Intouch Mobicare Pvt. Ltd. vs DCIT

“7.

The lear ned A O was not per suaded with the explana tion provided by the petitioner and passed an or der dated 29.07.2022 under Section 148A(d) of the Act, holding that it was a fit case for reopening the assessment pr oceedi ngs under Section 147/148 of the Act. The said order w as issued with the approval of the Commissioner of Income Tax (Exemption) [CIT(E )] on an assumption that the CIT(E) was a specified author ity under the provisions of Secti on 151 of the Act.

8.

The AO issued a notice dated 29. 07.2022 under Sec tion 148 of the Act accompanied with the or der dated 29.07.2022 passed under Section 148A(d) of the Act. It is the petitioner’ s case that the said notice is bar red by limitation.

9.

It is material to note that the original notice un der Section 148 of the Act [deemed to be a show cause notice under Section 148A(b) of the Act in ter ms of the decision in the case of Union of India & Or s. v. Ashish Agarwal (supra)] was issued on 28. 06.2021, that is, two days prior to the expiry of the limitation period as extended by vir tue of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisi ons) Act, 2020 [TOLA]. Thus, the AO had two days to issue the notice under Section 148 of the Act after receiving the reply dated 08.06.2022 filed by the pet itioner. Since the said peri od was l ess than seven days, the AO had, by virtue of the four th proviso to Section 149(1) of the Act, seven days to pas s an order under Section 148A(d) of the Act (which was necessar ily required to accompany a notice under Section 148 of the Act). The said period expired on 16.06.2022. Therefor e, the order passed under Section 148A(d) of the Act was beyond the per iod of limitation.

10.

The impugned notice is also liable to be set aside on the ground that it was issued without the approval of the authority specified under Section 151 of the Act. Since the impugned notice was issued bey ond the peri od of t hr ee years from the end of the relevant assessment year, thus, in ter ms of Section 151(ii) of the Act, the same w as required to be approved by the Princip al Chief Commissio ner or Principal Direct or General or where there is no such authority, by Chief Commissioner or Director General. The deter mination of the specified author ity for grant of approval under Section 151 of the Act depends on whether the notice under Section 148 of the Act has been is sued after the expir y of three years fr om the end of the r el evant assessment year or within the said per iod.

11.

Section 151 of the Act (as amended by the Finance Act, 2021) as in for ce on the date of issuance of notice r ead as under:

“151.

Sanction for issue of notice.- Specifi ed author ity for the purposes of sec tion 148 and sectio n 148A shall be,-

(i)

Pr incipal Commissioner or Principal Director or Commissioner or Director , if thr ee years or less than three years have elapsed from t he end o f the relevant assessment year;

(ii)

Pr incipal Chief Co mmissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director Gener al, Chief Commissioner or Director Gen eral, if mor e than three years have elapsed fr om th e end of the relevant assessment year.”

12.

The question w hether the sanction in respect of notices that were issued d ur ing the period of limitation as extended by TOLA required t he prior sanction in terms of Section 151 of the Act, as in f or ce after 31.03.20 21 or as in for ce p rior to the said date, has fell for consider ation of this court in sever al cases inclu ding Twylight Infr astr ucture Pvt. Ltd. v. Income Tax Officer War d 25 3 Delhi & Ors.: Neutr al Citation No.2024:DHC:259- DB and Abhinav Jindal HUF v. Income Tax Officer War d 54(1) Delhi & Ors.: Neutral Citation No.: 2024:DHC:7238-DB . This court had held that TOLA would have no relevance for deter mining the specified autho rity whose approval wa s mandatory under Section 151 of the Act for issuance of a notice under Secti on 148 of the Act. We consider it appos ite to r efer t o the f ollowing extract fr om the decision o f this court in Abhinav Jindal HUF v. Income Tax Officer Ward 54(1) Delhi & Ors. (supr a). The same is set out below:

“17.

As was noticed in the intr oductor y parts of this decision, the r espondents had, contrar y to the above, ar gued that once a notice for r eassessment comes to be issued after the expiry of four years by vir tue of the extended per iod of time made available by TOLA, all the impugned notices would fall within th e ken of sub-sectio n (2) of the pr e-amendment Section 151 and consequently the sanction and appr oval accor ded by the JCIT would be in accordance with law. *** *** ***

38.

It w ould therefore be wholly inc orr ect to read TOLA as intending to amend the distribution of power or the categor ization envisaged and prescr ibed by Section 151. The additional t ime that the said statute provided to a n authority cannot possibly be constr ued as altering or modifying the hie rarchy or the str ucture set up by Section 151 of the Act. The issue of approval would still be liable to be answer ed based on whether the reassessment was commenced after o r within a per iod of four years fr om the end of the rel evant AY or as per the amended regime dependent upon whether action was being pr oposed wi thin thr ee years of the end of the relevant AY or ther eafter. The bifurcation of those powers would continue unaltered and unaffected by TOLA.

39.

The fa llacy of the submission addr essed by th e respondents becomes even more evident when we weigh in consider ation the fact that even if the r eassessment action were initiated, as per the extended TOL A timelines, and thus after the period of four year s, Section 151 incor p orated adequate measur es to deal wit h such a contingency and in unambiguous terms identified the authority which w as to be moved for the purposes of sanction and appr oval. Secti on 15 1 distributed the powers of approval amongst a set of specified authorities based upon the lapse of time betwe en the end of the relevant AY and the date when reassessment was proposed. Thus eve n if the r eassessment was pr oposed to be initiated with the aid of TOLA aft er the exp iry of four years fr om the e nd of the r elevan t AY, the authorit y statutorily empower ed to confer approval would be the Pr incipal Chief Commissioner /Chief Commission er /Principal Commissioner /Commissioner . It would only b e in a case where t he r eassessment was proposed to b e initiated befor e the expiry of four year s fr om the end of the r elevant AY that approval could have been accorded by the JCIT. Similar would be the position which woul d emerge if the actions wer e tested on the basis of the amended Section 151 and which divides the power of sanction amongst tw o sets of authorities based on whether reassessment is c ommenced within three years or ther eafter .”

“10.

As indicated above, the speci fied author ity changes depending on the time limit prescr ibed in section 151 of the Act. It is on this account that there is a linkage betw een ruling r endered i n Ganesh Dass Khanna [Ganesh Dass Khanna v. ITO, (2024) 460 ITR 546 (Delhi); 2023 SCC OnLine D el 7286; 2023 : DHC : 818 7-DB.] and the instant matters.

11.

It may also be noted that in Ganesh Dass Khanna [Ganesh Dass Khanna v. ITO, (2024) 460 ITR 546 (Delhi); 2023 SCC OnLine Del 7286; 2023 : DHC : 8187-DB.] , we had r ecorded the stand of the Re venue that the is sue concerning limitation and the specifi ed authority are “inter twined”. For convenience, the relevant part of the judgment is extracted hereafter (page 567 of 460 ITR):

“24.

On behalf o f the Revenue, t he following broad submissions were made:……

(viii)

B oth under the unamended 1961 Act and amended 1961 Act, the issu e concerning limitation is inextr icably intertwined with two aspects:

(a)

First, the rank of the author ity granting approval/sanction for tr iggering reassessment proceedings.

(b)

Second, the quantum of income which has escaped assessment.” (Emphasis is ours)

“Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the r elevant asses sment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.”

13.

Therefor e, h aving r egar d to the aforesaid, the impugned notices and order s in each of the above-captioned writ petitions are quashed on the gr ound that ther e is no approval of the sp ec ified author ity, as indicated in sectio n 151(ii) of the A ct. The dir ection is issued with the caveat that the Revenue will have l iberty to tak e steps, if de emed necessary, albeit as per law.”

14.

In J M Financial & Investments Consultancy Services Pr ivate Limited v. ACIT, Cir cl e 3(2) (1) & Ors., W.P. N o. 1050/2020, decide d on 04.04.2022, t he Bombay High C our t had made obser vations to the eff ect that even if the time to issue notice may have been extend ed by TOLA, the same would not amend the pr ovisions of S ection 151 of the Act. The r ele vant extr act of the said decis ion is set out below :

“5.

Resp ondents have reli ed upon a letter dated 18th March 2021 issued by one Income T ax Offic er , who has given an opinion to the Additional Commissioner of Income Tax that in view of the Taxati on and other Laws (Relaxati on of Cer t ain Provisions) Act, 2020 (Relaxation Act), limitation, in ter alia, under provisi ons of Sectio n 151(1) and Section 151(2), whic h were original ly expiring on 31st Mar ch 2020 stand extended to 31s t March 2021. According to the Income Tax Officer, in view of the above, Ass essment Year 2015-2016 which falls under the categor y within four year s as on 31st Mar ch 2020, the statutor y approval for issua nce of notice under Section 148 of the Act for the Assessment Year 2015-2016 may be give n by the Range H ead as per the sai d provisions. Mr. Sharma clarifies that the Income Tax Officer is on ly c onveying the view of the Pr incip al Commissioner of In come Tax because this letter has been issued on the lett er head of Pr incipal Commissioner of Income Tax.

6.

Even for a moment we agree with the view expressed by the Pr incipal Commissioner o f Income Tax, still i t applies to only ca ses wher e the limitation was expir in g on 31st March 2020. In the case at hand, the assessment year is 2015-2016 and, therefor e, the six years limitatio n will expir e only on 31st Mar ch 2022. Certainly, therefor e, the Relaxation Act provisions may not be applicable. I n any event, the time to issue n otic e may have be en extended but that would not amount to amending the provisions of Secti on 151 of the Act.

7.

In our view, since four years had e xpired fr om the en d of the re levant a ssessment year , as pr ovided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chie f C ommissioner or Pr incipal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On t his ground alone, we w il l have to se t aside the notic e dated 31st Mar ch 2021 issued under Section 148 of t he Act, which is impugned in this petition. In view thereof, the consequent or ders and notices will also have to go. ”

“24.

As per section 151 of the Act, the "specified authority" who has to gr ant his sanction for the purposes of section 148 and section 148A is the Principal Chief Commissioner or Pr incipal Dir ector General or where ther e is no Principal Chief Commis sioner or Pr incipal Director G ener al, the Chief Commissioner or Director General if more than three year s have elapsed fr om the end of the re lev ant assessment year. The pr esen t petition r elates to the assessment year 2016-17, and as the impugned order and impugned notice are issued beyond the period of three years which elapsed on Mar ch 31, 2020 the appr oval as contemplated in section 151( ii) of the Act would have to be obtained w hich has not been done by the Assessing Offic er . Th e impugned notice mentions that the prior approval has been taken of th e "Principal Commissioner of Income-tax-8" ("PCIT-8 ") which is bad in law as the appr oval should have been obtained in terms of section 151(ii) and not section 151(i) of the Act and the Principal Commissioner of Income- tax-8 can not be the specif ied authority as per section 151 of the Act. Fur ther, even in the affidavit-in-reply, the Depar tment has accepted that the approval obtained is of the "Principal Commissi oner of Income-tax-8" and, hence, such an appr oval would be bad in law.

25.

The Taxati on and Other Laws (Relaxation and Amendment of Certain Provisions) Act, enacted o n September 29, 20 20 and came into force on March 31, 2020 ([2020] 428 ITR (St.) 29 ). It, inter alia, provided for a r elaxation of cer tain provisions of the Income-ta x Act, 1961. Wher e any time lim it for completi on or compliance of an action such as completion of an y proceedings or passing of any or der or issuance of any notice fell b etween the period March 20, 2020 to Decem ber 31, 2020, the time limit for completion of suc h action stood exte nded to Mar ch 31, 2021. Thus, the Taxation and Othe r Laws (Relaxat ion and Amendment of Certain Provisi ons) Act only se eks to extend the peri od of limitation and does not affect the scop e of section 151.

“13.

The orders and notices are challenged herein not on the gr ound that the time limit under pr eamended section 149 does not apply, but on the ground that sanction was not granted by the specified authority. Therefor e, i t remains to be considered as to whether the application of the proviso to secti on 149 has the effect of incor porating by r eference to preamended section 151. In or der to substantiate the contention that preamended section 15 1 gets incor porated by refer ence, learned standing counsel relied on sub-section (2) t o the pr eamended section 14 9. It should be notic ed that the pr oviso to sub-section ( 1) of the amended section 149 does n ot even incorporate the whole of preamended section 149. It m erely makes the time limit pr escribed ther ein applicable to the issuance of notic es for reassessmen t in respect of an y assessment year beginning befor e Apr il 1, 2021. A fortiori the provi so certainly d oe s not incorpor at e preamended section 151 by reference and make it applicable.

14.

The next question to be examined is the impact of the Taxation and Other Laws (Relaxation and Amendment of C er tain Pr ovisions) Act, 2020. Undoubtedly, the Taxation and Othe r Laws (Relaxat ion and Amendment of Certain Provisions) Act, 2020 extend ed the time limits under specified e nactments, including the Income-tax Act. As per clause (a)(ii) of sub-section(1) of section 3 ther eof, time limi ts for grant of sanction or approval wer e also extended. Since the petitioner does no t challenge the sanction with respect to the time limit, clause (a) of sub-section (1) of sect ion 3 is immater ial. Indeed, the Taxat ion and Other La ws (Relaxation an d Amendment of Certain Provisions) Act, 2020, which extends the time li mits for completion of specif ied tasks up to March 31, 2021, itself b ecome s irr elevant because of the nature of the challenge in these wr it petitions.

15.

In Siemens F inancial Services [Siemens Financial Services Pvt. Ltd. v. Dy. CIT, (2023) 457 ITR 647 (Bom); 2023 SCC OnLine Bom 2822; (2023) 154 taxmann.com 159 (Bom).] , the Divisi on Bench of the Bombay High Court concluded, in substantially similar facts and circumstances, that the amended section 151 and not the preamended section 151 would apply. F or reasons set out above, I concur w ith the conclusion in Siemens Financial Services [S iemens Financial Services Pvt. Ltd. v. Dy. CIT , (2023) 457 ITR 64 7 (Bom); 2023 SCC OnLine B om 2822; (2023) 154 taxmann.com 159 (Bom).] and Ganesh Das Khanna v. ITO [(2 024) 460 ITR 546 (Delhi); (2023) 6 HCC (Del) 516; (20 23) 156 taxmann.com 417 (Delhi).] as subsequently foll ow ed in Twylight Infrastructure [Twylight Infrastr ucture Pvt. Ltd. v. ITO, (2024) 463 ITR 702 (Delhi); 2024 SCC OnLine Del 330.] . Consequently, the validity of sanction for issuing the orders under section 148A(d) and the notices under section 148 should be tested with r ef erence to amended section 151. If so tested, it is e viden t that sanction was not granted by an authority specified under clause (ii) of section 151. Hence, the or ders under section 148A(d) and the notices under section 148 are quashed. As a corollary, the dr aft assessment orders under section 144B/144C cannot sur vive and ar e also quashed.

16.

These wr it pet itio ns are allow ed on the above ter ms. Ther e will be no or der as to costs. Consequently, the connected miscellane ous petitions are also cl osed.”

17.

We may also n ote the vi ew o f the Orissa High C ourt in Ambika Ir on and Steel Pvt. Ltd. v. Pr incipal Commissione r of Income Tax: 2022 SCC OnLine Ori 4162 which is also si milar to the view as expressed by this court. The relevant extr act of the said decis ion is r eproduced bel ow:

“2.

In each of these cases, the challenges to a notice issued by the Incom e- tax Department (her einafter “Department”) under section 148 of t he Income-tax Act, 1961, (IT Act) as it stood prior to the amendment by the Finance Act of 2021 with effect fro m April 1, 2021. In other words, in e ach of these case s, the notice under section 148 of the Income-tax Act has been issued pr ior to Apr il 1, 2021. In many of them, in fact, the date of the notice is March 31, 2021.

3.

In each of these cases, the relevant assessment year (AY) in relation to which such notice has been issued is mor e than four year s prior to the date of the reop ening, i.e., it is beyond four years from the expiry of the assessment year in question and is clearly therefor e, time barred in terms of the first proviso to section 147 of the Income-tax Act.

4.

The stand of the Revenue th at in view of th e notifications issued by the Central Gover nment in terms of the pr ovisions of the Taxat ion and Other Laws (Relaxati on and Amendment of Cert ain Pr ovisi ons) Act, 2020, the said time limits stood extended is clear ly untenable as those notifications wer e issued to deal wit h the situation arising fr om the amendment to the Income-tax Act by the Finance Act, 2021 with effect fr om Apr il 1, 2021 w hereas in these cases the notices wer e issued prior to April 1, 20 21.

5.

This c our t had an occasion in similar cir cumstances to quash an identical notice under section 148 of th e Income-tax Act by its order dated November 20, 2019 in Wr it Petition (C) N o. 7618 of 2009 and which order sto od confirmed by this cour t by the dismissal of the Department' s r eview petition, i. e., RVWPET No. 188 of 2020 by the order dated December 3 , 2021 which reads as under:

“1.

Although the point made by the Revenue in this review p etition is that this cour t in its order dated November 20, 2019 er red in drawing a distinction between an Additio nal Commissioner and Comm issioner in ter ms of their authority, the point involv ed was that for the purpose o f section 151(1) of the Income-tax Act, 1961 since the r eop ening of th e assessment was beyond four years, it had to have the prior approval of the Commissioner of Income-tax, and ther e was no such approval in the pr esent case.

2.

Consequently, n o ground is made out for r eviewing the order dated November 20, 2019 in Writ Petition (C) No. 7618 of 2009.

3.

The revi ew petition is dismissed.”

6.

Indeed in the n otice issued under section 148 of the Income-tax Act on Mar ch 31, 2021 which has been challenged in Writ Petition (C) No. 41 826 of 2021 it has been stated that the notices had been issued after obtaining “necessar y satisfaction of the Joint Commissioner of I ncome-tax Range-I, Cuttack” whereas the Officer aut hor ized to r ecor d the necessar y satisfaction had to be the Chief Commissioner of Income-tax/Commissioner of Income-tax.

7.

For all the afo resaid reasons, in each of the above cases, the impugned notice under section 148 of the Income-tax Act is her eby quashed. The writ petitions are allowed, but in the circumstances, with no order as to costs.”

18.

In vi ew of the above, the or der dated 29.07.2 022 passed under Section 148A(d) of the Act is not sustainable. Consequently, the subsequent proceedings, including the assessment order dated 23.05.2023, cannot be sustained. Accordingly, the impugned order passed under Section 148A(d) of the Act, the notice issued under Section 148 of the Act as well as the assessm ent order dated 23.05.2023 and the demand raised pursuant ther eto, are h er eby set aside.”