit report in Form No. 56F and Form No. 10DA. Further, the details of deduction claimed under Section 10AA and 80JJAA of the Act was also reported in the Tax Audit report in Form 3CB read with Form 3CD which was submitted to respondent no. 1 also during the course of assessment proceedings. 5. Petitioner's case was selected for scrutiny and notice dated 17th June 2016 under Section 143(2) of the Act came to be issued. Respondent no. 1 also issued a notice dated 22nd August 2017 under Section 142(1) of the Act. This was followed by another notice dated 5th October 2017 calling upon petitioner to file details of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons recorded which is being provided as an attachment to the imputed initial notice. In the reasons, it was alleged as under : (i) Petitioner has claimed deduction under Section 80JJAA of the Act, which allows deduction of an amount equal to 30% of the additional wages paid to the new regular workmen employed by assessee. The basic condition to avail this deduction is to derive profit from manufacture of goods in the factory. This condition has not been fulfilled by petitioner and hence, petitioner is not eligible for deduction under Section 80JJAA of the Act; (ii) The percentage of profit derived by assessee from its undertaking eligible for deduction under Section 10AA of the Act is more than the profit derived from the non-eligible undertaking and, hence, it appears that petitioner has reported higher profits in the units eligible for 100% deduction; (iii) In the computation of income, petitioner has added Rs. 79.49 Crores on account of realized foreign exchange loss (Forex), which was reduced in computation of income in the last year. However, in the last year, the total amount reduced was Rs. 86.40 Crores and, therefore, the difference of Rs. 6.90 Crores has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss was transferred from hedging reserve account to profit and loss account. However, as the deduction had already been claimed in the earlier year, there was no deduction claimed in this year in the computation of income. The difference of Rs. 6.90 Crores pertains to transactions which did not materialize till 31st March 2015 and hence, the same was not transferred from the hedging reserve to profit and loss account. Further the said amount has been charged to the profit and loss account of subsequent year and has been adjusted in the computation of income of the subsequent years, and therefore, does not reflect in the income chargeable to tax of the current year. Thus, there is no income which has escaped assessment; (g) Calibre Point Business Solutions Ltd., which was a wholly owned subsidiary of petitioner, had merged with petitioner on the appointed date of 1st April 2013 as per order dated 10th October 2014 of the Bombay High Court. Subsequent to the merger, all the transactions of Calibre Point Business Solutions Ltd. were considered in the return and assessment of petitioner and hence, all the transactions of Calibre Point Business Solutions Ltd. are already accounted fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith respect to claim of deduction under Section 10AA of the Act and, therefore, in our view, it must be presumed that the said issue has already been dropped by respondent no. 1 while passing the impugned order. 12. Respondent no. 1, thereafter, issued the notice dated 27th August 2022 manually, stating that respondent no. 1 has information in the case of petitioner, which requires action in consequence of the judgment of the Hon'ble Apex Court, which suggests that income chargeable to tax for Assessment Year 2015-2016 has escaped assessment. It is further stated in the notice that it has been issued after taking approval of respondent no. 3. 13. Separately, a communication dated 27th August 2022 was issued where respondent no. 1 stated that DIN No. ITBA/AST/M/148_1/ 2022-23/1044985555(1) has been generated for the issuance of notice dated 26th August, 2022 under Section 148 of the Act. In response, petitioner filed on 23rd September 2022 its return of income to the notice dated 27th August 2022 and also sought a copy of the approval for passing the impugned order and for issuing the notice, which was provided on 30th September 2022. It is necessary to note that respondent no. 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 149(1) (b) of the Act, for any assessment year beginning on or before the 1st day of April 2021, the notice cannot be issued even under the new provisions. Section 149(1) (b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under Section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, sixth year expired on 31st March 2022. The notice under Section 148 of the Act, in the present case, is issued on 27th August 2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said Section. The stand 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 correct because that would render the first proviso to Section 149 of the Act redundant and otiose. The time limit to issue notice under Section 148 of the Act had already expired on 1st April 2021 for Assessment Year 2013-2014 and Assessment Year 2014-2015 when Section 149 of the Act was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Ashish Agarwal (Supra) and upto 10th June 2022, which is a period of 16 days. The 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 respondent no. 1. Even if the same was to be excluded, still that would mean further exclusion of 5 days. Even then the impugned notice dated 27th August 2022 is still beyond limitation; (e) The impugned notice dated 27th August 2022 is invalid and bad in law as the same has been issued without DIN. In the impugned notice dated 27th August 2022 no DIN is mentioned and, hence, in view of the Circular No. 19 of 2019 dated 14th August 2019 issued by CBDT, the notice is invalid. A separate intimation letter dated 27th August 2022 cannot validate the notice because (i) the intimation letter refers to a DIN with respect to notice dated 26th August 2022 under section 148 of the Act whereas, the impugned notice issued to petitioner is dated 27th August 2022; and (ii) the procedure prescribed in Circular No. 19 of 2019 for non-mention of DIN has not been complied with. In the case of non-compliance of those procedure prescribed in the notice f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the types of the assets as mentioned above. The alleged claim of disallowance of deduction also cannot fall under the category of either expenditure in respect of transaction in relation to an event or an entry in the books of account because it is neither a case of expenditure in respect of transaction in relation to an event nor a case of entry in the books of account as no entries are passed in the books of account for claiming a deduction under the provisions of the Act; (h) Respondent no. 1 has no power to review his own assessment when the same information was provided and considered by him during the original assessment proceedings. There cannot be a reopening based on a change of opinion. The claim of deduction under Section 80JJAA of the Act was made by petitioner in the return of income and petitioner had filed Form 10DA being the report of the Chartered Accountant. In the Form, a note has been filed alongwith Form 10DA and it has specifically been submitted by petitioner that software development activity constitutes 'manufacture/production of article or thing'. The claim of deduction under Section 80JJAA of the Act was also disclosed in the Tax Audit Report fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded period, i.e., till 30th June 2021. The Finance Act, 2021, however, has merely changed the procedure to be followed prior to issuance of notice with effect from 1st April 2021. Subsequently, the Hon'ble Apex Court in Ashish Agarwal (Supra) held that the Section 148 notices issued between 1st April 2021 and 30th June 2021 will be deemed to have been issued under Section 148A of the Act. Any notice issued under Section 148 from 1st April 2021 would be governed only by the timelines specified under the new Section 149 even though it may relate to the past assessment years. Consequently, applying the new Section 149, should any proceedings be initiated by the end of 31st March 2020, the same would get extended because of TOLA upto 30th June 2021. If this is not done then some of the assessment years for the past periods cannot be proceeded at all in the absence of TOLA. The Hon'ble Apex Court's expression that 'revenue should not be left remediless' cannot be overlooked and the decision rendered inoperative. CBDT with a view to implement the judgment of the Hon'ble Apex Court in the case of Ashish Agarwal (Supra) in a uniform manner, in exercise of power under Section 119 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted as under : (a) In view of the Finance Act, 2021, which came into force from 1st April 2021, for Assessment Year 2015-2016, the Revenue will have upto ten years to issue notice under Section 148 of the Act subject to it complying with the preconditions mentioned in Section 149(1) (b) of the Act; (b) The six years limitation prescribed as it stood immediately before the commencement of the Finance Act, 2021 will not be applicable. 19. Mr. Sharma submitted as under : (a) The expression "at that time" used in the first proviso to Section 149(1) of the Act would mean 1st April 2021 and not the date of the notice under Section 148 of the Act. (b) Mr. Sharma, relying on the notification dated 29th March 2022 [Notification No. 18/2022/F. No. 370142/16/2022-TPL], submitted as under : (i) The guideline dated 1st August 2022 issued by the CBDT includes a suggested format for issuing notice under Section 148 of the Act, as an Annexure to the said guideline and it requires the designation of the Assessing Officer alongwith the office address to be mentioned and, therefore, it is clear that the JAO is required to issue the said notice and not the FAO. (ii) ITBA step-by-step Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) Whether the impugned notice dated 27th August 2022 is invalid and bad in law as the same has been issued without a DIN? (4) Whether the impugned notice dated 27th August 2022 is invalid and bad in law being issued by the JAO as the same was not in accordance with Section 151A of the Act? (5) Whether the issues raised in the impugned order show an alleged escapement of income represented in the form of an asset or expenditure in respect of transaction in relation to an event or an entry in the books of account as required in Section 149(1) (b) of the Act? (6) Whether respondent no. 1 has proposed to reopen on the basis of change of opinion and if it is permissible? (7) When the claim of deduction under Section 80JJAA of the Act has been consistently allowed in favour of petitioner by the Assessing Officers/ Appellate Authorities in the earlier years, can the Assessing Officer have a belief that there is escapement of income? (8) Whether the approval granted by the Sanctioning Authority was valid? 21 As regards issue no. 1, for Assessment Year 2015-2016 the provisions of TOLA are not applicable. This is a categorical finding in Tata Communications Transformation Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring on 31st March 2020 stand extended to 31st March 2021. According to the Income Tax Officer, in view of the above, Assessment Year 2015-2016 which falls under the category within four years as on 31st March 2020, the statutory approval for issuance of notice under Section 148 of the Act for the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. Mr. Sharma clarifies that the Income Tax Officer is only conveying the view of the Principal Commissioner of Income Tax because this letter has been issued on the letterhead of Principal Commissioner of Income Tax. 6. Even for a moment we agree with the view expressed by the Principal Commissioner of Income Tax, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at hand, the assessment year is 2015-2016 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions may not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. 7. In our view, since four years had expired from the end of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2015-2016 which falls under the category within four years as on 31st March 2020, the statutory approval for issuance of notice under Section 148 of the Act for the Assessment Year 2015-2016 may be given by the Range Head as per the said provisions. Mr. Sharma clarifies that the Income Tax Officer is only conveying the view of the Principal Commissioner of Income Tax because this letter has been issued on the letterhead of Principal Commissioner of Income Tax. 6. Even for a moment we agree with the view expressed by the Principal Commissioner of Income Tax, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at hand, the assessment year is 2015-2016 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions may not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act." 6. In the present case, counsel for the respondents reiterated the stand of the revenue as was taken before the Court in the aforementioned case. However, we do not find any reason to take a vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, admittedly, sanction has been granted by an Additional Commissioner of Income Tax, it is not a valid sanction and therefore, notice issued based on an invalid sanction is also not valid and has to be quashed. ************************** (19) It is also petitioner's case that the approval obtained for issuing notice under section 148 of the Act is not in accordance with the mandate of Section 151 as the said approval is of Additional Commissioner of Income Tax instead of Principal Commissioner of Income Tax. It is petitioner's case that the reasons put up for approval on 26.03.2021, which is after the expiry of four years from the end of the relevant assessment year 2015-2016 and approval was granted on 30.03.2021. Therefore, Mr. Joshi submitted that as per Section 151 of the Act, as four years have elapsed at the time of reopening, the sanction is required to be obtained from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax and since the sanction has not been obtained from any of these four Commissioners of Income Tax, the notice issued is bad in law. (20) Sub-Section 1 of Section 151 of the Act provides that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Johnson v. DCIT, Equitable Financial Consultancy Services Pvt Ltd v. ITO and Asian Paints Ltd. v. ACIT. Therefore, there is no question of Revenue relying on TOLA to justify the impugned notice under Section 148 of the Act as being within the period of limitation. 22. This Court in Tata Communications Transformation Services Ltd. (Supra) as well as in Siemens Financial Services (P.) Ltd. (Supra) has also rejected the argument of Revenue on the issue of travel back. Paragraphs 28, 29 and 30 of Siemens Financial Services (P.) Ltd. (Supra) read as under : 28. The interpretation placed by the CBDT in paragraph 6.1 of Instruction No. 1/2022 dated 11th May 2022 cannot be countenanced as it is not open to them to clarify that the law laid down by the Apex Court means that the extended reassessment notices will travel back in time to their original date when such notices were to be issued and, then, the new section 149 of the Act is to be applied as this is contrary to the judgment of this court in Tata Communications (supra) wherein it is held that TOLA does not envisage traveling back of any notice. However, even assuming that it is held that these notices travel back to the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an fall within the ambit of TOLA, and the power to extend the time limit within which those actions are to be taken. There was no amendment to the provisions of Sections 147 to 151 of the Act. The court also observed that amendments to the substantive provisions of the Act were envisaged under Section 3 of TOLA, which was only a relaxation provision dealing with time limits under various enactments. The Assessing Officer could have assumed jurisdiction while issuing the impugned notices only after complying with the amended Section 147 which has not been done. In Tata Communications (Supra), this court also held that TOLA was not applicable for A.Y.-2015-2016 or any subsequent years. Hence question of applicability of notification issued under TOLA also would not arise. Paragraphs 34 to 49 of Tata Communications (Supra) read as under : 34. It is well settled that the validity of a notice issued under Section 148 of the Act must be judged on the basis of the law existing on the date on which such notice is issued. Even the Revenue accepts this well settled position. Further, the provisions of Sections 147 to 151 are procedural laws and accordingly, the provisions as existing on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument of the Revenue that Relaxation Act creates a legal fiction such that the notices issued under Section 148 of the Act are deemed to be issued on 31st March, 2021. The so-called legal fiction is directly contrary to the Revenue's own Circular No. 549 of 1989, which is binding on them as well as the well settled principle that the validity of a notice is to be judged on the basis of the law that prevails at the time of its issue. 39. Even though Relaxation Act was in existence when the Finance Act, 2021 was passed, the parliament has specifically made the amended provisions of Sections 147 to 151 of the Act as being applicable with effect from 1st April, 2021. Therefore, the intention of the legislature is clear that substituted provisions must apply to notices issued with effect from 1st April, 2021. No savings clause has been provided in the Act for saving the erstwhile provisions of Sections 147 to 151 of the Act, like in Section 297 of the Act where, the Parliament when it intended, has specifically provided the savings clause. 40. On a plain reading of Relaxation Act it is clear that the only powers granted to the Central Government by Relaxation Act is the power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o initiate proceedings as per the amended law. The Madras High Court has considered this very plea and granted liberty to initiate reassessment proceedings in accordance with the provisions of the amended Act, "if limitation for it survives". 44. As submitted by Mr. Mistri, with whom we agree, Chapter II of Relaxation Act provide for - "Relaxation of Certain Provisions of Specified Act"and Section 3 forms part of this Chapter. Further Chapter III provides for amendment to Income Tax Act, 1961 and various Sections of the Act have been amended in Chapter III. From this the following propositions emerge : (a) Wherever the Parliament thought fit, the Parliament has itself amended the provision of the Income Tax Act, 1961 and not left it for the CBDT to make the amendment. Therefore, it is clear that no power is given under Relaxation Act to postpone the applicability of provisions of the Income Tax Act. (b) Chapter II of Relaxation Act is only for 'Relaxation of Certain Provisions of Specified Act' and, therefore, there is no question of the Revenue relying on this Chapter and Section 3 to justify the postponement of applicability of certain provisions of the Income Tax Act. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t'. In contradistinction, Section 4 of Relaxation Act which does amend several provisions of the Act falls in Chapter III, which is titled 'Amendments to the Income Tax Act, 1961'. It will be apposite to notice that the amendments provided for in Section 4 were made by the Legislature itself in terms of the said Section and no such power to amend the Act was delegated to the Central Government. Therefore, we would agree with Mr. Pardiwalla that it is only Section 4 of Relaxation Act which amended the Act and no such amendments to the substantive provisions of the Act were envisaged under Section 3 of Relaxation Act, which was only a relaxation provision dealing with time limits under various enactments. 48. Mr. Pardiwalla submitted that even assuming for a moment that the primary contention of petitioners that the Explanations in the notifications are invalid is not accepted, still the impugned notices will be bad in law as the Explanation only seeks to effectuate the provisions of the erstwhile Sections 148, 149 and 151 of the Act. It does not cover the erstwhile Section 147 of the Act. As rightly submitted by Mr. Pardiwalla, the Assessing Officer could have assumed jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly modified the orders passed by the respective High Courts to the effect that the notices issued under Section 148 of the Act which were subject matter of writ petitions before various High Courts shall be deemed to have been issued under Section 148A (b) of the Act and the Assessing Officer was directed to provide within 30 days to the respective assessee the information and material relied upon by the Revenue so that the assessee could reply to the show cause notices within two weeks thereafter. The Apex Court held that the Assessing Officer shall thereafter pass orders in terms of Section 148A(d) in respect of each of the concerned assessees. Thereafter, after following the procedure as required under Section 148A may issue notice under Section 148 (as substituted). The Apex Court also expressly kept open all contentions which may be available to the assessee including those available under Section 149 of the Act and all rights and contentions which may be available to the concerned assessee and revenue under the Finance Act 2021 and in law, shall be continued to be available. 23. Even in New India Assurance (Supra), the Court held that reliance by Revenue on Instruction No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2013-14, the time limit to issue a notice under Section 148 of the Act had already expired on 1st April 2021. On the said date, the assessee had a vested right, which de hors the 1st proviso to the amended Section 149 of the Act, could not be taken away and thus, based on the well settled principles of law, the reopening of the AY 2013-14 after 31st March 2021 is invalid, without jurisdiction and barred by limitation. 37. We shall deal with Mr. Sharma's submissions as under : (a) As regards reliance on the provisions of the Limitation Act, 1963, the provisions of the Limitation Act, 1963 do not apply to the provisions of the Income Tax Act, 1961 and especially, not in the present case in view of the specific period provided for in the provisions of the Act as well as TOLA. In any case, this defence of respondents cannot be sustained as they have not taken any such contention in either the order passed under Section 148A(d) or in the affidavit in reply; (b) As regards applicability of Section 3 of TOLA - exclusion of Covid period, this argument is, in effect, nothing but the theory of travel back in time which was urged by the Revenue to support the reopening notices issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is that despite the substantive defence available to the assessee in Section 149 of the amended Act, as well as the express directions of the Hon'ble Supreme Court allowing the assessee to take all defences available under the Act, the judgment of Ashish Agarwal (Supra) would permit them to reopen the assessment of AY 2013-14 would not only make the defence expressly available to the assessees useless and unusable, but would be contrary to well established principles of law. In Supreme Court Bar Association (Supra), the Hon'ble Supreme Court espoused that its powers conferred under Article 142 of the Constitution of India, being curative in nature and even with the width of its amplitude, cannot be construed as powers which authorise the Court to ignore the substantive rights of a litigant while dealing with a cause pending before it. Article 142 would not be used to supplant substantive law applicable to a case or cause and it will not be used to build a new edifice where none existed earlier by ignoring express statutory provisions dealing with a subject and thereby to achieve something indirectly which cannot be achieved directly. In the present case, Revenue's argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notices without being hit by limitation, if issued on or before 30th March 2021 and (ii) the defence under Section 149 available to the assessee would mean that if the Revenue had issued any notice under Section 148 under the unamended Act during the period 1st April 2021 to 30th June 2021 pertaining to AY 2013-14, the same would be barred by limitation under Section 149 in effect means the Civil Appeal of the Revenue in Ashish Agrawal (Supra) was dismissed, are completely flawed. It completely fails to appreciate that the limitation period to issuance of reopening notices under Section 148 for all Assessment Years prior to AY 2013-14 had already expired on 31st March 2019 or earlier. The provisions of TOLA obviously could not save such a time limit and the Revenue could not have validly issued reopening notices for years prior to AY 2013-14 on or after 1st April 2019. Therefore, the defence so expressly allowed to be taken by the Hon'ble Supreme Court would otherwise be unnecessary; (f) The submission that the Apex Court, in exercise of power under Article 142 of the Constitution, has deemed the notices issued between 1st April 2021 to 30th June 2021 under Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is valid in terms of Apex Court order in Ashish Agrawal (Supra), then the notice under Section 148 of the Act cannot be issued on 31st March 2021 and respondent cannot be expected to do impossible. It has nowhere been urged by petitioner that assessing officer ought to complete the proceedings before the show cause notice under Section 148A (b) of the Act was issued. It is the case of petitioner that the reopening notice under Section 148 ought to have been issued within 6 years from the end of the AY 2013-14. This limitation period, as extended by TOLA, expired on 31st March 2021. However, in the present case, the reopening notice has been issued in July 2022 and, therefore, beyond the statutory time limit. In any case, as stated above, the Hon'ble Supreme Court, while invoking powers under Article 142, consciously and categorically granted liberty to assessees to raise all defences available to the assessee, including the defences under Section 149 of the Act. This specific and express directions cannot be set at naught. Accepting this contention of the Revenue would be a travesty of justice. 38. In the circumstances, in our view, the notice issued under Section 148 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,- (a) a search under section 132 which is initiated; or (b) a search under section 132 for which the last of authorisations is executed; or (c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have been issued under the erstwhile provision of Section 149(1) (b) of the Act, for any assessment year beginning on or before the 1st day of April 2021, the notice cannot be issued even under the new provisions. 25. Section 149(1) (b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under Section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, 6th year expired on 31st March 2022. The notice under Section 148 of the Act, in the present case, is issued on 27th August 2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso redundant - (i) 'at any time' in the first line of the proviso. (ii) 'beginning on or before 1st day of April, 2021,' in the second line of the proviso. (iii) 'at that time' in the fourth line of the proviso. If we have to give effect to the interpretation suggested by the Revenue, then the proviso would have read as under : "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; 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period of limitation prescribed under Section 149 or the restriction as per the first proviso below Section 149 of the Act. Therefore, for considering the restriction on issue of a notice under section 148 of the Act prescribed in the first proviso to Section 149 of the Act, the fresh/presently impugned notice dated 27th August 2022 issued under Section 148 of the Act is required to be considered. The said notice is admittedly beyond the erstwhile period of limitation of six years prescribed by the Act prior to its amendment by the Finance Act, 2021. For the Assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June 2022 to 28th June 2022 cannot be excluded as per the fifth proviso. This is because petitioner on 8th June 2022 did not request for any further time and furnished its response to the show cause notice under Section 148A (b) of the Act. It is the Assessing Officer who has suo moto issued another letter on 28th June 2022 asking petitioner to furnish further details by 8th July 2022. Therefore, even assuming a period of 27 days (i.e., 16 days from 24th May to 8th June and 11 days from 28th June to 8th July) are excluded from the date of the impugned 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06;ख्या / DIN & Document No.: ITBA/AST/S/91/2022-23/1044985587(1) दिनांक / Dated : 27/08/2022 Intimation Letter for Notice u/s 148 of the Income-tax Act, 1961 Sir/Madam/M/s, This is to inform you that Notice u/s 148 of the Income-tax Act, 1961 dated 26/08/2022 is having Document No.(DIN) ITBA/ AST/M/1481/2022-23/1044985555(1). This is a system generated document and does not require any signature. (emphasis supplied) We agree with petitioner that this letter cannot validate the notice issued under Section 148 of the Act on 27th August 2022. The reason is firstly, the intimation letter refers to a DIN with respect to some notice under Section 148 of the Act dated 26th August 2022. The impugned notice issued to petitioner is dated 27th August 2022 and not 26th August 2022 for which the DIN is generated. Secondly, the procedure prescribed in Circular No. 19 of 2019 dated 14th August 2019 for non-mention of DIN in case letter/notice/order has not been complied with by respondent no. 1. It is settled that if DIN is not mentioned in the letter/notice/order, the reason for not mentioning the DIN and the approval f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other person, on or after the 1st day of October, 2019 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of such communication. 3. In exceptional circumstances such as,- (i) when there are technical difficulties in generating/ allotting/quoting the DIN and issuance of communication electronically; or (ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties: or (iii) when due to delay in PAN migration. PAN is lying with non-jurisdictional Assessing Officer; or (iv) when PAN of assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) when the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner/ Director General of income-tax. In cases where manual communication is required to be issued due to delay in PAN mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph 4 of the Circular provides that any order/ communication which is not in conformity with paragraphs 2 and 3 of the Circular shall be treated as invalid and shall be deemed to have never been issued. The contents of the Circular have been re-iterated in a Press Release dated 14th August 2019; (b) It is indisputable that the impugned assessment order dated 28th September 2021 does not bear a DIN and further that the said order issued without a DIN does not bear the required format set out in paragraph 3 of the Circular and, therefore, the impugned assessment orders for Assessment Year 2011-2012 to 2019-2020 ought to be treated as invalid and deemed never to have been issued. We find support for this view in Brandix Mauritius Holdings Ltd. (Supra) where the Hon'ble Delhi High Court has held that an order passed in contravention of the said Circular is void, bad in law and of no legal effect. Paragraphs 16 to 17.1, 18 and 19 read as under : 16. The final assessment order was passed by the Assessing Officer (AO) on 15.10.2019, under Section 147/144(C)(13/143(3) of the Act. Concededly, the final assessment order does not bear a DIN. There is nothing on record to show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the satisfaction note no regularization dated 13th October 2021 has been issued; (e) In view of the binding nature of Circular issued under Section 119 of the Act, and the peculiar facts and circumstances of the case, the consequences of contravention of the Circular set out above, therefore, ought to be given full effect to. The object of the said Circular is clear and laudatory and intended to ensure that proper trail of all assessment and other orders are maintained and further that any deviation therefrom can only be undertaken after prior written approval of the higher authorities under the Act. Therefore, the satisfaction note dated 13th July 2021 and the impugned order of assessment dated 28th September 2021 ought to be treated as invalid and deemed never to have been issued; xxxxxxxxxxxxxxxx (emphasis supplied) Therefore, the impugned notice dated 27th August 2022 issued under Section 148 of the Act is invalid and bad in law as the same has been issued without a DIN. 32. As regards issue no. 4, Section 151A reads as under : Faceless assessment of income escaping assessment. 151A. (1) The Central Government may make a scheme, by notification in the Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, (b) and the issuance of notice under Section 148 of the Act, shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act for issuance of notice and in a faceless manner, to the extent provided in Section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee. The impugned notice dated 27th August, 2022 has been issued by respondent no. 1 (JAO) and not by the NFAC, which is not in accordance with the aforesaid Scheme. 33. The guideline dated 1st August 2022 relied upon by the Revenue is not applicable because these guidelines are internal guidelines as is clear from the endorsement on the first page of the guideline - "Confidential For Departmental Circulation Only". The said guidelines are not issued under Section 119 of the Act. Any such guideline issued by the CBDT is not binding on petitioner. Further the said guideline is also not binding on respondent no. 1 as they are contrary to the provisions of the Act and the Scheme framed under Section 151A of the Act. The effect of a guideline came up for discussion in Sofitel Realty LLP vs. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148 of the Act. The Scheme dated 29th March 2022 in paragraph 3 clearly provides that the issuance of notice "shall be through automated allocation" which means that the same is mandatory and is required to be followed by the Department and does not give any discretion to the Department to choose whether to follow it or not. That automated allocation is defined in paragraph 2(b) of the Scheme to mean an algorithm for randomised allocation of cases by using suitable technological tools including artificial intelligence and machine learning with a view to optimise the use of resources. Therefore, it means that the case can be allocated randomly to any officer who would then have jurisdiction to issue the notice under Section 148 of the Act. It is not the case of respondent no. 1 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or recomputation under Section 147 of the Act. Therefore, if Revenue's arguments are to be accepted, there is no purpose of framing a Scheme only for clause 3(a) which is in any event already covered under faceless assessment regime in Section 144B of the Act. The argument of respondent, therefore, renders the whole Scheme redundant. An argument which renders the whole Scheme otiose cannot be accepted as correct interpretation of the Scheme. The phrase "to the extent provided in Section 144B of the Act" in the Scheme is with reference to only making assessment or reassessment or total income or loss of assessee. Therefore, for the purposes of making assessment or reassessment, the provisions of Section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term "to the extent provided in Section 144B of the Act" is not relevant. The Scheme provides that the notice under Section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, "to the extent provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officers. Therefore, it is clear that the Assessing Officer are randomly selected to handle a case and it is not merely a case where notice is sought to be issued through automation. (ii) It is further erroneously stated in paragraph 3 of the Office Memorandum that "To this end, as provided in the section 148 of the Act, the Directorate of Systems randomly selects a number of cases based on the criteria of Risk Management Strategy." The term 'randomly' is further used at numerous other places in the Office Memorandum with respect to selection of cases for consideration/issuance of notice under Section 148 of the Act. Respondent is clearly incorrect in its understanding of the said Scheme as the reference to random in the said Scheme is reference to selection of Assessing Officer at random and not selection of Section 148 cases as random. If the cases for issuance of notice under Section 148 of the Act are selected based on criteria of the risk management strategy, then, obviously, the same are not randomly selected. The term 'randomly' by definition mean something which is chosen by chance rather than according to a plan. Therefore, if the cases are chosen based on risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management criteria. The reference to risk management criteria in clause 3 of the Scheme is to the effect that the notice under Section 148 of the Act should be in accordance with the risk management strategy formulated by the board which is in accordance with Explanation 1 to Section 148 of the Act. In our view, the Revenue is misinterpreting the Scheme, perhaps to cover its deficiency of not following the Scheme for issuing notice under Section 148 of the Act. (iv) In paragraph 3.1 of the Office Memorandum, it is stated that the case is selected prior to issuance of notice are decided on the basis of an algorithm as per risk management strategy and are, therefore, randomly selected. It is further stated that these cases are 'flagged' to the JAO by the Directorate of Systems and the JAO does not have any control over the process. It is further stated that the JAO has no way of predicting or determining beforehand whether the case will be 'flagged' by the system. The contention of the Revenue is that only cases which are 'flagged' by the system as per the risk management strategy formulated by CBDT can be considered by the Assessing Officer for reopening, however, in clause (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme along with Section 151A of the Act makes it clear that neither the Section or the Scheme speak about the detailed specifics of the procedure to be followed therein. This argument of the Revenue is clearly contrary to the Scheme as the Scheme is very specific to provide, inter alia, that the issuance of notice under Section 148 of the Act shall be through automated location and in a faceless manner. Therefore, the Scheme is mandatory and provides the specification as to how the notice has to be issued. Further the argument of the Revenue that Section 151A of the Act takes into account that the procedure may be modified under the Act is without appreciating that if the procedure is required to be modified then the same would require modification of the notified Scheme. It is not open to the Revenue to refuse to follow the Scheme as the Scheme is clearly mandatory and is required to be followed by all Assessing Officers. (viii) The argument of the Revenue in paragraph 5.1 of the Office Memorandum that the Section and Scheme have left it to the administration to device and modify procedures with time while remaining confined to the principles laid down in the said Section and Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is claimed in respect of the deduction allowed under Section 10AA of the Act. None of the issues raised in the impugned order show an alleged escapement of income represented in the form of asset as required in Section 149(1) (b) of the Act. 41. As regards the claim of deduction under Section 80JJAA of the Act, an issue of correctness of claim of deduction under Chapter VI of the Act, in our view, cannot be covered by Section 149(1) (b) of the Act. Section 149(1) (b) of the Act prescribes that escaped income must be represented in the form of (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event; (iii) an entry in the books of Account. The question of a correctness of the claim of deduction under Section 80JJAA of the Act cannot represent escapement of income in the form of an asset. The term 'asset' is defined in Explanation to Section 149 of the Act to include immovable property being land or building or both, shares and securities, loans and advances, deposit in bank account. The present case does not fall in any of the types of the assets as mentioned above. Further, the alleged claim of disallowance of deduction also can never fall under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings and the assessment order accepting revised return came to be passed. 36. We would agree with the submissions of Mr. Pardiwalla that if change of opinion concept is given a go by, that would result in giving arbitrary powers to the Assessing Officer to reopen the assessments. It would in effect be giving power to review which he does not possess. The Assessing Officer has only power to reassess not to review. If the concept of change of opinion is removed as contended on behalf of the Revenue, then in the garb of re-opening the assessment, review would take place. The concept of change of opinion is an in-built test to check abuse of power by the Assessing Officer. As held in Dr. Mathew Cherian (Supra), whether under old or new regime of reassessment, it is settled position that the issues decided categorically should not be revisited in the guise of reassessment. That would include issues where query have been raised during the assessment and query have been answered and accepted by the Assessing Officer while passing the assessment order. As held in Aroni Commercials (supra) even if assessment order has not specifically dealt with that issue, once the query is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal employee cost" means the total emoluments paid or payable to additional employees employed during the previous year: Provided that in the case of an existing business, the additional employee cost shall be nil, if- (a) there is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year; (b) emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed: Provided further that in the first year of a new business, emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost; (ii) "additional employee" means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include- (a) an employee whose total emoluments are more than twenty-five thousand rupees per month; or (b) an employee for whom the entire contribution is paid by the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year in which such employment is provided. The fact that the claim of deduction under Section 80JJAA of the Act has been allowed to petitioner consistently since Assessment Year 2010-2011 is not disputed. Therefore, respondent no. 1 cannot allege that income chargeable to tax has escaped assessment on account of such claim being allowed for Assessment Year 2015-2016 when such claim stands allowed for earlier years on identical facts, i.e., with respect to the same business activity. 45. As regards Ms. Gokhale's submissions that the merits of the claim of deduction under Section 80JJAA of the Act cannot be urged/argued in the present writ petition and petitioner has an alternate remedy to argue the merits of the case before the Assessing Officer, in our view, petitioner is not arguing the merits of deduction under Section 80JJAA of the Act. It is the submission of petitioner that the jurisdictional conditions prescribed under Sections 147, 148, 148A, 149, 151, and 151A of the Act have not been fulfilled by respondent no. 1 before issuing the impugned notice under Section 148 of the Act. As jurisdictional conditions are not fulfilled by respondent no. 1, the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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