> v. Assistant Commissioner Of Income Tax Circle 19(1) Delhi & Ors

$~34. *IN THE HIGH COURT OF DELHI AT NEW DELHI+W.P.(C) 7220/2024 & CM APPL. 30096/2024VIKRAM KAPAHI .....Petitioner Through:Mr. Ved Jain, Mr. Nischay Kantoor,Ms. Sonuja Dodeja, Mr. DivyanshDubey and Mr. Govind Gupta, Advs. versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 19(1)DELHI & ORS. .....RespondentThrough:Mr. Puneet Rai, Sr. Standing Counselwith Mr. Ashvini Kumar, Mr RishabhNangia, JSC. % CORAM:HON'BLE THE ACTING CHIEF JUSTICEHON'BLE MR. JUSTICE TUSHAR RAO GEDELAO R D E R 15.01.2025 1.The petitioner has filed the present petition, inter alia, impugning anotice dated 29.03.2024 issued by respondent no.1/Assessing Officer(hereafter the AO) under Section 148A(b) of the Income Tax Act, 1961(hereafter the Act); the order dated 16.04.2024 passed under Section148A(d) of the Act; notice dated 16.04.2024 issued under Section 148 of theAct in respect of the assessment year (AY) 2016-17. The petitioner alsoimpugns the intimation letter dated 16.04.2024 recording the prior approvalgranted by respondent no.3. 2.It is the petitioner’s case that the impugned notice dated 16.04.2024 issued under Section 148 of the Act was passed beyond the period oflimitation. 3.After some arguments, it is apparent that the controversy involved iscovered in favour of the petitioner by a decision of this court in ManjuSomani v. Income Tax Officer Ward-70(1) & Ors: Neutral Citation:2024:DHC:5411-DB. 4.We also consider it apposite to refer to the following passages of thedecision of the Supreme Court in Union of India & Ors. v. Rajeev Bansal:2024 SCC OnLine SC 2693 whereby the said view has been upheld. “46. The ingredients of the proviso could be broken down foranalysis as follows: (i) no notice under Section 148 of the newregime can be issued at any time for an assessment year beginningon or before 1 April 2021; (ii) if it is barred at the time when thenotice is sought to be issued because of the “time limits specifiedunder the provisions of’ 149(1)(b) of the old regime. Thus, a noticecould be issued under Section 148 of the new regime for assessmentyear 2021-2022 and before only if the time limit for issuance of suchnotice continued to exist under Section 149(1)(b) of the old regime.********* 49. The first proviso to Section 149(1)(b) requires the determinationof whether the time limit prescribed under Section 149(1)(b) of theold regime continues to exist for the assessment year 2021-2022 andbefore. Resultantly, a notice under Section 148 of the new regimecannot be issued if the period of six years from the end of therelevant assessment year has expired at the time of issuance of thenotice. This also ensures that the new time limit of ten yearsprescribed under Section 149(1)(b) of the new regime appliesprospectively. For example, for the assessment year 2012-2013, theten year period would have expired on 31 March 2023, while the sixyear period expired on 31 March 2019. Without the proviso toSection 149(1)(b) of the new regime, the Revenue could have hadthe power to reopen assessments for the year 2012-2013 if theescaped assessment amounted to Rupees fifty lakhs or more. Theproviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.” 5.In the present case the notice under Section 148 of the Act could havebeen issued for a maximum period of six years from the end of the relevantassessment year. The said period expired on 31.03.2023. Notwithstandingthe same, Mr. Rai, the learned counsel for the Revenue submits that theimpugned notices and order should be considered within the specified timeas in the earlier round this court had stayed the proceedings. He submits thatthe benefit of the stay granted by the court in Vikram Kapahi v. AssistantCommissioner of Income Tax Circle 19(1) Delhi & Ors., W.P.(C)1747/2023 is required to be construed in favor of the Revenue. Accordingto him, the time period during which the said petition was pending beforethis court is required to be excluded for the purposes of computinglimitation. 5.In the present case the notice under Section 148 of the Act could havebeen issued for a maximum period of six years from the end of the relevantassessment year. The said period expired on 31.03.2023. Notwithstandingthe same, Mr. Rai, the learned counsel for the Revenue submits that theimpugned notices and order should be considered within the specified timeas in the earlier round this court had stayed the proceedings. He submits thatthe benefit of the stay granted by the court in Vikram Kapahi v. AssistantCommissioner of Income Tax Circle 19(1) Delhi & Ors., W.P.(C)1747/2023 is required to be construed in favor of the Revenue. Accordingto him, the time period during which the said petition was pending beforethis court is required to be excluded for the purposes of computinglimitation. 6.We find no merit in the aforesaid contention. The AO, prior to issuingthe impugned notice, had issued a notice dated 29.06.2021 under Section148 of the Act. The said notice was faulted as the same was issued under thestatutory regime as existing prior to 01.04.2021. Subsequently the SupremeCourt had, in exercise of its power under Article 142 of the Constitution ofIndia directed that the notices issued under Section 148 of the Act under theold regime, but after 01.04.2021, be construed as notices under Section148A(b) of the Act. The said order passed in Union of India and Ors. v.Ashish Agarwal: (2023) 1 SCC 617, was directed to be applicable PANIndia in respect of all such notices irrespective of whether any challengeagainst the said notices was subsisting at the relevant time. Additionally, the Revenue was also directed to furnish the material to the assessee on whichsuch notices were premised. 7.Following the directions issued by the Supreme Court, the AO hadsupplied the material to the petitioner. After considering the petitioner’sresponse, the AO passed an order dated 26.07.2022 under Section 148A(d)of the Act and issued a notice dated 26.07.2022 under Section 148 of the Actin respect of AY 2016-17. The aforesaid notice dated 26.07.2022 waschallenged by the petitioner in W.P.(C) 1747/2023 and by an order dated13.02.2023, the operation of the said notice was stayed. 8.The petitioner’s challenge to the said notice was, inter alia, foundedon the basis that it had been issued without the necessary mandatoryapprovals. The said issue was decided by this court in a batch of matters inTwylight Infrastructure Pvt. Ltd. v. Income Tax Officer Ward 25(3) Delhi& Ors.: Neutral Citation No. 2024:DHC:259-DB. The relevant extract ofthe said decision is set out below: “6. A faint argument is made on behalf of the revenue that theapproval of the specified authority is not mandatory, which, in ouropinion, is in the teeth of the provisions of the Act. In this behalf, theold Section 151 and the amended version of the provision (afterFinance Act 2021) are made reference to. 6.1. For the sake of convenience, the provisions of Sections 148, 149and 151, before and after amendment are extracted hereafter: Prior to Finance Act 2021 “148. (1) Before making the assessment, reassessmentor recomputation under section 147, the AssessingOfficer shall serve on the assessee a notice requiringhim to furnish within such period, as may be specifiedin the notice, a return of his income or the income ofany other person in respect of which he is assessableunder this Act during the previous year corresponding to the relevant assessment year, in the prescribed formand verified in the prescribed manner and setting forthsuch other particulars as may be prescribed; and theprovisions of this Act shall, so far as may be, applyaccordingly as if such return were a return required tobe furnished under section139 : Provided that in a case— (a) where a return has been furnished during theperiod commencing on the 1st day of October, 1991and ending on the 30th day of September, 2005 inresponse to a notice served under this section, and to the relevant assessment year, in the prescribed formand verified in the prescribed manner and setting forthsuch other particulars as may be prescribed; and theprovisions of this Act shall, so far as may be, applyaccordingly as if such return were a return required tobe furnished under section139 : Provided that in a case— (a) where a return has been furnished during theperiod commencing on the 1st day of October, 1991and ending on the 30th day of September, 2005 inresponse to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelvemonths specified in the proviso to sub-section (2) ofsection 143, as it stood immediately before theamendment of said subsection by the Finance Act,2002 (20 of 2002) but before the expiry of the timelimit for making the assessment, re-assessment orrecomputation as specified in sub-section (2) of section153, every such notice referred to in this clause shallbe deemed to be a valid notice: Provided further that in a case— (a) where a return has been furnished during theperiod commencing on the 1st day of October, 1991and ending on the 30th day of September, 2005, inresponse to a notice served under this section, and (b) subsequently a notice has been served under clause(ii) of sub-section (2) of section 143 after the expiry oftwelve months specified in the proviso to clause (ii) ofsub-section (2) of section 143, but before the expiry ofthe time limit for making the assessment, reassessmentor recomputation as specified in sub-section (2) ofsection 153, every such notice referred to in this clauseshall be deemed to be a valid notice…. xxxxxxxxx 149. (1) No notice under section 148 shall be issuedfor the relevant assessment year,— (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls underclause (b) or clause (c); (b) if four years, but not more than six years, haveelapsed from the end of the relevant assessment yearunless the income chargeable to tax which has escapedassessment amounts to or is likely to amount to onelakh rupees or more for that year; (c) if four years, but not more than sixteen years, haveelapsed from the end of the relevant assessment yearunless the income in relation to any asset (includingfinancial interest in any entity) located outside India,chargeable to tax, has escaped assessment…. xxxxxxxxx 151. (1)No notice shall be issued under section 148by an Assessing Officer, after the expiry of a periodof four years from the end of the relevant assessmentyear, unless the Principal Chief Commissioner orChief Commissioner or Principal Commissioner orCommissioner is satisfied, on the reasons recorded bythe Assessing Officer, that it is a fit case for the issueof such notice. (2) In a case other than a case falling under sub-section (1),no notice shall be issued under section148 by an Assessing Officer, who is below the rank ofJoint Commissioner, unless the Joint Commissionerissatisfied,onthereasonsrecordedbysuchAssessing Officer, that it is a fit case for the issue ofsuch notice. (3) For the purposes of sub-section (1) and sub-section(2), the Principal Chief Commissioner or the ChiefCommissioner or the Principal Commissioner or theCommissioner or the Joint Commissioner, as the casemay be, being satisfied on the reasons recorded by theAssessing Officer about fitness of a case for the issueof notice under section 148, need not issue such noticehimself.” Post Finance Act 2021 “148. Before making the assessment, reassessment or (2) In a case other than a case falling under sub-section (1),no notice shall be issued under section148 by an Assessing Officer, who is below the rank ofJoint Commissioner, unless the Joint Commissionerissatisfied,onthereasonsrecordedbysuchAssessing Officer, that it is a fit case for the issue ofsuch notice. (3) For the purposes of sub-section (1) and sub-section(2), the Principal Chief Commissioner or the ChiefCommissioner or the Principal Commissioner or theCommissioner or the Joint Commissioner, as the casemay be, being satisfied on the reasons recorded by theAssessing Officer about fitness of a case for the issueof notice under section 148, need not issue such noticehimself.” Post Finance Act 2021 “148. Before making the assessment, reassessment or recomputation under section 147, and subject to theprovisions of section 148A, the Assessing Officer shallserve on the assessee a notice, along with a copy of theorder passed, if required, under clause (d) of section148A, requiring him to furnish within such period, asmay be specified in such notice, a return of his incomeor the income of any other person in respect of whichhe is assessable under this Act during the previousyear corresponding to the relevant assessment year, inthe prescribed form and verified in the prescribedmanner and setting forth such other particulars as maybe prescribed; and the provisions of this Act shall, sofar as may be, apply accordingly as if such return werea return required to be furnished under section 139: Provided thatno notice under this section shall beissued unless there is information with the AssessingOfficer which suggests that the income chargeable totax has escaped assessment in the case of the assesseefor the relevant assessment year and the AssessingOfficer has obtained prior approval of the specifiedauthority to issue such notice… xxxxxxxxx 149. (1) No notice under section 148 shall be issuedfor the relevant assessment year— (a) ifthree yearshave elapsed from the end of therelevant assessment year, unless the case falls underclause (b); (b) ifthree years, but not more than ten years, haveelapsed from the end of the relevant assessment yearunless the Assessing Officer has in his possessionbooks of account or other documents or evidencewhich reveal that the income chargeable to tax,represented in the form of asset, which has escapedassessment amounts to or is likely to amount to fiftylakh rupees or more for that year… xxxxxxxxx151. Specified authority for the purposes of section—148 and section 148A shall be, (i)Principal Commissioner or Principal Director orCommissioner or Director, if three years or less thanthree years have elapsed from the end of the relevantassessment year; (ii)PrincipalChiefCommissionerorPrincipalDirector General or where there is no Principal ChiefCommissioner or Principal Director General, ChiefCommissioner or Director General, if more thanthree years have elapsed from the end of the relevantassessment year...” [Emphasis is ours] 7. A careful perusal of the above extract would show that afteramendment, Section 151 has been split and the part which enjoinsthat the approval of the specified authority is mandatory standsembedded in the first proviso to Section 148. 7.1.Theconcernedspecifiedauthorities,dependingontheapplicable timeframe, are adverted to in Section 151 of the Act. 8. The first proviso to Section 148 and Section 151, when readconjointly, demonstrate the untenability of the submission made onbehalf of the revenue. 9. We may also note that in Ganesh Dass Khanna, we wereconsidering the provision of Section 149 of the Act and have takenthe view that since the escaped income was less than Rs.50,00,000/-,the time limit as prescribed in Section 149(1)(a) of the Act wouldapply. 10. As indicated above, the specified authority changes dependingon the time limit prescribed in Section 151 of the Act. It is on thisaccount that there is linkage between ruling rendered in GaneshDass Khanna and the instant matters. 7.1.Theconcernedspecifiedauthorities,dependingontheapplicable timeframe, are adverted to in Section 151 of the Act. 8. The first proviso to Section 148 and Section 151, when readconjointly, demonstrate the untenability of the submission made onbehalf of the revenue. 9. We may also note that in Ganesh Dass Khanna, we wereconsidering the provision of Section 149 of the Act and have takenthe view that since the escaped income was less than Rs.50,00,000/-,the time limit as prescribed in Section 149(1)(a) of the Act wouldapply. 10. As indicated above, the specified authority changes dependingon the time limit prescribed in Section 151 of the Act. It is on thisaccount that there is linkage between ruling rendered in GaneshDass Khanna and the instant matters. 11. It may also be noted that in Ganesh Dass Khanna, we hadrecorded the stand of the revenue that the issue concerning limitationand the specified authority are “intertwined”. For convenience, therelevant part of the judgement is extracted hereafter: “24. On behalf of the revenue, the following broadsubmissions were made:… …(viii) Both under the unamended 1961 Act andamended 1961 Act,the issue concerning limitation isinextricably intertwined with two aspects: (a)First,therankoftheauthoritygrantingapproval/sanctionfortriggeringreassessmentproceedings. (b) Second, the quantum of income which has escapedassessment.” [Emphasis is ours] 12. Clearly, the revenue advanced the argument of interlinkagebetween limitation and the ascertainment of the specified authoritydue to the plain language of the amended Section 151 of the Act.Section 151, when read alongside the first proviso to Section 148,brings the aspect of inextricable linkage to the fore. 12.1. Clauses (i) and (ii) of Section 151 of the amended Act (whichhas been extracted hereinabove) clearly specify the authority whoseapproval can trigger the reassessment proceedings. Thus, if three (3)years or less have elapsed from the end of the relevant AY, thespecified authority who would grant approval for initiation ofreassessment proceedings will be the Principal Commissioner orPrincipal Director or Commissioner or Director. However, if morethan three (3) years from the end of the relevant AY have elapsed,the specified authority for according approval for reassessment shallbe the Principal Chief Commissioner or Principal Director Generalor, where there is no Principal Chief Commissioner or PrincipalDirector General, Chief Commissioner or Director General. 12.2. That the approval is mandatory is plainly evident on perusal ofthe first proviso appended to Section 148 of the Act. the saidproviso, at the risk of repetition, reads as follows: “…Provided thatno notice under this section shall beissued unless there is information with the AssessingOfficer which suggests that the income chargeable totax has escaped assessment in the case of the assesseefor the relevant assessment year and the AssessingOfficer has obtained prior approval of the specifiedauthority to issue such notice….” 12.3. In these cases, there is no dispute that although three (3) yearshad elapsed from of the end of the relevant AY, the approval wassought from authorities specified in clause (i), as against clause (ii)of Section 151. 12.4. Before us, the counsel for the revenue continue to hold this position. The only liberty that they seek is that if, based on thejudgement in Ganesh Dass Khanna, the impugned orders andnotices are set aside, liberty be given to the revenue to commencereassessment proceedings afresh. 13.Therefore, having regard to the aforesaid, the impugnednotices and orders in each of the above-captioned writ petitionsare quashed on the ground that there is no approval of thespecified authority, as indicated in Section 151(ii) of the Act. Thedirection is issued with the caveat that the revenue will haveliberty to take steps, if deemed necessary, albeit as per law. 12.4. Before us, the counsel for the revenue continue to hold this position. The only liberty that they seek is that if, based on thejudgement in Ganesh Dass Khanna, the impugned orders andnotices are set aside, liberty be given to the revenue to commencereassessment proceedings afresh. 13.Therefore, having regard to the aforesaid, the impugnednotices and orders in each of the above-captioned writ petitionsare quashed on the ground that there is no approval of thespecified authority, as indicated in Section 151(ii) of the Act. Thedirection is issued with the caveat that the revenue will haveliberty to take steps, if deemed necessary, albeit as per law. 14. Needless to add, the rights and contentions of both the sides willremain open, in the event the revenue triggers reassessmentproceedings. 15. The above-captioned writ petitions are disposed of, in theaforesaid terms. 16. Consequently, the pending applications shall stand closed. 17. Parties will act based on the digitally signed copy of the order.” [emphasis added] 9.Following the aforesaid decision in Twylight Infrastructure Pvt. Ltd.v. Income Tax Officer Ward 25(3) Delhi & Ors. (supra) this court allowedthe petition filed by the petitioner being W.P.(C) No. 1747/2023 on13.03.2024 and set aside the notice dated 26.07.2022. 10.It is apparent from the above that the notice issued under Section 148of the Act in the earlier round was set aside on the ground that the AO hadnot followed the mandatory requirement of seeking an approval from thecompetent authority. 11.Clearly, the fact that the petitioner had succeeded in its challenge tothe said notice cannot be a ground for exclusion of the period spent by theassessee in pursuing the said litigation. The time spent by the petitioner inpursuing the challenge can neither be excluded nor can be claimed as resulting in extension of the period of limitation. 12.The Revenue is required to take all necessary steps for initiation of theassessment proceedings within the period of limitation. This wouldobviously mean steps in accordance with law. The fact that the Revenue hadnot taken the steps in accordance with law cannot possibly be construed as afactor in favour of the Revenue for extending the limitation as stipulatedunder Section 149 of the Act. Plainly, there was no court order impeding theRevenue from issuing a notice under Section 148 of the Act, in accordancewith law. 13.In view of the above, we reject the contention that the period oflimitation as stipulated under Section 149(1) of the Act stood extended byvirtue of the proceedings initiated by the orders passed in W.P.(C)1747/2023. 14.In view of the above, the present petition is allowed and the noticedated 29.03.2024 issued by respondent no.1/ AO under Section 148A(b) ofthe Act; the order dated 16.04.2024 passed under Section 148A(d) of theAct; and the notice dated 16.04.2024 issued under Section 148 of the Act inrespect of the AY 2016-17, are set aside. VIBHU BAKHRU, ACJ JANUARY 15, 2025N.Khanna TUSHAR RAO GEDELA, J