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TMI Blog2025 (1) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been applicable. This according to the writ petitioner would have required the respondents to follow the procedure as prescribed by Section 148A of the Act which had come to be introduced by virtue of Finance Act, 2021. It is these aspects which came to be noticed by the Court originally when it entertained the writ petition on 15 February 2022 and led to the passing of an interim order providing that while it would be open for the Assessing Officer [AO] to frame an order of assessment, the same would not be given effect to. 2. When the matter was heard finally by us, Mr. Aggarwal, learned senior counsel appearing for the writ petitioner, had contended that since the notice had been digitally signed on 09 April 2021, it would be that date which would be liable to be viewed as the date of issuance of notice. It was his contention that this issue in any case stands conclusively settled in light of the judgment of the Court in Suman Jeet Agarwal vs. Income Tax Officer and Ors 2022 SCC OnLine Del 3141 and where the Court had held as follows:- "25.24. With respect to impugned notices falling in category "A", there is an additional factor which evidence that the said notices were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter they were sent and delivered through the Income Tax Business Application portal on or after April 1, 2021, the impugned notices falling under category "A" can only be said to have been issued on or after April 1, 2021" xxxx xxxx xxxx 31. For the reasons and principles that we have laid down, we dispose of these writ petitions with the following directions : 31.1. Category "A" : The notices falling under category "A", which were digitally signed on or after April 1, 2021, are held to bear the date on which the said notices were digitally signed and not March 31, 2021. The said petitions are disposed of with the direction that the said notices are to be considered as show-cause notices under section 148A (b) of the Act as per the directions of the apex court in the Ashish Agarwal, (supra) judgment" 3. It was further submitted that from the reasons which had been supplied it is apparent that the income which is alleged to have escaped assessment was spelt out as INR 46,17,000/- and thus falling below the threshold of INR 50 lakhs which forms part of the amended Section 149 (1) (b) as that provision came to exist in the statute post 01 April 2021. According to Mr. Aggarw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Section 148A route or undertake a course correction pursuant to the judgment rendered by the Supreme Court in Union of India and Ors. vs. Ashish Agarwal (2023) 1 SCC 617. Learned counsel sought to draw sustenance and support for the aforenoted submission from the judgment handed down by this Court in Anindita Sengupta vs. Assistant Commissioner of Income Tax and Ors 2024 SCC OnLine Del 2296. 8. Having broadly noticed the rival submissions which were addressed, we proceed to examine the challenge on merits hereinafter. 9. From the case as set up in the writ petition as well as the various decisions which were cited for our consideration, it becomes apparent that the challenge originally appears to have been addressed on grounds which ultimately found favour with this Court in Mon Mohan Kohli vs. Assistant Commissioner of Income Tax and Anr. 2021 SCC OnLine Del 5250. Mon Mohan Kohli was a decision which was concerned with the validity of reassessment notices issued after the promulgation of Finance Act, 2021 and thus at a time when section 148A had come to exist on the statute and yet the respondents having chosen to commence proceedings based on the erstwhile regime of reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces which may be available to the assessees including those available under Section 149 of the IT Act and all rights and contentions which may be available to the assessees concerned and Revenue under the Finance Act, 2021 and in law shall continue to be available." 11. As is manifest from the above, the Supreme Court in order to strike a just balance between the interest of the assessee and the Revenue, provided that all notices issued pan India after 01 April 2021, albeit in accordance with the procedure contemplated under the earlier regime of reassessment, would be deemed to be notices referable to Section 148A (b) and the procedure as prescribed in that provision being thereafter liable to be followed. 12. It would be relevant to note that the judgment of the Supreme Court in Ashish Agarwal came to be pronounced in May 2022 and by which time the reassessment proceedings drawn against the writ petitioner pursuant to liberty accorded by us came to be completed and an order of assessment passed on 31 March 2022 making additions of INR 49,98,000/- on account of unexplained cash credits under Section 69 of the Act as well as INR 3,68,750/- on account of income from other so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther in accordance with section 148A (d). As we read that decision, we find ourselves unable to construe those directions as either warranting or mandating a reopening of proceedings which had come to be rendered a quietus in the meanwhile. The judgment was primarily concerned with the validity of various notices which had been promulgated and proceedings drawn in accordance with the statutory procedure which stood in place prior to April 1, 2021. It also becomes pertinent to note that the decision rendered by our court in Mon Mohan Kohli v. Asst. CIT [(2022) 441 ITR 207 (Delhi); 2021 SCC OnLine Del 5250.] perhaps constituted the solitary exception in the sense of having left a window open to the respondents to draw proceedings afresh. A majority of the High Courts, however, do not appear to have made such a provision or provide the Revenue with a right of recourse. The Supreme Court was thus faced with a peculiar and an unprecedented situation where the Revenue was rendered remediless to assess escaped income even though material may have merited such an action being pursued solely on account of a misinterpretation of the correct legal position. It was these factors which clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of those judgments were primarily concerned with concluded assessments. It is this indubitable position which constrained the Supreme Court to frame directions requiring those notices to be treated as being under section 148A (b) and for the Assessing Officer proceeding thereafter to frame an order as contemplated by section 148A (d) of the Act. The Supreme Court significantly observed that the High Courts instead of quashing the impugned notices should have framed directions for those notices being construed and deemed to have been issued under section 148A. Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] proceeded further to observe that the Revenue should have been "permitted to proceed further with the reassessment proceedings as per the substituted provisions...." Our view of the judgement being confined to proceedings at the stage of notice is further fortified from the Supreme Court providing in paragraph 8 of the report that "The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the Income-tax Act as substituted by the Finance Act, 2021 ((2021) 432 ITR (Stat) 52) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a notice under section 148 and the manifest intent of the Supreme Court being that its judgment would apply and govern irrespective of whether an appeal had been laid before it. 28. It is in the aforesaid context that we also bear in mind the pertinent observations rendered by the Constitution Bench in High Court Bar Association v. Uttar Pradesh [(2024) 6 SCC 267.] when it held that a direction under article 142 of the Constitution should not impact the substantive rights of those litigants who are not even parties to the lis. The Constitution Bench while acknowledging the amplitude of the article 142 power placed a significant caveat when it observed that benefits derived by a litigant based on a judicial order validly passed cannot be annulled especially when they may not even have been parties to the cause. This too convinces us to hold in favour of the petitioner and come to the inevitable conclusion that the writ petition must succeed." 14. The disputation on the aforenoted issues again arose for the consideration of the Supreme Court in Rajeev Bansal. The petitioner seeks to draw support from the recordal of submissions advanced by the Additional Solicitor General of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old regime for reassessment with a new regime. The first proviso to section 149 does not expressly bar the application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 3 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-tax Act, including sections 149 and 151 of the new regime. Once the first proviso to section 149 (1) (b) is read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: Assessment Year Within Years Expiry of Limitation read with TOLA for (2) (3) Within Six Years (4) Expiry of Limitation read with TOLA for (4) (5) 2013-2014 31.03.2017 TOLA not applicable 31.03.2020 30.06.2021 2014-2015 31.03.2018 TOLA not applicable 31.03.2021 30.06.2021 2015-2016 31.03.2019 TOLA not applicable 31.03.2022 TOLA not applicable 2016-2017 31.03.2020 TOLA not applicable 31.03.2023 TOL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which, however, still survives is whether the impugned notice issued on 09 April 2021 can be said to be barred by time or lacking in jurisdiction. Undisputedly, AY 2015-16 pertains to a period prior to 01 April 2021 and would thus be governed by the First Proviso to Section 149. Section 149 as amended by Finance Act, 2021 reads as under: - "149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: 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 such notice could not have been issued at that time on account of being beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferable to Section 148A (b) of the Act. The formulation of this legal fiction in Ashish Agarwal stands lucidly explained by the Supreme Court in Rajeev Bansal the relevant extracts whereof are reproduced hereinbelow: - "94. Before we proceed, we need to bear in mind three important periods: (i) The period up to June 30, 2021 - this period is covered by the provisions of the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020; (ii) The period from July 1, 2021 to May 3, 2022 - the period before the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.]; and (iii) The period after May 4, 2022 - the period after the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.]. This period is covered by the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] and the provisions of the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. 95. The third proviso to section 149 reads thus: "Provided also that for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing due regard to the purpose for which the legal fiction is created. (State of Maharashtra v. Laljit Rajshi Shah [(2000) 2 SCC 699; 2000 SCC (Cri) 533.]) The consequences that follow the creation of the legal fiction "have got to be worked out to their logical extent". (Bengal Immunity Comany Ltd. v. State of Bihar [(1955) 6 STC 446 (SC); 1955 SCC OnLine SC 2.]) The court has to assume all the facts and consequences that are incidental or inevitable corollaries to giving effect to the fiction. (Industrial Supplies Pvt. Ltd. v. Union of India [(1980) 4 SCC 341.]) 99. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], this court created a legal fiction by deeming the section 148 notices issued under the old regime as show-cause notices under section 148A (b) of the new regime. The purpose of the legal fiction was to enable the Revenue "to proceed further with the reassessment proceedings as per the substituted provisions" of the Income-tax Act. Accordingly, all the reassessment notices issued under the old regime were deemed to always have been show-cause notices issued under section 148A (b) of the new regime. The fiction replaced section 148 notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were effectively inhibited from performing their responsibility under section 148A until the requirement of supply of relevant material and information to the assessees was fulfilled. This court lifted the inhibition by directing the Assessing Officers to supply the assessees with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. Thus, during the period between the issuance of the deemed notices and the date of judgment in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], the Assessing Officers were deemed to have been prohibited from proceeding with the reassessment proceedings. 103. In VLS Finance Ltd. v. CIT [(2016) 384 ITR 1 (SC); (2016) 12 SCC 32.] a two-judge Bench of this court was called upon to interpret Explanation 1 to section 158BE of the Income-tax Act. Section 158BE provides the time limit for completion of block assessments. Explanation 1 to the provision excludes "period during which the assessment proceedings is stayed by an order or injunction of any court" from the period of limitation. This court held that the exclusion of the period of limitation has to be computed "r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], the Assessing Officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show-cause notices were deemed to have been stayed by order of this court from the date of their issuance (somewhere from April 1, 2021 till June 30, 2021) till the date of decision in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , that is, May 4, 2022. 106. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], this court directed the Assessing Officers to provide relevant information and materials relied upon by the Revenue to the assessees within thirty days from the date of the judgment. A show-cause notice is effectively issued in terms of section 148A (b) only if it is supplied along with the relevant information and material by the Assessing Officer. Due to the legal fiction, the Assessing Officers were deemed to have been inhibited from acting in pursuance of the section 148A (b) notice till the relevant material was supplied to the assessees. Therefore, the show-cause notices were deemed to have been stayed until the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell for completion from March 20, 2020 to March 31, 2021, till June 30, 2021. All the reassessment notices under challenge in the present appeals were issued from April 1, 2021 to June 30, 2021 under the old regime. Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] deemed these reassessment notices under the old regime as show-cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. (East End Dwellings Co. Ltd. v. Finsbury Borough Council [[1952] A.C. 109. (Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.")] ) Therefore, the logical effect of the creation of the legal fiction by Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] is that the time surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of two weeks granted to the assessees to reply to the show-cause notices must also be excluded in terms of the third proviso to section 149. 111. The clock started ticking for the Revenue only after it received the response of the assessees to the show-causes notices. After the receipt of the reply, the Assessing Officer had to perform the following responsibilities : (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the Assessing Officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, was available to the Assessing Officers to issue the reassessment notices under section 148 of the new regime. 112. Let us take the instance of a notice issued on May 1, 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show-cause not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtinent observations: - "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." 21. As is manifest from the above, by virtue of GKN Driveshafts, the respondents were placed under an obligation to communicate the reasons for formation of opinion of income having allegedly escaped assessment to the assessee and providing him an opportunity to object to the commencement of a reassessment action on jurisdictional grounds. It was this procedural safeg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from rupees one lakh to rupees fifty lakhs is beneficial for the assessees. Mr. Venkataraman has also conceded on behalf of the Revenue that all notices issued under the new regime by invoking the six-year time limit prescribed under section 149 (1) (b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than rupees fifty lakhs. 53. The position of law which can be derived based on the above discussion may be summarized thus : (i) section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to section 149 (1) (b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to section 149 (1) (b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 148A (b) notice but being one made solely on the basis of the liberty accorded by this Court in the interim. The distinction that thus needs to be acknowledged, and one which we seek to underline, is Anindita Sengupta being a case where a final order of assessment had already come to be framed even before the Supreme Court had pronounced its verdict in Ashish Agarwal. It was in that backdrop that we had held that a final order of assessment which came to be drawn upon culmination of reassessment proceedings was not liable to be reversed consequent to what was held in Ashish Agarwal. An order framed pursuant to the interim liberty accorded by this Court while initially entertaining the writ petition would clearly not fall in the same genre. It would in any case, and as would be true for all interim orders, be subject to the outcome of the writ petition. Such an order of assessment remains inchoate and vulnerable since it would come into being only if the challenge of the writ petitioner were to ultimately fail. We thus find ourselves unable to uphold the submissions of Mr. Panda based on Anindita Sengupta. 28. That only leaves us to deal with the last limb of the challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to April 30, 2021 and lastly up to June 30, 2021. 34. Concededly, the Finance Act, 2021 was enacted thereafter and came into effect from April 1, 2021. It is admitted by the respondents that the terminal point for initiation of reassessment for the assessment year 2015-2016 in ordinary circumstances would have been March 31, 2020 and that date clearly fell within the period spoken of in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. The period for issuance of notice for the assessment year 2015-2016, thus and principally speaking, stood extended up to June 30, 2021. 35. However, the key to answering the argument which was canvassed on behalf of the respondents is contained in section 3 itself and which purported to extend the period for completion of proceedings, passing of an order, issuance of a notice, intimation, notification, sanction or approval. The provision extended the time limit for such action, notwithstanding anything contained in the specified Act, initially up to March 31, 2021 and which date was extended subsequently to April 30, 2021 and lastly up to June 31, 2021. 36. Section 3 thus essentially extended the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the relevant assessment year or thereafter. The bifurcation of those powers would continue unaltered and unaffected by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 39. The fallacy of the submission addressed by the respondents becomes even more evident when we weigh in consideration the fact that even if the reassessment action were initiated, as per the extended Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act timelines, and thus after the period of four years, section 151 incorporated adequate measures to deal with such a contingency and in unambiguous terms identified the authority which was to be moved for the purposes of sanction and approval. Section 151 distributed the powers of approval amongst a set of specified authorities based upon the lapse of time between the end of the relevant assessment year and the date when reassessment was proposed. Thus even if the reassessment was proposed to be initiated with the aid of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act after the expiry of four years from the end of the relevant assessment year, the authority statutori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are concerned nowhere prescribe a timeframe within which sanction is liable to be accorded. "Sanction" when used in section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved. That is clearly not the position which obtains here. We thus find ourselves unable to sustain the impugned action of reassessment. The impugned notices which rest on a sanction obtained from the Joint Commissioner of Income-tax would thus be liable to be quashed." 30. Mr. Panda, learned counsel appearing for the respondents, however contended that the view expressed by us in Abhinav Jindal would no longer sustain in light of the judgment in Rajeev Bansal. According to learned counsel, the Supreme Court in Rajeev Bansal has ultimately held that the grant of approval under Section 151 would have to be in consonance with the extended time limits which came to be introduced by TOLA. We deem it apposite to extract the following passages from Rajeev Bansal: - "73. Section 151 imposes a check upon the power of the Revenue to reopen assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 444 ITR 1 (SC); (2023) 1 SCC 617.], after April 1, 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of section 151 of the new regime is thus: (i) If income escaping assessment is less than rupees fifty lakhs : (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than rupees fifty lakhs : (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 76. Grant of sanction by the appropriate authority is a precondition for the Assessing Officer to assume jurisdiction under section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 148A". Although this court waived off the requirement of obtaining prior approval under section 148A(a) and section 148A (b), it did not waive the requirement for section 148A (d) and section 148. Therefore, the Assessing Officer was required to obtain prior approval of the specified authority according to section 151 of the new regime before passing an order under section 148A (d) or issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, where applicable." 31. As is evident from a reading of the aforenoted passages, the Supreme Court in Rajeev Bansal had merely alluded to the time frames within which approval could be sought and obtained and that being regulated by the extended timelines which TOLA had introduced. However, Rajeev Bansal cannot possibly be construed or read as affirming the authority of a Joint Commissioner to accord approval or the said authority being viewed as the competent authority for the purposes of grant of approval post 01 April 2021. 32. We thus come to conclude t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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