Case Law Details
Venkateswar Medicare Pvt. Ltd. Vs ITO (ITAT Kolkata)
ITAT Kolkata held that reopening of assessment framed u/s. 148A(d) without application of mind and without controverting the explanation of the assessee is bad in law and is accordingly being quashed. Thus, appeal of the assessee allowed.
Facts- Present appeal has been preferred by the assessee against order of CIT(A). In this appeal, the only issue pressed at the time of hearing was in respect of the jurisdiction of the AO issuing notice u/s. 148 and framing the assessment accordingly u/s. 147 read with section 144B of the Act which is non-est and bad in law.
Conclusion- Undoubtedly the notice has been issued by ITO, Ward-2(1), Kolkata who is a non- jurisdictional ITO and it should have been issued by the officer of the rank of ACIT/DCIT. Besides, the decision of Hon’ble Apex Court in the case of DCIT (Exemption) & Vs. Kalinga Institute of Industrial Technology, Special Leave to Appeal (C) No(s). 29304/2019 and WP(C) No. 898/2017 as relied on by the Ld. DR to defend his arguments is not applicable as the assessee has objected to the issuance of notice within 30 days from the issuance of the notice u/s 148 of the Act itself. Therefore, in our opinion, the assessment so framed is invalid for the want of jurisdiction. Accordingly, we quash the assessment made by the AO.
Held that the AO has not applied his mind to the reply given by the assessee and not controverted the arguments of the assessee. The Ld. AR, therefore, submitted that the assessment framed by the AO without application of mind and without controverting the explanation given by the assessee is bad in law. The reliance was placed by the Ld. AR on the decision of jurisdictional High Court in the case of Excel commodity & Derivative Pvt. Ltd. Vs. Union of India & Ors. in which the Hon’ble Court has held that the assessment framed u/s. 148A(d) without application of mind and without controverting the explanation of the assessee is bad in law and is accordingly being quashed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
Both the appeals filed by the assessee are against the separate orders of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 30.11.2023 for AYs 2014-11 and 2016-17.
2. First we take up ITA No. 1416/Kol/2023. In this appeal, the only issue pressed at the time of hearing was in respect of the jurisdiction of the AO issuing notice u/s. 148 and framing the assessment accordingly u/s. 147 read with section 144B of the Act which is non-est and bad in law.
3. Brief facts of the case are that the assessee filed the return of income declaring total income of Rs.39,72,460/-. Thereafter, the AO received information that the assessee is a beneficiary of accommodation entries from Shri Mukesh Banka to the tune of 92,50,000/- during the current financial year and accordingly, the case of the assessee was reopened u/s. 147 of the Act by issuing notice u/s. 148 dated 30.06.2021 by ITO, Ward- 2(1), Kolkata. The notice u/s 148A(b) was issued on 26.05.2022. Both the notices were issued by ITO Ward-2(1) Kolkata. The assessment was framed vide order dated 26.05.2023 passed u/s 147 r.w.s. 144B of the Act by making addition of 35.50 Lacs.
4. The ld AR vehemently argued that the assessment framed is invalid and bad in law on four counts. First, Ld. AR stated that the income of the assessee was Rs.39,72,460/- and therefore the assessment has to be framed by the AC/DC in terms of CBDT circular 1/2011 [F. No. 187/12/2010-IT(A-I)] dated 31.01.2011.The Board has issued instruction in exercise of power u/s 119 of the Act that in case of non-corporate assessee where the income is declared up to Rs. 15 Lacs, the assessment would be framed by ITO and above Rs. 15 Lacs AC/DCs whereas the said limit was set at Rs. 20 Lacs and above Rs. 20 Lacs ITO/ and AC/DCs respectively. The Ld. A.R. submitted that since the order has been passed in violation of instruction and therefore the same is without valid jurisdiction.The jurisdiction to issue the notice and to frame the assessment vests with the ACIT whereas the notice was issued by ITO, Ward-2(1), Kolkata. Again notice u/s. 148 of the Act was issued on 28.07.2022 by the same ITO, Ward-2(1), Kolkata which was replied by the assessee vide letter dated 11.08.2022 a copy of which is available at page nos. 18 to 25. In the said letter vide para 5 the assessee objected to the issuance of notice u/s. 148 of the Act by the ITO, Ward-2(1), Kolkata as without jurisdiction and submitted that the entire assessment proceeding consequently would be bad in law. However, the AO instead of referring the matter back to the ld. PCIT for taking necessary remedial action proceeded with the framing of assessment and finally the assessment was made vide order dated 26.05.2023 passed u/s. 147 read with 144B of the Act dated 26.05.2023 by making an addition of Rs.35,50,000/- u/s. 68 of the Act. The Ld. AR submitted that thus the assessment so was framed was invalid and non est for the want of jurisdiction. In defense of his arguments, the Ld. AR relied on the following decisions :
(i) PCIT M/s. Shree Shoppers Ltd. in ITAT 39/2023 in IA No.GA/1/2023 dt. 15.03.2023;
(ii) M/s. Shree Shoppers Vs. DCIT in ITA No. 865/Kol/2018 dt. 08.09.2022;
(iii) Smita Biswas ACIT in ITA No. 464/Kol/2022 dt. 05.01.2024 &
(iv) Shivam Finance ACIT in ITA No. 422/Kol/2023 dt. 21.06.2023.
The Ld. AR submitted that in all the above decisions, it has been held that if the notice issued u/s 143(2) of the Act is invalid then all the subsequent proceedings are also invalid and without jurisdiction. The Ld. AR, therefore, prayed that the assessment order framed may kindly be quashed.
4.1 Secondly ,the Ld. AR vehemently submitted that the notice issued u/s. 148A(b) dated 26.05.2022 in respect of assessment year 2013-14 is barred by limitation as the same was issued after 01.04.2021, a copy of which is placed at page 2 of the paper book. The Ld. AR also brought to the notice of the bench that the notice u/s. 148 of the Act was issued for the impugned assessment year on 30.06.2021. The Ld. AR submitted that the notice issued u/s. 148 of the Act is barred by limitation and, therefore, the consequent assessment framed by the Ld. AO is also bad in law and non est in the eyes of law. In defense of his arguments, the AR relied on the decision of Hon’ble Apex court in the case of M/s. Arati Marketing Pvt. Ltd. Vs. Union of India & Ors. in WPO No. 2747 of 202 dated 12.02.2024 wherein the Hon’ble Apex Court has held that the provisions of old regime of section 148 of the Act including (TOLA) are read into or applied to the new regime applicable from 01.04.2021, it would also necessarily mean that provisions repealed by the Parliament without any saving and exception clause is applied by the revenue even after it has come to an end which is clearly not permissible in law. The Ld. AR stated that the said decision was rendered by the Hon’ble Apex Court in the context of old regime u/s. 148 having been repealed/abrogated and replaced by new set of provisions by finance Act, 2021 which came into force on 01.04.2021. The Ld. AR submitted that the new section 148A was inserted w.e.f. 01.04.2021. The Ld. AR argued that the Hon’ble Apex Court has held that no notice u/s. 148 of the Act (unamended provision) can be issued after 01.04.2021 within the said section as it is not on the statute book following abrogation/repealing of the said section w.e.f. 01.04.2021. The Ld. AR, therefore, prayed that even on this ground the assessment framed by the AO is bad in law and has been barred by limitation as no notice could have been issued post 31.03.2021 u/s 148 of the Act for the impugned assessment year.
4.2 Thirdly , the Ld. AR vehemently argued that in the impugned assessment year, the addition made by the AO was only of Rs.35,50,000/-. The ld. AR further submitted that the provisions of section 149 of the Act were modified and amended by Finance Act, 2021. Clause (a) to sub-section 1 to section 149 provides that no notice u/s 148 of the Act shall be issued if three years have elapsed from the end of relevant assessment year unless the case falls under clause (b). Clause b to section 149(1) of the Act provides that no notice u/s 148 of the Act shall be issued if three years have elapsed but not more than ten years have elapsed from the end of the relevant assessment year unless the AO has in his possession books of accounts or other documents or evidences which reveal that income chargeable to tax represented in the form of an asset or expenditure in respect of transaction or in relation to an event or occasion or an entry or entries in the books of accounts which has escaped assessment is likely to amount to fifty lacs or more. The ld AR submitted that there are certain exceptions which provide that the case can be reopened provided the AO has in his possession the books of account or other documents or evidences which reveal that income chargeable to tax represented in the form of (i) asset, (ii) expenditure in respect of a transaction or in relation to an event or occasion or (iii) entry or entries in the books of account which has escaped amount to or is likely amounts to Rs. 50 lakh or more. The Ld. AR, therefore contended that the case of the assessee obviously doesnot fall in any of the exceptions as enumerated under the said section and, therefore, the income which has escaped amounts to or is likely to amount of Rs. 50 lakh or more. In the instant case, the Ld. AO has made addition only of Rs.35,50,000/- in respect of non genuine unsecured loans and, therefore, the provisions of section 149(1)(b) of the Act do not apply to the instant case. Even on this ground the assessment framed by the AO is bad in law. In defense of his arguments, the Ld. AR relied on the decision of Hon’ble Jharkhand High Court in the case of Ratan Bej Vs. PCIT in WP(T) No. 3589 of 2023 dated 24.01.2024 wherein the Hon’ble Court has decided the same in favour of the assessee.
4.3 Arguing on the fourth limb, the Ld. AR submitted that as per the reasons recorded by the Ld. AO, it was noted that assessee has received and is beneficiary of accommodation entry amounting to Rs.92,50,000/- received from the concerns belonging to or operated by Shri Mukesh Banka during the year and accordingly, the Ld. AO came to the conclusion that income has escapement to that extent. The Ld. AR stated that the assessee has filed objection to the notice issued u/s. 148A(b) dated 26.05.2022 vide his written submission dated 15.06.2022 in which the assessee stated that as per the books of account of the assessee there was no transaction of Rs. 27 lakh on 26.04.2013 as noted in the said notice with Funidea Vinimay Pvt Ltd. There was only one transaction of Rs.25,50,000/- on 26.04.2013 from the said party which was the short term loan and which was repaid on 24.03.2015. Similarly, in respect of second party e. Manikala Dealmark Pvt. Ltd., the assessee stated that as per the notice issued by the AO, the assessee received Rs. 5.00 lakh on 01.05.2013 whereas as per the books of account the short term loan received by the assessee on 05.02.2013 which was repaid on 24.03.2015. In respect of third party i.e. Moonview Conclave Pvt. Ltd., the notice of the AO stated that assessee has received Rs. 10.00 lakh on 06.02.2013 which was appearing in the books of account of the assessee and was repaid on 20.03.2015. In respect of fourth party, Gyneshwar Agencies Pvt Ltd as per the notice of the AO, transaction was Rs.25.00 lakh whereas as per the books of account of the assessee there was no such transaction with the said entity and as a matter of fact, the assessee had transaction with Gyaneshwar Vyapar Pvt. Ltd. on 26.04.2013 of Rs.25.00 lakh which represented short term loan which was subsequently repaid on 24.03.2015. The Ld. AR stated that the notice issued by the Ld. AO u/s. 148A(b) of the Act has been comprehensively replied as stated above controverting the observations as noted by the AO in the notice. However, the AO has not applied his mind to the reply given by the assessee and not controverted the arguments of the assessee. The Ld. AR, therefore, submitted that the assessment framed by the AO without application of mind and without controverting the explanation given by the assessee is bad in law. The reliance was placed by the Ld. AR on the decision of jurisdictional High Court in the case of Excel commodity & Derivative Pvt. Ltd. Vs. Union of India & Ors. in APO/123/2023, IA No. GA/1/2023 dated 08.01.2024 in which the Hon’ble Court has held that the assessment framed u/s. 148A(d) without application of mind and without controverting the explanation of the assessee is bad in law and is accordingly being quashed.
5. The Ld. DR relied on the orders of the lower authorities and submitted that these notices were issued on on-line on the basis of database and the objections and arguments of the assessee would have been true had the notice been issued manually. The Ld. DR, therefore, prayed that the legal issue raised by the assessee may kindly be dismissed so far as the first contention of the assessee is concerned by relying on the decision of Hon’ble Apex Court in the case of DCIT (Exemption) & Anr. Vs. Kalinga Institute of Industrial Technology, Special Leave to Appeal (C) No(s). 29304/2019 and WP(C) No. 898/2017. On the remaining contentions of the assessee , the ld DR relied on the orders of authority below.
6. After hearing the rival submissions and perusing the material available on record, we find that undisputedly the returned income of the assessee was Rs.39,72,460/- and the jurisdiction to issue notice and to frame the assessment vested with the ACIT/DCIT whereas the notice u/s. 148 of the Act dated 06.2021 has been issued by ITO, Ward-2(1), Kolkata. We note that the notice u/s 148A(d)of the Act dated 28.07.22 was replied by the assessee vide letter dated 11.08.2022, a copy of which is available at pages 18 to 25 of the paper book. In the said letter the assessee objected to the issuance of notice by ITO, Ward- 2(1), Kolkata to be without jurisdiction which would render all the proceeding as invalid and void. The said communication by the assessee to the AO went unheeded and no action was taken on the objection raised by the assessee and the AO proceeded with the assessment and framed the same accordingly. Now, issue before us is whether the assessment framed by the AO lacked jurisdiction. We have also perused the decisions relied on by the assessee as noted hereinabove which are discussed as under:
(i)In the case of PCIT Vs. Shree Shoppers Ltd. (supra), the Hon’ble Calcutta High Court has held as under:
“We have heard Ms. Smita Das De, learned standing counsel for the appellant/revenue. Though the respondent has been served and affidavit of service filed, none appears for the respondent .
The short issue which falls for consideration in the instant case is whether there is valid notice issued under Section 143 (2) of the Act for commencing the scrutiny assessment. The Tribunal has noted the facts and rendered a finding that on the date when the case was selected for scrutiny, the authority who issued the notice namely, the Income Tax Officer, Ward No.9(4), Kolkata did not have jurisdiction and the jurisdiction was with the Deputy Commissioner of Income Tax. The following factual finding has been recorded by the Tribunal:
“Therefore, the legal ground stands to be admitted and the same relates to invalid notice issued u/s 143(2) of the Act. It is a settled position of law that for carrying out the assessment proceedings u/s. 143(3) of the Act, the statutory requirement of serving of valid notice u/s. 143(2) of the Act is must and in absence thereof the subsequent proceedings become invalid. In the case of assessee, the facts are that the assessee has declared income of Rs. 48,47,180/- in the e-return filed on 26.09.2012. For selecting the case for scrutiny notice u/s. 143 (2) of the Act was issued by ITO, Ward-9 (4), Kolkata dated 23.09.2013. The Central Board of Direct Taxes (CBDT vide Instruction no. 1/2011 supra) revised the monetary limit for issuing notice by ITO/DCs/ACs. Through this instruction it stated that in case of metro cities in case of corporates declare income above Rs.30 lakh the jurisdiction of such corporate assessee will lie with the DCs/ACs. It is not in dispute that as on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which was more than Rs.30 lakhs and the same was lying (with the DCs/Acs but the notice u/s. 143(2) of the Act has been issued by ITO, Ward-9(4), Kolkata. It is true that subsequently the assessment has been framed by DCIT, Circle-9(2), Kolkata but the point in dispute is that on date of issuing a notice u/s. 143(2) of the Act, whether the ITO, Ward- 9(4), Kolkata was having a valid jurisdiction to issue such notice u/s. 143(2) of the Act.”
The above factual position recorded by the Tribunal is not in dispute. Therefore, we are of the clear view that the Tribunal rightly allowed the assessee’s appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable as it goes to the root of the matter.
Thus, we find no ground to differ with the findings recorded by the learned Tribunal.
In the result, the appeal filed by the revenue (ITAT/39/2023) is dismissed and the substantial questions of law are answered against the revenue.
Consequently, the connected application for stay (IA No.GA/2/1/2023) also stands closed .”
(ii) Similarly, ratio has been laid down by Hon’ble Coordinate Bench in the case of Smita Biswas (supra), wherein the operative portion of the order is as under:
“9. After hearing the rival contentions and perusing the material on record, I find that though the notice u/s 143(2) was issued by ITO, Ward-1(4), Jalpaiguri who is the jurisdictional AO however the assessment in this case was framed by ACIT, Circle-1(1), Jalpaiguri . We note that there is no valid order of transfer of jurisdiction from ITO to ACIT and therefore the transfer of jurisdiction is in contravention of provisions of Section 127(1), (2) and (3) of the Act. The case of the assessee is squarely covered by the decision of Jurisdictional High Court in the case of Kusum Goyal (supra)the relevant extracts of the High Court are extracted below:
“It is evident that the respondent no. 2 had sought to justify his action by stating that the jurisdiction automatically gets vested with the jurisdictional officer and no order under Section 127 is required to be passed. In my view, the letter/notice dated 21st October, 2009 is patently illegal since it has been held in this judgment that in case of transfer within the same city, locality or place although the opportunity of hearing as postulated in Section 127(1) and (2) has been dispensed with, other statutory formalities which includes issuing an order are required to be complied with. Similarly transfer of files for the assessment years 2007-2008, 2008-2009 and the earlier years letter/notice dated 30th July, 2009 issued by the respondent no.1 is also bad in law. The argument of the respondents that in case of intra city transfer no order is required to be passed, cannot be accepted in view of the settled position of law in Kashiram Aggarwalla (supra) and in S.L.Singhania (supra) wherein the validity of the orders were under challenge, meaning thereby an order recording transfer has to be on the records. The judgment in Subhas Chandra Bhaniramka (supra)where it has been held that in case of transfer of file under section 158BD resorthas to be made to section 127 also applies in the instant case. The judgement in M.A.E.K.K. Verma (supra) relied on by the Revenue is not applicable as it dealt with the question whether in case of intra city transfer notice is required to be served and whether separate orders of transfer are required under Wealth Tax Act, 1957 and Gift Tax Act, 1956. Therefore, since it has been held in this judgement that it is imperative on part of the respondents to issue order under section 127(3), the letters/notices under challenge are set aside and quashed. The writ petition is allowed. Consequential proceedings are also set aside and quashed. Accordingly, the notice dated 6th January, 2010 regarding the penalty proceedings under section 271(1)(c) for the assessment year 2006-07 is also set aside and quashed. The application being G.A.No. 81 of 2010 is also allowed.
The case of the assessee is also covered by the decision of Co-ordinate Bench decision in the case of Amiya Gopal Dutta (supra). For the sake of ready reference, the operative part is extracted below:
“5. At the outset, the Ld. Counsel for the assessee submitted that the assessment passed u/s 144 of the Act dated 17.12.2018 is void ,ultra vires and nullity in the eyes of law as the same was passed by the Assistant Commissioner of Income Tax, Circle-1(1), Jalpaiguri whereas as per the CBDT circular 1/2011 [F. No. 187/12/2010-IT(A-I)] dated 31.01.2011 the Board has issued instruction in exercise of power u/s 119 of the Act that in case of non- corporate assessee where the income is declared up to Rs. 15 Lacs, the assessment would be framed by ITO and above Rs. 15 Lacs AC/DCs whereas the said limit was set at Rs. 20 Lacs and above Rs. 20 Lacs ITO/ and AC/DCs respectively. The Ld. A.R. submitted that since the order has been passed in violation of instruction of CBDT by the Assistant Commissioner of Income Tax, Circle-1(1), Jalpaiguri which is not a metro city and therefore the same may kindly be quashed. In defense of his arguments the Ld. A.R relied on the decision namely Hirak Sarkar vs. ACIT, Circle-23(1), Hooghly in ITA No. 850/Kol/2019 for AY 2011-12 dated 12.08.2021 and Sanat Kumar Sahana vs. ACIT in ITA No. 2202/Kol/2015-16 dated 29.05.2020. Therefore, the Ld. A.R submitted that the appeal of the assessee may kindly be allowed by quashing the said assessment.
6. The Ld. D.R on the other hand submitted that how this happened has to be ascertained from the office of AO. Besides the Ld. D.R referred to the provisions of Section 292BB of the Act by submitting that this issue was never raised by the assessee either in the assessment proceedings or in the appellate proceedings and therefore the assessee should not be allowed to raise this issue at this stage. Alternatively the issue may be set aside to the file of the AO and since this is a procedural defect that may be cured by the authorities below.
7. We have heard the rival submissions and perused the material on Undisputed facts are that the assessee is a non corporate assessee and has declared total income of Rs. 10.02,340/- during the year. We observe that the notice u/s 143(2) of the Act was issued by ITO, Ward-1(1), Jalpaiguri to the assesse whereas the assessment was framed by the Assistant Commissioner of Income Tax, circle-1(1), Jalpaiguri. We have also perused the instruction No. 1/2011 as stated herein above which is extracted below for the sake of convenience and ready reference:
INSTRUCTION NO. 1/2011 NO. 187/12/2010-IT(A-l)], SECTION 119 OF THE INCOME TAX ACT/1961 – INCOME-TAX AUTHORITIES – INSTRUCTIONS TO SUBORDINATE AUTHORITIES
INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-I)], DATED 31-1-2011
References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship.
An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under:
Metro charges for the purpose of above instructions shall be Ahmadabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune.
The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011.
In terms of the above instruction in the case of non-corporate assessee in non-metro cities, the ITR filed upto Rs. 15 lacs has to be assessed by ITO and therefore in the instant case the assessment is framed in violation of above instruction by the Board. The case of the assessee is squarely covered by the decision of Co-ordinate Bench of Kolkata benches in the case of Hirak Sarkar (supra). The operative part is reproduced as under:
5. I have considered the rival contentions of both the ld. representatives of the parties. Before proceeding further, it will be appropriate to refer to section 120 of the Act which, for the sake of ready reference, is reproduced as under:
“Jurisdiction of income- tax authorities
(1) Income- tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.
[Explanation.- For the removal of doubts, it is hereby declared that any income-tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub-section (1)].
(2) The directions of the Board under sub- section (1) may authorise any other income- tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income- tax authorities who are subordinate to it.
(3) In issuing the directions or orders referred to in sub- sections (1) and (2), the Board or other income- tax authority authorised by it may have regard to any one or more of the following criteria, namely:-
(a) territorial area;
(b) persons or classes of persons;
(c) incomes or classes of income; and
(d) cases or classes of cases
……
6. A perusal of the aforesaid statutory provisions would reveal that the jurisdiction of Income Tax Authorities may be fixed not only in respect of territorial area but also having regard to a person or classes of persons and income or classes of income also. Therefore, the CBDT having regard to the income as per return has fixed the jurisdiction of the Assessing Officers.
6. Now, in this case, the reasons for forming belief of escapement of income by the assessee were recorded by the ITO, Ward-23(3), Hooghly and thereafter, notice u/s 148 of the Act was also issued by the by the ITO, Ward-23(3), Hooghly. However, the assessment has been framed by the ACIT, Circle-23(1), Hooghly. At this stage, it will be appropriate to refer to the provisions of section 127 of the Act as under:
Power to transfer cases
(1) The [Principal Director General or] Director General or [Principal Chief Commissioner or] Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
8. A perusal of the above statutory provisions would reveal that jurisdiction to transfer case from one Assessing Officer to other Officer lies with the Officers as mentioned in section 127(1) who are of the rank of Commissioner or above. No document has been produced on the file by the Department to show that the case was transferred by the competent authority from ITO, Ward-23(3), Hooghly to ACIT, Circle-23(1), Hooghly. Even, there is no document on the file that the ACIT, Circle-23(1), Hooghly had ever recorded any reasons to form belief that the income of the assessee has escaped assessment nor did he issue any notice u/s 147 of the Act. On the other hand, the ITO, Ward-23(3), Hooghly had recorded the reasons for reopening of the assessment and had issued notice u/s 148 of the Act, but did not proceed further with the framing of assessment. Under the circumstances, the assessment framed by ACIT, Circle-23(1), Hooghly, is bad in law on two counts, firstly he did not have any pecuniary jurisdiction to frame the assessment and secondly he himself did not form any belief that the income of the assessee has escaped assessment nor did he issue notice u/s 148 of the Act which was sine qua non to assume jurisdiction to frame to assessment. The issue relating to the pecuniary jurisdiction also came into consideration before the Coordinate Bench of the Tribunal in ITA No.2517/Kol/2019 and Others vide order dated 03.02.2021, wherein the Tribunal further relying upon various other decisions of the Coordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that the assessment framed by Assessing Officer who was not having pecuniary jurisdiction to frame such assessment was bad in law. The relevant part of the order dated 03.02.2021 passed in ITA No.2517/Kol/2019 and Others is reproduced as under:
“5.2. The assessee relied on the recent decision of this Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd. vs. DCIT, in ITA No. 2634/Kol/2019, order dated 12.01.2021. We find that the issues that arise in this appeal are clearly covered in favour of the assessee. This order followed the principles of law laid down in a number of other decisions of the ITAT, Kolkata Bench on this issue.
5.3. Kolkata “B” Bench of the Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd.(supra) held as follows:
“10.In this case, the ITO Ward-3(3), Kolkata, issued notice u/s 143(2) of the Act on 04/09/2014. In reply, on 22/09/2014, the assessee wrote to the ITO, Ward-3(3), Kolkata, stating that he has no jurisdiction over the assessee. Thereafter on 31/07/2015, the DCIT, Circle-11(1), Kolkata, had issued notice u/s 142(1) of the Act to the assessee. The DCIT, Circle-11(1), Kolkata, completed assessment u/s 143(3) of the Act on 14/03/2016. The issue is whether an assessment order passed by DCIT, Circle-11(1), Kolkata, is valid as admittedly, he did not issue a notice u/s 143(2) of the Act, to the assessee. This issue is no more res-integra. This Bench of the Tribunal in the case of Soma Roy vs. ACIT in ITA No. 462/Kol/2019; Assessment Year 2015-16, order dt. 8th January, 2020, under identical circumstances, held as under:-
“5. After hearing rival contentions, I admit this additional ground as it is a legal ground, raising a jurisdictional issue and does not require any investigation into the facts. The ld. Counsel for the assessee submitted that as per Board Instruction No. 1/2011 [F. No. 187/12/2010-IT(A-I)], dt. 31/01/2011, the jurisdiction of the assessee is with the Assistant Commissioner of Income Tax, Circle-1, Durgapur, as the assessee is a non-corporate assessee and the income returned is above Rs.15,00,000/- and whereas, the statutory notice u/s 143(2) of the Act, was issued on 29/09/2016, by the Income Tax Officer, ward-1(1), Durgapur, who had no jurisdiction of the case. He submitted that the assessment order was passed by the ACIT, Circle-1(1), Durgapur, who had the jurisdiction over the assessee, but he had not issued the notice u/s 143(2) of the Act, within the statutory period prescribed under the Act. Thus, he submits that the assessment is bad in law.
5.1. On merits, he rebutted the findings of the lower authorities. The ld. Counsel for the assessee relied on certain case-law, which I would be referring to as and when necessary.
6. The D/R, on the other hand, submitted that the concurrent jurisdiction vests with the ITO as well as the ACIT and hence the assessment cannot be annulled simply because the statutory notice u/s 143(2) of the Act, was issued by the ITO and the assessment was completed by the ACIT. He further submitted that the assessee did not object to the issue of notice before the jurisdictional Assessing Officer and even otherwise, Section 292BB of the Act, comes into play and the assessment cannot be annulled. On merits, he relied on the orders of the lower authorities.
7.1 I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:-
8. I find that there is no dispute in the fact that the notice u/s 143(2) of the Act dt. 29/09/2016 has been issued by the ITO, Wd-1(1), Durgapur. Later, the case was transferred to the jurisdiction of the ACIT on 11/08/2017. Thereafter, no notice u/s 143(2) of the Act was issued by the Assessing Officer having jurisdiction of this case and who had completed the assessment on 26/12/2017 i.e., ACIT, Circle-1(1), Durgapur. Under these circumstances, the question is whether the assessment is bad in law for want of issual of notice u/s 143(2) of the Act.
9. This Bench of the Tribunal in the case of Shri Sukumar Ch. Sahoo vs. ACIT in ITA No. 2073/Kol/2016 order dt. 27.09.2017, held as follows:-
“5. From a perusal of the above Instruction of the CBDT it is evident that the pecuniary jurisdiction conferred by the CBDT on ITOs is in respect to the ‘non corporate returns’ filed where income declared is only upto Rs.15 lacs ; and the ITO doesn’t have the jurisdiction to conduct assessment if it is above Rs 15 lakhs. Above Rs. 15 lacs income declared by a non- corporate person i.e. like assessee, the pecuniary jurisdiction lies before AC/DC. In this case, admittedly, the assessee an individual (non corporate person) who undisputedly declared income of Rs.50,28,040/- in his return of income cannot be assessed by the ITO as per the CBDT circular (supra). From a perusal of the assessment order, it reveals that the statutory notice u/s. 143(2) of the Act was issued by the then ITO, Ward-1, Haldia on 06.09.2013 and the same was served on the assessee on 19.09.2013 as noted by the AO. The AO noted that since the returned income is more than Rs. 15 lacs the case was transferred from the ITO, Ward-1, Haldia to ACIT, Circle-27 and the same was received by the office of the ACIT, Circle-27, Haldia on 24.09.2014 and immediately ACIT issued notice u/s. 142(1) of the Act on the same day. From the aforesaid facts the following facts emerged:
i) The assessee had filed return of income declaring 50,28,040/-. The ITO issued notice under section 143(2) of the Act on 06.09.2013.
ii) The ITO, Ward-1, Haldia taking note that the income returned was above Rs. 15 lacs transferred the case to ACIT, Circle-27, Haldia on 24.09.2014.
iii) On 09.2014 statutory notices for scrutiny were issued by ACIT, Circle-27, Haldia.
6. We note that the CBDT Instruction is dated 31.01.2011 and the assessee has filed the return of income on 29.03.2013 declaring total income of Rs.50,28,040/-. As per the CBDT Instruction the monetary limits in respect to an assessee who is an individual which falls under the category of ‘non corporate returns’ the ITO’s increased monetary limit was upto Rs.15 lacs; and if the returned income is above Rs. 15 lacs it was the AC/DC. So, since the returned income by assessee an individual is above Rs.15 lakh, then the jurisdiction to assess the assessee lies only by AC/DC and not ITO. So, therefore, only the AC/DC had the jurisdiction to assess the assessee. It is settled law that serving of notice u/s. 143(2) of the Act is a sine qua non for an assessment to be made u/s. 143(3) of the Act. In this case, notice u/s. 143(2) of the Act was issued on 09.2013 by ITO, Ward-1, Haldia when he did not have the pecuniary jurisdiction to assume jurisdiction and issue notice. Admittedly, when the ITO realized that he did not had the pecuniary jurisdiction to issue notice he duly transferred the file to the ACIT, Circle-27, Haldia on 24.09. 2014 when the ACIT issued statutory notice which was beyond the time limit prescribed for issuance of notice u/s. 143(2) of the Act. We note that the ACIT by assuming the jurisdiction after the time prescribed for issuance of notice u/s. 143(2) of the Act notice became qoarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, the issuance of notice by the ACIT, Circle-27, Haldia after the limitation period for issuance of statutory notice u/s. 143(2) of the Act has set in, goes to the root of the case and makes the notice bad in the eyes of law and consequential assessment order passed u/s. 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the eyes of law. Therefore, the legal issue raised by the assessee is allowed. Since we have quashed the assessment and the appeal of assessee is allowed on the legal issue, the other grounds raised by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed.
7. In the result, appeal of assessee is allowed.
9. 1. This Bench of the Tribunal in the case of Krishnendu Chowdhury vs. ITO reported in [2017] 78 taxmann.com 89 (Kolkata-Trib.) held as follows:-
“Return of income of assessee was Rs. 12 lakhs – As per CBDT instruction, jurisdiction for scrutiny assessment vested in Income-tax Officer and notice under section 143(2) must be issued by Income-tax Officer, Ward-I, Haldia and none other – But, notice was issued by Asstt. Commissioner, Circle Haldia much after CBDT’s instruction and knowing fully well that he had no jurisdiction over assessee – Whether, therefore, notice issued by Asstt. Commissioner was invalid and consequently assessment framed by Income-tax Officers becomes void since issue of notice under section 143(2) was not done by Income-tax Officers as specified in CBDT instruction No. 1/2011.”
9.2 The Hon’ble High Court of Calcutta in the case of West Bengal State Electricity Board vs. Deputy Commissioner of Income Tax, Special Range – I, reported in [2005] 278 ITR 218 (Cal.) has held as follows:-
“Section 254 of the Income-tax Act, 1961 – Appellate Tribunal – Powers of – Assessment years 1983-84 to 1987-88 – Whether a question of law arising out of facts found by authorities and which went to root of jurisdiction can be raised for first time before Tribunal – Held, yesWhether jurisdiction of Assessing Authority is not dependent on date of accrual of cause of action but on date when it is initiated – Held, yes – Whether once a particular jurisdiction is created, same must be prospective and cannot be retrospective and it has to be interpreted having regard to manner in which it has been sought to be created – Held, yes – Assessee”
9.3 The Hon’ble Supreme Court in the case of CIT vs. Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC), held as follows:-
“7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer.
On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.
8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon’s case (supra). The issue that however needs to be considered is the impact of Section 292BB of the Act.
9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.”
10. Respectfully following the propositions of law laid down in all these case-law and applying the same to the facts of the case, we hold that the assessment order is bad in law for the reason that the Assessing Officer having jurisdiction over the assessee, has not issued a notice u/s 143(2) of the Act as required by the statute. Notice issue by the officer having no jurisdiction of the assessee is null and void. When a notice is issued by an officer having no jurisdiction, Section 292BB of the Act, does not comes into play. Coming to the argument of the ld. D/R that objection u/s 124(3) of the Act has to be taken by the assessee on rectifying notice u/s 143(2) of the Act from a non-jurisdictional assessing officer, I am of the view that I need not adjudicate this issue, as I have held that non-issual of statutory notice/s 143(2) of the Act by the jurisdictional Assessing Officer makes the assessment bad in law. Under these circumstances, we allow this appeal of the assessee.”
6. Respectfully following the propositions of law laid down in these orders stated above, we hold that the orders are bad in law for the reason that the assessing authority passed the order u/s 143(3) of the Act i.e. DCIT-13(1), Kolkata has not issued a notice u/s 143(2) of the Act and also for the reason that the jurisdiction of these cases lies with the ITO and not the DCIT. Hence all the orders passed by the ld. CIT(A) in these four cases are hereby quashed and the appeals of the assessees are allowed.”
9. In view of the discussion made above and respectfully following the decision cited above, it is held that the reassessment framed u/s 147 of the Act being without jurisdiction is bad in law and the same is accordingly set aside.
10. In the result, the appeal of the assessee stands allowed.
Since the facts before us are materially similar to ones as decided by the Co-ordinate Bench of the tribunal, we, respectfully the decision of the coordinate bench ,quash the assessment order passed on the ground of lack of jurisdiction. Accordingly the appeal of the assessee is allowed.”
It is pertinent to note that in the Co-ordinate Bench decision the issue of pecuniary jurisdiction has been decided whereas in the above High Court order issue of transfer of jurisdiction in terms of Section 127(1), (2) and (3) has been discussed and decided. I also note that the Co-ordinate Bench in the case of M/s Rupasi Bangla Agro Industries Pvt. Ltd. vs. ITO in ITA No. 909/Kol/2023 for AY 2013-14 dated 14.12.2023 has decided the issue u/s 143(2) in favour of the assessee after distinguishing the decision of Hon’ble Apex Court in the case of DCIT(Exemption) & Another vs. Kalinga Institute of Industrial Technology; Special Leave to Appeal (C ) No(s). 29304/2019 and WP(C ) No. 898/2017 which was relied by the Ld. D.R. to defend his arguments that the notice u/s 143(2) of the Act if issuedby wrong AO then the assessee is at liberty to take objection to raise the issue within one month of the issuance of the notice in the assessment proceedings. The Co-ordinate Bench held that the facts of the case of Kalinga Institute of Industrial Technology (supra) are distinguishable and not applicable. In view of the above facts and circumstances and ratio laid down, I am inclined to quash the assessment framed and the appeal of the assessee is allowed.
10. In the result, the appeal of the assessee is ”
6.1 Undoubtedly the notice has been issued by ITO, Ward-2(1), Kolkata who is a non- jurisdictional ITO and it should have been issued by the officer of the rank of ACIT/DCIT. Besides, the decision of Hon’ble Apex Court in the case of DCIT (Exemption) & Vs. Kalinga Institute of Industrial Technology, Special Leave to Appeal (C) No(s). 29304/2019 and WP(C) No. 898/2017 as relied on by the Ld. DR to defend his arguments is not applicable as the assessee has objected to the issuance of notice within 30 days from the issuance of the notice u/s 148 of the Act itself. Therefore, in our opinion, the assessment so framed is invalid for the want of jurisdiction. Accordingly, we quash the assessment made by the AO.
6.2. The second argument of the AR for the assessee was with regard to the issue of assessment being barred by limitation as no notice u/s. 148 could be issued post 31.03.2021. We have perused the provisions of the Act carefully and found that the old regime of reassessment has undergone a sea change and section 148 of the Act has been repealed and abrogated and replaced by new sections of 148 and 148A w.e.f. 01.04.2021 by the Finance Act 2021. For the sake of better understanding of the provisions of the Act and Taxation and Other Laws (Relaxation and Amendment of certain provisions ) Act, 2020 (TOLA) and subsequent notifications , we would like to narrate the chronology of notifications of legislation concerning the said abrogation/repelling and substituting the new regime as under:
“On March 31, 2020 the Taxation & Other Laws (Relaxation of certain Provisions) Ordinance, 2020 promulgated.
On June 24, 2020 Notification No. 35/2020 was issued by the CBDT in exercise of the power of Section 3(1) of the Ordinance extending the time for issue of notice under Section 148 to March 31, 2021. The said notification came into force from June 30, 2020.
On September 29, 2020 the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”) was enacted, inter alia, to replace the Ordinance, which received the assent of the President. TOLA was deemed to have come into force on March 31, 2020. In terms of Section 3(1), the time to issue notice under Section 148 of the Income Tax Act (old unsubstituted), stood extended to March 31, 2021.
On March 28, 2021, Finance Act, 2021, it received the assent of the President, by Sections 40,41,43,44, old Sections 147, 148, 149 and 151 were to stand substituted with effect from April 1,2021 and by Section 42, Section 148A was to be inserted also with effect from April 1, 2021.
On March 31,2021 Notification No 20/2021 was issued by the CBDT in purported exercise of power under Section 3(1) of TOLA to extend the time limit under the old Section 149 of the Act for issue of notice under the old Section 148 of the Act for the assessment years 2013-14 and 2014-15 (which was to expire on March 31,2021) to April 30, 2021.
On April 27,2021 Notification No. 38/2021was issued by the CBDT in exercise of power under Section 3 (1) of TOLA to extend the time limit under the old Section 149 of the Act for issue of notice under the old Section 148 of the Act for the assessment years 2013-14 and 2014-15 which was extended to 30th June, 2021 .
On May 4, 2022 judgment of the Hon’ble Supreme Court was passed in the Act shall be deemed to have been issued under the new Section 148A(b) and all defences which may be available to the assessee including under Section 149 of the Act and all rights and contentions which may be available to the assessee and revenue under the Finance Act, 2021 and in law shall continue to be available.
On May 11, 2022 Instruction No. 01/2022 issued by the Central Board of Direct Taxes. The said circular proceeded on the basis that proceedings under Sections 147/148 of the Act for, inter alia, the assessment years 2013-14 and 2014-15 did not get time barred on March 31, 2021.
The Finance Act, 2021 completely reformed the system of reassessment by bringing in a completely new procedure of reassessment with effect from April 1, 2021.
In terms of Sections 40, 41, 43 and 44 of the Finance Act, 2021, which came into force on April 1, 2021, as per Section 2(a) thereof, the old Sections 147, 148, 149 and 151 stood repealed/abrogated and replaced by a new set of provisions.
Further, by Section 42, a new Section 148A was inserted also with effect from April 1, 2021.
By Section 43 of Finance Act 2021, old Section 149 of the Act was substituted with effect from April 1, 2021 without any savings clause. The new Section 149 laid down new time limits for issue of notice under the new Section 148 of the Act. As such, the first proviso to the new Section 149(1) of the Act stipulated that no notice under the new Section 148 of the Act shall be issued at any time if such notice could not have been issued at that time on account of being beyond the time limit specified under the old Section 149(1)(b) of the limit for issue of notice under the old Section 148 of the Act had expired in terms of the old Section 149(1)(b) of the Act.
Since by the Finance Act, 2021, the old Section 149 of the Act was repealed and replaced by a new provision with effect from April 1, 2021, there was no question of complying with the old Section 149 of the Act after March 31, 2021. Similarly, there was no question of extension of the time limit for compliance of the old Section 149 of the Act after March 31, 2021. Having regard to the proviso to the new Section 149 (1) of the Act, the only purpose for which one was required to look at the old Section was to ascertain whether limitation for issue of notice under the old Section 149 of the Act had set in before April 1, 2021.
The first proviso to the new section 149(1) of the Act is not a savings clause as contended on behalf of the revenue. It is neither worded nor reads as a savings clause. Rather, the new provision manifests a clear intention that the new section 149 of the Act cannot be resorted to where limitation had set in terms of the old Section 149(1)(b) of the Act. The first proviso did not save anything which expired prior to its enactment.”
6.3 We note that undisputedly and undeniably the Finance Act 2021 has repealed the old regime of re-assessment u/s 148 of the Act w.e.f. 1.4.2021 meaning thereby that the old regime was effective till 3.2021. As is apparent from the above the old regime which was amended and had been repealed post 31.3.2021 was sought to be extended till 30.06.2021 by means of TOLA and subsequent notifications issued by the CBDT thereby unamneded and unsubstituted old provisions of section 147, 148, 149 and 151 of the Act were made applicable till 30.6.2021 meaning thereby that the period of limitation for the purpose of issuance of notice u/s 148 of the Act by treating the same as notice issued u/s 148A(b) of the Act. In the instant case before us the notice u/s. 148 of the Act dated 30.06.2021 was apparently issued after 31.03.2021 under new regime of reassessment as provided under the Act in respect of AY 2014-15 on the ground that the time limit to issue notice u/s. 148 of the Act (old unamended) stood extended upto 31.06.2021. In our opinion the notice issued u/s 148 of the Act on after 1.4.2021 is clearly barred by limitation. If this is accepted this would result in dichotomy of two system in operation for the same period which are in conflict interse. The case of the assessee is also squarely covered by the decision of the Apex court in the case of M/s. Arati Marketing Pvt. Ltd. Vs. Union of India & Ors. in WPO No. 2747 of 202 dated 12.02.2024 wherein the Hon’ble Apex Court has held that the provisions of old regime of section 148 of the Act including (TOLA) are not applicable post 31.3.2021. The operative part of the decision of the Hon’ble Apex Court is as extracted below:
Considering the facts and circumstances of the case, submission of the parties, relevant provisions of law including unamended old Sections 147, 148, 149 and 151 of the Income Tax Act, 1961 as stood on March 31, 2021, prior to enactment of the Finance Act, 2021, and present substituted Sections 147, 148, 149, 151 and newly inserted Section 148A of the Income Tax Act, 1961 as enacted by Finance Act, 2021, without having any savings clause for the old provisions relating to reassessment proceedings, Section 3 of the Taxation and Other Laws (Relaxation and Amendment of certain Provisions) Act, 2020 (TOLA), Notification No. 20/2021 dated 31st March, 2021 and Notification No. 38/2021 dated 27th April, 2021 issued by the CBDT in exercise of alleged delegated power conferred under TOLA, for aiding the old provisions relating to reassessment proceedings which stood and remained in force till 31st March, 2021, various judgments relied upon by the parties referred hereinabove and on reading all together I am inclined to hold that all the impugned notices issued under newly inserted Section 148A(b) of the Income Tax Act, 1961 by Finance Act, 2021, relating to assessment years 2013-14 and 2014-15, which have been issued on or after 1st April, 2021 by extending the time of limitation by the CBDT for issuance of notice under Section 148 of the old Act in exercise of power under Section 3 of TOLA is unauthorised in law and all such impugned notices are barred by limitation and that all subsequent proceedings on the basis of the aforesaid impugned notices are not sustainable in law and accordingly the same are quashed for the following summarized reasons:
i. TOLA which was initially enacted and subsequent notifications being Notification No. 20/2021 dated 31st March, 2021 and Notification No. 38/2021 dated 27th April, 2021 issued by CBDT in aid of unamended and unsubstituted old provisions of Sections 147, 148, 149 & 151 of the Income Tax Act, 1961 for extending the period of limitation for the purpose of issuance of notice under Section 148 by converting or treating the same as notice under Section 148A(b) of the Income Tax Act, 1961, relating to assessment years 2013-14 and 2014- 15 after 31st March, 2021 for the period 1st April, 2021 to 30th June, 2021 or thereafter is arbitrary, unreasonable and not sustainable in law in view of coming into effect the Finance Act, 2021, enacted by the Parliament which became effective from 1st April, 2021 by which old Sections 147, 148, 149 and 151 of the Act were substituted and also new Section 148A which was inserted without any saving clause and as a consequence of which old unamended Sections 147, 148, 149 and 151 have ceased to exist in statute book after 31st March, 2021 and extending the period of limitation under the old unamended ceased provisions for issuance of notice under old Section 148 of the Income Tax Act, 1961, by converting the same into notices under Section 148A of the Act, newly inserted by Finance Act, 2021 on the basis of the aforesaid two notifications by the CBDT in exercise of power under TOLA, is highly arbitrary and not sustainable in law.
ii. The provisions of TOLA applied only to the pre-amended law as applicable till 31.03.2021 – Section 3 of TOLAl clearly provided for extension of time limit for undertaking any action required to be undertaken from 20.03.2020 to 31.03.2021 only.
Therefore, the question of application of provisions of TOLA by the revenue in the case of notices on or after 1st April, 2021, issued under old Section 148 or newly inserted Section 148A of the IncomeTax Act, 1961, relating to assessment years 2013-14 and 2014-15 after coming into effect the Finance Act, 2021 from 1st April, 2021 amending and subsisting the old provisions under Section 147 to 151 of the Income Tax Act, 1961, without any saving clause does not arise and such exercise by the authority under TOLA under the aforesaid two notifications by the CBDT in conflict of the relevant provisions under Finance Act, 2021 is wholly unwarranted and bad in law.
iii. The erstwhile regime of Section 148 of the Act (applicable up to 31.03.2021) had been repealedby the parliament without any savings and exception clause and was substituted with an altogethernew regime vide the Finance Act, 2021 with effect from 01.04.2021.
iv. Therefore, the question of application of provisions of TOLA by the revenue in the case of notices on or after 1st April, 2021, issued under old Section 148 or newly inserted Section 148A of the Income Tax Act, 1961, relating to assessment years 2013-14 and 2014-15 after coming into effect the Finance Act, 2021 from 1st April, 2021 amending and subsisting the old provisions under Section 147 to 151 of the Income Tax Act, 1961, without any saving clause does not arise and such exercise by the authority under TOLA under the aforesaid two notifications by the CBDT in conflict of the relevant provisions under Finance Act, 2021 is wholly unwarranted and bad in law.
v. If the provisions of the old regime of Section 148 of Act (including TOLA) are read into/applied to the new regime applicable w.e.f. 01.04.2021, it would necessarily result in deferring the implementation of the new/substituted reassessment regime, which was never the intention of the Parliament, and which is not permissible in law.
vi. The aforesaid consequence would, in fact, be directly in the teeth of judgment (s) of Hon’ble Delhi High Court in the case of Mon Mohan Kohli vs. ACIT [2021] 441 ITR 207 (Del.) and Hon’ble Allahabad High Court in the case of Ashok Kumar Aggarwal vs. Union of India [2021] 439 ITR 1 (All), which were followed by this Hon’ble Court in the judgment rendered in a batch of matters titled Bagaria Properties & Investment Pvt. Ltd. Vs Union of India & [2022] 441 ITR 359 (Cal) – the aforesaid rulings have been duly affirmed by the Hon’ble Supreme Court in the case of Ashish Agarwal (supra) as laying down the correct law.
vii. If the provisions of the old regime of Section 148 (including TOLA) are read into/applied to the new regime applicable from 04.2021, it would also necessarily mean that a provision repealed by the Parliament without any savings and exception clause, is applied by the Revenue even after its life has come to an end which is clearly not permissible in law.
viii. If the submissions of the Revenue were to be accepted, it would imply that notwithstanding a complete overhaul of the reassessment provisions brought about by 01.04.2021 till 30.06.2021 two parallel schemes of reopening (i.e., unamended law as well as amended law) will operate simultaneously and it would result in a direct conflict between two altogether differing statutory scheme/provisions relating to reassessment, which could by no stretch of imagination be the intention of the Parliament, and which is not permissible in law.
ix. If validity of notices issued on or from 01.04.2021 to 30.06.2021 is tested on the basis of pre- amended provisions including TOLA and notifications issued thereunder, both issued in the context of pre-amended law, the same shall result in following ambiguity/anomaly:
a. During the period from 01.04.2021 to 30.06.2021 both pre-amended as well as amended scheme of reassessment shall continue to operate – this shall result in direct conflict of two provisions/statutory schemes; b. Apex Court in Ashish Agarwal (supra) categorically held that all defences, including defense of limitation, as available under the amended provisions, including the amended Section 149, shall be available – application of old law shall, however, defeat the said right specifically recognized by the Apex Court as available to the assessee;
c. Even if the defense available to the assessee under the substantive provisions of Section 149(1)(b) and first proviso of the new Act thereto shall not be available, thereby rendering the said provision otiose and a dead letter of the law (from 01.04.2021 to 30.06.2021), and the operation of the amended provisions would have to be deferred/postponed up to and after 30.06.2021 without having any legislation by the Parliament to this effect. Revenue Respondent no. 3/Central Board of Direct Taxes (‘CBDT”) has erroneously resorted to Instruction No. 1 dated 11.05.2022 by contending that the Apex Court decision in Ashis Agarwal (supra) read with TOLA permits the notices to “travel back in time to their original date when such notices were to be issued” i.e., on or before 31.03.2021 and that consequent notices issued from 01.04.2021 to 30.06.2021 are within time permitted it will be contrary to the intention of legislating Finance Act, 2021, coming into effect from 1st April, 2021 subsisting the old law relating to reassessment. The aforesaid interpretation canvassed in the CBDT Instruction is, in fact, is again in direct conflict with the judgments of various Hon’ble High Courts, which have duly been affirmed by the Apex Court in Ashis Agarwal (supra).
In view of the aforesaid declaration that the impugned notices issued on or after 1st April, 2021, by the CBDT, relating to assessment years 2013-14 and 2014-15, under Section 148 (old) of the Income Tax Act, 1961 by converting/treating the same as under newly inserted Section 148A of the Income Tax Act, 1961, by Finance Act, 2021 which came into effect from 1st April, 2021, in exercise of power under TOLA being barred by limitation, all subsequent proceedings on the basis of aforesaid impugned notices being not sustainable in law, are quashed and all legal consequences will follow automatically.
In view of discussion and observation made above all these writ petitions are disposed of accordingly by allowing the same. No order as to costs. Urgent certified photocopy of this judgment, if applied for, be supplied to the parties upon compliance with all requisite formalities.
Considering the ratio laid down by the Hon’ble Apex Court and the facts of the assessee , we are inclined to hold that the notice issued u/s 148 of the Act dated 30.06.2021 is barred by limitation and so is the consequent assessment framed.
6.4 On the third argument of the assessee, we have perused the material available on record, we observe that apparently the addition in this case has been made of Rs. 35.50 lakh and thus, AO has no jurisdiction to issue notice u/s. 148 of the Act in terms of provision of section 149(1)(b) as the AO was not having any books of account/document/evidence, which revealed that income escaping assessment amount to or is likely to amount to 50 lakh or more. The case of the assessee finds support from the decision of Hon’ble Jharkhand High Court in the case of Ratan Bej Vs. PCIT in W.P.(T) No.3589 of 2023 dated 24.01.2024, wherein the Hon’ble High court has held as under:
“9. At this stage, it would be pertinent to indicate that Section 148 and 148A which have been introduced by way of the Finance Act, 2021, has been codified following the judgment rendered by the Apex Court in the matter of GKN Driveshafts (India) Limited (supra). The provisions mandate that, before making any assessment under Section 147, the Assessing Officer must serve a notice to the Assessee requiring him to file his return of income within specified time and before such notice, the Assessing Officer shall record his reasons for the same.
While the earlier provision required the Assessing Officer to have reason to believe that there is escapement of income, the new provision required any information as specified under Explanation 1 to Section 148 to be present for there to be a reopening of the case.
Furthermore, Section 148A which was inserted by the Finance Act, 2021 reiterates the procedure to be followed by the Assessment Officer upon receiving such information, including conducting any inquiry regarding the information received, providing an opportunity of being heard to the Assessee through serving of notice to show cause within the prescribed time in the notice (which must not be less than 7 days and not more than 30 days on the date of serving the notice or the time period till which time extension was received by the Assessee), considering the reply given by the assessee and deciding on the basis of the material that is present, including the reply, about whether the case is fit for passing a notice under Section 148 through passing an order within 1 month from the reply.”
Therefore the assessment has been re-opened invalidly and we, respectfully following the ratio laid down in the aforesaid decision set aside the order of Ld. CIT(A) and quashing the assessment so framed on this count as well.
6.5 So far as the fourth argument is concerned, we note from the notice issued u/s 148A(b) of the Act dated 26.05.2022 that assessee has received and is beneficiary of accommodation entries amounting to Rs.92.50 lacs received from the concerns belonging to or operated by Shri Mukesh Banka during the impugned financial year and accordingly, the Ld. AO came to the conclusion that income has escaped to that extent. We also note that the assessee has filed objections to the notice u/s. 148A(b) dated 26.05.2022 vide his written submissions dated 15.06.2022 in which the assessee stated that as per the books of accounts of the assessee there was no transaction of Rs. 27.00 lakh on 26.04.2013 as noted in the said reasons with Funidea Vinimay Pvt Ltd. and there was only one transaction of Rs.25.50 Lacs on 26.04.2013 from the said party which was the short term loan which was repaid on 24.03.2015. Similarly, in respect of second party i.e. Manikala Dealmark Pvt. Ltd., the assessee stated that as per the notice issued by the AO, the assessee received 5.00 lakh on 01.05.2013 whereas as per the books of account the short term loan received by the assessee on 05.02.2013 which was repaid on 24.03.2015. In respect of third party i.e. Moonview Conclave Pvt. Ltd., the notice of the AO stated that assessee has received Rs. 10.00 lakh on 06.02.2013 which was appearing in the books of account of the assessee and was repaid on 20.03.2015. In respect of fourth party, Gyneshwar Agencies Pvt Ltd as per the notice of the AO, transaction was Rs.25.00 lakh whereas as per the books of account of the assessee there was no such transaction with the said entity and as a matter of fact, the assessee had transaction with Gyaneshwar Vyapar Pvt. Ltd. on 26.04.2013 of Rs.25.00 lakh which represented short term loan which was subsequently repaid on 24.03.2015. Thus the notice issued by the Ld. AO u/s. 148A(b) of the Act has been comprehensively replied as stated above controverting the allegations of the AO as incorrect and baseless. However, the AO has not applied his mind to the reply given by the assessee and not controverted the arguments of the assessee. Thus apparently the assessment framed by the AO without application of mind and without controverting the explanation given by the assessee is bad in law. The case of the assessee is squarely covered by the decision of jurisdictional High Court in the case of Excel commodity & Derivative Pvt. Ltd. Vs. Union of India & Ors. in APO/123/2023, IA No. GA/1/2023 dated 08.01.2024 in which the Hon’ble Court has held that the assessment framed u/s. 148A(d) without application of mind and without controverting the explanation of the assessee is bad in law and is accordingly being quashed. The relevant part of the decision is extracted as under:
“The allegation against the assessee was that they have taken a loan from Brightmoon Supply Pvt. Ltd. and the same has been shown to adjust outstanding loan and the assessee was called upon to substantiate the transaction. The assessee, in no uncertain terms, stated that Brightmoon Supply Pvt. Ltd. is a Non-Banking Financial Company and the assessee has taken unsecured loan of Rs.25,00,000/- during the assessment year 2019-20 and the same was repaid along with the interest in the same assessment year. The assessee enclosed the ledger copy along with balance confirmation along with its reply. Therefore, the assessee submitted that the allegation that they have routed back their unaccounted income by way of unsecured loan is baseless and without any corroborative evidence.
If such was the explanation given by the assessee, it was the duty of the Assessing Officer to consider the explanation and give reasons as to why it is not acceptable. However, the Assessing Officer only states that the assessee has failed to substantiate the alleged amount of escaped income of Rs. 25,00,000/- is a genuine transaction. The order passed under Section 148A(d) is a non- speaking order, outcome of total non-application of mind and it also reveals that the Assessing Officer had no material to controvert the explanation offered by the assessee that Brightmoon Supply Pvt. Ltd. is a NBFC and loan was taken during the assessment year 2019-20 and repaid along with interest in the same year and this was substantiated by the assessee by producing the ledger copy of a loan account.
Thus, we find it is not a case where the power under Section 148 of the Act could have been invoked by the assessing officer.
Accordingly, the appeal is allowed.
The order passed in the writ petition set aside. Consequently, the writ petition is allowed and the order passed under Section 148A(d) of the Act dated 19th April, 2023 is quashed and all other proceedings consequent thereto are set aside.
The stay application IA No : GA/1/2023 stands disposed of.”
We, therefore, respectfully following the ratio laid down in the above decision, quash the assessment on the ground of non-application of mind and also for not controverting the explanation offered by the assessee.
7. The issue raised on merit are not being adjudicated at this stage and are being left open to be decided if the need arises for the future at the later stage.
8. Now, we take up ITA No. 1417/Kol/2023. The only issue raised at the time of hearing was with respect to the assessment framed by the AO is non est and bad in law.
9. The facts in brief are that the AO issued notice u/s 148 on 4.2021 and u/s 148A(b) of the Act on 23.05.2022. The amount mentioned by the AO in the notice issued u/s 148A(b) was only 13.00 lacs received from Snow Fall Impex Pvt Ltd. and accordingly the assessee is beneficiary of the said amount. The addition made by the AO in the impugned assessment was also Rs. 13 lakh thereby assessing the income at Rs. 13.00 lacs as the assessee has shown nil income in the return of income, which is below Rs.50 lakh and the AO was not having in his possession any books of account/other documents or evidence which reveals that income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 50 lakh or more.
10. The issues raised in the above appeal are identical to one as decided by us in para and therefore our decision would, mutatis mutandis, apply to this appeal as well. Consequently the assessment is quashed and appeal is allowed.
11. In the result, both the appeals of the assessee are allowed.
Order is pronounced in the open court on 29th July, 2024
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