M/s Galax Minerals (P) Ltd. vs Income Tax Officer, Ward 23(1), New Delhi

2.

That the CIT(A) has erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 147/144B of the Act without appreciating that the same were without jurisdiction and hence, deserved to be quashed as such.

2.1

That the CIT(A) has failed to appreciate that the notice u/s. 148A(b) of the Act, under section 148 of the Act order u/s. 148A(d) of the Act were also illegal, invalid and without jurisdiction and deserves to be quashed as such.

2.2

That the Ld. CIT(A) has failed to appreciate that there was no tangible material on record in the form of specified information to suggest that income of the appellant had escaped assessment in view thereof the proceedings initiated were illegal, untenable and therefore unsustainable.

2.3

That the CIT(A) has failed to appreciate that non supply of information in accordance with clause (i) of Explanation 1 to Section 148 of the Act even otherwise vitiated the notice u/s. 148A(b) of the Act and order u/s. 148A(d) of the Act.

2.4

That the CIT(A) has failed to appreciate that initiation of proceeding was mechanical and without any application of mind much less independent application of mind, therefore the notices issued u/s. 148A (b) of the Act; and u/s. 148 of the Act were invalid notice; and also order u/s. 148A(d) of the Act was an invalid order and thus assumption u/s. 147 of the Act was without jurisdiction.

2.5

That the Ld. CIT(A) has failed to appreciate that notice issued u/s. 148 of the Act after three years have elapsed from the end of the relevant assessment year in absence of possession of books of account or other documents or evidence which reveal that the income chargeable to tax represent in the form of ‘asset’, which has escaped assessment amounting to or to amount to fifty lakh rupees or more for that year in view of provisions of section 149(1)(b) of the Act.

2.6

That notice u/s. 148A(b) of the Act was issued based on factually incorrect assumptions and presumptions and therefore such a notice being highly cryptic vague could not legally and logically be made a basis for assumption of jurisdiction and therefore deserves to be quashed as such.

2.7

That the CIT(A) has failed to appreciate that order u/s. 148A(d) of the Act and, notice dated 29.7.2022 u/s. 148 of the Act have been issued without validly complying with section 151 of the Act; and thus ex-consequenti assumption of jurisdiction was illegal, invalid and, void ab initio were also without jurisdiction.

2.8

That the Ld. CIT(A) has failed to appreciate that notice u/s. 148A(b) of the Act and order u/s. 148A(d) of the Act were contrary to section 151A of the Act; and therefore, the assumption of jurisdiction was not in accordance with law.

“4.

Undisputedly, we are in this writ petition concerned with Assessment Year 2016-17 and in respect of which the notice under section 148 of the Act ultimately came to be issued on 29 July, 2022. It is thus apparent that the action had come to be initiated after the expiry of three years from the end of the relevant AY. It is in the aforesaid context that the petitioner contends that the sanction accorded by the PCIT would not sustain.

5.

In cases where assessment is sought to be commenced after the lapse of three years from the end of the relevant AY, undisputedly, it would be the Principal Chief Commissioner who would be liable to be recognized as being the competent authority. Viewed in that light, it is apparent that the reassessment action would not sustain…… Consequently, and for the aforesaid reasons, we find ourselves unable to sustain the reassessment action on this short score alone.

7.

Accordingly, the writ petition is allowed. The impugned order referred to Section 148A(d) and notice under section 148, both dated 29.7.2022 are quashed. However, the present order shall be without prejudice to the right of the respondent to draw such other proceedings as may be permissible in law.”

“Considered the rival submissions and the material placed on record. We observed that the Notice dated 29.07.2022 issued u/s 148 of the Act is not a valid notice, as the approval was not granted by the specified authority i.e. Principal Chief Commissioner of Income Tax as mandated u/s 151(ii) We further observe that the impugned notice u/s 148 for AY 2017-18 was issued on 29.07.2022, after obtaining the approval Pr.CIT, Delhi i.e. beyond the period of three years from the end of the relevant assessment year and thus, in terms of sec.151(ii) of the Act, the same was required to be approved by the Principal Chief Commissioner or Principal Director General or where there is no such authority, by Chief Commissioner or Director General. We further observe that in the case of the assessee, the said notice u/s 148 was not issued with the prior approval of the Principal Chief Commissioner or any other authority specified u/s 151(ii) of the Act. In this regard, we find force from the judgment of Hon’ble Delhi High Court in the case of Communist Party of India (Marxist) (supra) wherein Hon’ble Delhi High Court relying on various judgments decided the issue in favour of the assessee as under :-

“18.

In view of the above, the order dated 29.07.2022 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 13\48 of the Act as well as the assessment order dated 23.05.2023 and the demand raised pursuant thereto, are hereby set aside.”

“110.

The effect of the creation of the legal fiction in Ashish Agarwal (Supra) was that it stopped the clock of limitation with effect from the date of issuance of section 148 notices under the old regime {Which is also the date of issuance of the deemed notices}. As discussed in the preceding segment of the judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officer to the assessee in terms of the direction issued by this court in Ashish Agarwal (Supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assessee to reply to the cause notices must be excluded in terms of the third proviso to section 149.

111.

The clock started ticking for the Revenue only after it received the response of the assessee to the show cause notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities; (i) consider the reply of the assessee under section 149A(C); (ii) take a decision under section 149A(d) basd on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was see State of AP v. AP Pensioners Association, (2005) 13 SCC 161 [28]. [This court observed that the “legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing thereform.”] PART F required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime.

112.

Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause, notice will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty–one days [days between 1 May 2021 and 30 June 2021] to issue a notice under section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-One days from 18 June 202 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on 18 August 2022.”