Explore the complexities surrounding the validity of re-assessment proceedings under Section 147/148A of the Income Tax Act, focusing on the impact of the Taxation & Other Laws (Relaxations & Amendments of Certain Provisions) Act, 2020 (TOLA) and the amendment through the Finance Act, 2021. Delve into the judgment of the Apex Court in the case of Union of India vs. Ashish Aggarwal and the subsequent CBDT Instructions No. 1/2022, emphasizing the significance of obtaining the sanction for issuing notice under Section 148 by the Specified Authority under Section 151 of the IT Act. Gain insights from recent legal cases, including J.M. Financial and Investment Consultancy Services Pvt. Ltd. v. Asst. CIT and Ma Multi-Infra Development Pvt. Ltd. v. Asst. CIT, highlighting the court’s stance on the applicability of TOLA to the sanction under Section 151 and the implications for re-assessment proceedings.
Validity of Re assessment proceedings under section 147/148A of the Income Tax Act had been a subject matter of huge litigation on different grounds. The litigation was further aggravated due to following reasons:-
1) Taxation & other laws (Relaxations & Amendments of certain provisions) Act, 2020 (TOLA).
2) Amendment of Re-assessment provisions through Finance Act, 2021.
3) Overlapping of the different assessment schemes under the old and new provisions.
4) Judgment of the Apex Court in case of Union of India vs. Ashish Aggarwal.
5) CBDT Instructions No. 1/2022 Dt. 11/05/2022 giving effect to the judgment of Honorable Supreme Court in the case of UOI Vs. Ashish Aggarwal.
In this write up I will restrict my discussion relating to sanction for issue of notice U/S 148 by the Specified Authority U/S 151 of the IT Act. Section 151 (before amendment by Finance Act, 2021) read as under:-
Section 151
1) ” No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.
2) In a case other than a case falling under sub section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.
3) For the purposes of sub section (1) and sub section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue before such notice himself”.
The issue relating to applicability of TOLA to sanction U/S 151 was adjudicated upon in the case of J.M. Financial and Investment Consultancy Services Pvt. Ltd. V. Asst. CIT (2023) 451 ITR 205 (Bom).
In this case the petitioner challenged the notice Dt. 31st March, 2021 issued U/s 148 for A/Y 2015-16. The case of the petitioner was that the approval obtained for issuing notice U/S 148 is not in accordance with the mandate of Section 151 (as it existed at that time) as the said approval is of Additional Commissioner of Income Tax instead of Principal Commissioner of Income Tax. The petitioner’s case was put up for approval on March 23, 2021 which was after the expiry of four years from the end of relevant Assessment Year. It was stated that as four years had elapsed at the time of re-opening, the sanction was required to be obtained from Principal Commissioner. Hence the notice issued was bad in law.
The department’s contention was that the approval granted by the Additional Commissioner of Income Tax was valid because the limitation, inter alia, under the provisions of section 151 which were originally expiring on March 31, 2020 stood extended to March 31, 2021 by the TOLA.
Honorable Bombay High Court quashed the notice U/S 148 Dt March 31,2021 holding that since four years had expired from the end of the relevant Assessment Year as provided U/S 151(1), it is only the Principal Commissioner and not the Additional Commissioner, who could have accorded the approval. In any case time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act.
On similar facts the same High Court following the decision in the above case the court echoed the same views in Ma Multi-Infra Development Pvt. Ltd. V. Asst. CIT (2023) 451 ITR 181 (Bom).
Conclusion:-
It is established law that if section u/s 151 is not obtained from the appropriate superior authority, the re assessment proceedings are invalid and liable to be set aside. The provisions of TOLA are not applicable to the time limit set out in section 151 for obtaining the requisite sanction from the specified superior authority.
Author Bio
Revenue has challenged Mumbai High court decision on j.m.finsical in supreme court on Dec 2022 in bench of Hon judge
Sanjeev khanna.No stay however given .
only Notice issued by Supreme court