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TMI Blog2025 (5) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... rt is whether the impugned notice has been issued beyond the period stipulated under Section 149 (1) of the Act. PREFATORY FACTS 3. Briefly stated, the facts relevant to address the aforesaid controversy are as under: 3.1 The petitioner filed its income tax return under Section 139 (1) of the Act in respect of Assessment Year [AY] 2016-17 on 30.11.2016. The petitioner's return of income was selected for scrutiny and the Assessing Officer [AO] issued a notice dated 04.09.2017 under Section 143 (2) of the Act. The said proceedings culminated in an assessment order dated 18.12.2018 passed under Section 143 (3) of the Act. In terms of the said assessment order, the AO made an addition of Rs. 2,98,84,704/- to the declared income of the petitioner for AY 2016-17. 3.2 The petitioner appealed the said assessment order before the Commissioner of Income Tax (Appeals)-8, Mumbai [CIT(A)]. 3.3 The said appeal was partially allowed by an order dated 14.02.2020, whereby the learned CIT(A) deleted the addition of Rs. 8,35,864/- made on account of disallowance under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 [Rules]. 3.4 The income tax officials conducted search an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion and argued that, in terms of the fourth proviso to Section 153A (1) of the Act, no notice for the relevant assessment year or years could be issued unless the AO had in his possession books of account or other documents or evidence which revealed that income represented in the form of an asset has escaped assessment. Thus, the extended period of limitation beyond the six years preceding the assessment year relevant to previous year in which a search was conducted, would be applicable only in cases where the AO had evidence, which discloses that the escaped income was represented by an asset. He contended that, in the present case, the income which is alleged to have escaped assessment is on account of an expenditure, which the AO had disallowed and not on account of any asset which represent such income. REASONS & CONCLUSION 7. At the outset, it is relevant to refer the relevant extract of Section 149 of the Act, as was in force at the material time. The same is set out below: "149. Time limit for notice: - (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, unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149 (1) (b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149 (1) (b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section149 (1) (b) to protect the interests of the assesses. *** *** *** 54. The proviso to Section 149 (1) (b) of the new regime uses the expression "beyond the time limit specified under the provisions of clause (b) of sub section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021." Thus, the proviso specifically refers to the time limits specified under section 149 (1) (b) of the old regime. The Revenue accepts that without application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, the time limit for issuance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and of the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A (1) of the Act, the assessments can be reopened for a block of six years preceding the assessment year relevant to the previous year in which search under Section 132 of the Act is conducted or requisition is made under Section 132A of the Act as well as the relevant assessment year or years. 13. As is apparent from the plain language of Section 153A (1) of the Act, the AO has the jurisdiction to issue a notice in respect of each of the assessment years falling within six assessment years as well as for the relevant year or years as referred to in Clause (b) of Section 153A (1) of the Act. However, the fourth proviso to Section 153A (1) of the Act proscribes issuance of any notice for assessment or reassessment in respect of a relevant assessment year unless the conditions as stipulated in the fourth proviso are satisfied. 14. The expression "relevant assessment year" is defined under Explanation 1 to sub-section (i) of Section 153A of the Act to mean a year that falls beyond the period of six assessment years preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, but not later than ten assessment years from the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard, summons notices were issued to the above non-filers to verify the genuineness of the transactions by investigation wing. However, no response has been received from the parties till date. In the absence of any compliance by the party and in view of the fact that above parties are non-filer till date, the genuineness of contract/rent payments made by Smart Chip could not be verified. In view of the above, assessee's income aggregating Rs. 4,46,21,363/- has escaped assessment by way of various transactions during the FY 2015-16 to FY 2020-21 in the nature of contract, rent, professional charges with various parties who have not either never filed the ITR or not filed in the year in which transaction. Hence the genuineness of expenses of Rs. 4,46,21,363/- with non-filers from FY 2015-16 to 2020-21 needs to be verified. B. DISALLOWANCE OF PERSONAL EXPENSES It is noticed that during the course of search proceedings, some incriminating evidences were seized from the premises of Mr. Matthew David Foxton (34, Jor Bagh, New Delhi-110003) annexurized as Annexure A-2 in Premise TDR-9, wherein some instances of personal expenses of the key persons of Smart Chip Pvt. Ltd. were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total revenue of Vihaan Infrasystems Ltd.; * Mr. Sanjeev Shriya, his family members and Mr. Alok Mukherjee were shareholders and key managerial persons of Vihaan Infrasystems Ltd. in the past years and can be said to have significant influence over the affairs of Vihaan Infrasystems Ltd. and thus, it can be observed that Vihaan Infrasystems Ltd. was used to book non-genuine expenses in the books of Smart Chip and divert money for the benefit of specific persons; * Common address, website of Vihaan Infrasystems Ltd. and Smart Chip and other group companies; * Vihaan Infrasystems Ltd. presented as a group company /related company of Idemia Group entities; * Mr. Sanjeev Kumar Jain, holding substantial shares in Vihaan Infrasystems Ltd., was the former employee of Smart Chip and having close relationship/connivance with Mr. Sanjeev Shriya; * The fees charged by Vihaan Infrasystems Ltd. was much higher as compared to other contractual manpower company; * No proper documentation and proof of service existed in respect of expense transactions with Vihaan Infrasystems Ltd. * Discrepancies in employee's attendance record found which further establishes the non-receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment made to Vihaan Infrasystems Limited for F.Y. 2015-16 relevant to A.Y. 2016-17 in the head of business expenses has escaped assessment and needs to be examined. *** *** *** 2. Evidently, warrant was issued in the name of the assessee and the case of the assessee was covered under Search u/s 132 of the Income Tax Act 1961 on 21.03.2023. 3. Hence, in light of the provisions of Explanation-2 to Section 148 and first proviso to Section 148A, I am satisfied that I have 'information' which suggests that income chargeable to tax has escaped assessment in the case of the assessee for the year under consideration and it is a fit case to issue notice u/s 148 r.w.s 149 r.w.s 151(ii) of the Income Tax Act 1961 as amended by the Finance Act 2022. 4. In view of the above, the assessee has misrepresent the amount of Rs.9.21 Crorcs [Rs.0.49 Crore expenses debited to non-filers + Rs.0.024 Crores as personal expenses + Rs.8.70 Crores as expenses debited to Vihaan Infrasystems Ltd. represented in the form of an entry and expenditure] in its ITR filed for F. Y. 2015-16 relevant to A. Y. 2016-17 by way of various tax-avoiding arrangements and shifting profits to their Associated Enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X
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