Bombay High Court: Reassessment notice issued under Section 148 of the Income-tax Act, 1961 (IT Act) for AY 2015-16 without containing DIN; and issued by Jurisdictional Assessing Officer (JAO) and not by the National Faceless Assessment centre in accordance with Section 151A is invalid.
- Introduction
- Prior to the amendment of IT Act 2021, re-assessment proceedings could be initiated under Section 148 of the Act; and proceeding could be opened up to either 3 years or 6 years or 10 years from the end of Assessment year in which the return was filed. However, with effect from 1 April 2021, the re-assessment proceedings are required to be initiated under Section 148A of the IT Act and the re-opening of assessment proceedings can be done for either 3 years or 10 years, subject to conditions being met prescribed under each section. [for timeline refer section 149 of the IT Act]
- Further, for the purpose of assessment, re-assessment or re-computation the notices must be issued by the National Faceless Assessment centre in accordance with Section 151A of the IT Act.
- Issue
The present case[1] was filed before the Hon’ble Bombay High Court in relation to the following:
- Reassessment under the old provisions i.e., 148 of the Act instead of 148A of the Act;
- Issue of notice by jurisdictional officer and not NFAC;
- Issuance of Notice without DIN;
- Claim of deduction under 80JJAA was not fulfilled by the assessee; and
- Escapement of income due to realisation of forex loss in earlier year.
- Decision of the High Court
The Hon’ble court noted that the department had no response in relation to question as to why the notice was issued in accordance with old provisions after 01.04.2022.
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Q. No. |
Issue |
Answer by the Hon’ble Court |
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1 |
Whether TOLA is applicable for Assessment Year 2015-2016 and whether any notice issued under Section 148 of the Act after 31st March 2021 will travel back to the original date |
For Assessment Year 2015-2016 the provisions of TOLA are not applicable; the same was clearly laid down in case of Tata Communications Transformation Services Ltd reported at (2022) 443 ITR 49 (Bom) and was followed in the case of Siemens Financial Services (P.) Ltd. reported at 3 (2023) 154 taxmann.com 159 (Bombay)
Not applicable. |
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2 |
Whether the notice dated 27th August 2022 issued under Section 148 of the Act is barred by limitation as per the first proviso to Section 149 of the Act |
Section 149(1)(b) of the erstwhile provisions provided a time limit of six years from the end of the relevant assessment year for issuing notice under Section 148 of the Act. For the relevant assessment year, being Assessment Year 2015-2016, 6th year expired on 31st March 2022. The notice under Section 148 of the Act, in the present case, is issued on 27th August 2022, i.e., clearly beyond the period of limitation prescribed in Section 149 read with the first proviso to the said section.
Yes, barred by limitation. |
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3 |
Whether the impugned notice dated 27th August 2022 is invalid and bad in law as the same has been issued without a DIN |
The intimation letter refers to a DIN with respect to some notice under Section 148 of the Act dated 26th August 2022. The impugned notice issued to petitioner is dated 27th August 2022 and not 26th August 2022 for which the DIN is generated. Further, the procedure prescribed in Circular No.19 of 2019 dated 14th August 2019 for non-mention of DIN in case letter/notice/order has not been complied with by respondent no.1. It is settled that if DIN is not mentioned in the letter/notice/order, the reason for not mentioning the DIN and the approval from specified authority for issuing such letter/notice/ order without DIN has to be obtained and mentioned in such letter/notice/order. Therefore, the impugned notice is invalid.
Yes, the same is invalid. |
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4 |
Whether the impugned notice dated 27th August 2022 is invalid and bad in law being issued by the JAO as the same was not in accordance with Section 151A of the Act |
The guideline dated 1st August 2022 relied upon by the Revenue is not applicable because these guidelines are internal guidelines as is clear from the endorsement on the first page of the guideline –“Confidential For Departmental Circulation Only”. The said guidelines are not issued under Section 119 of the Act. Any such guideline issued by the CBDT is not binding on petitioner. Further the said guideline is also not binding on respondent no.1 as they are contrary to the provisions of the Act and the Scheme framed under Section 151A of the Act.
in our view, there is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant.
Further the Hon’ble Telangana High Court in the case of Kankanala Ravindra Reddy vs. Income Tax Officer reported at (2023) 156 taxmann.com 178 (Telangana) has held that in view of the provisions of Section 151A of the Act read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We are also of the same view.
Yes, invalid |
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5 |
Whether the issues raised in the impugned order show an alleged escapement of income represented in the form of an asset or expenditure in respect of transaction in relation to an event or an entry in the books of account as required in Section 149(1)(b) of the Act |
In the impugned order, the Assessing Officer has restricted the escapement of income only with regard to Rs.6,54,04,038/- on the claim of deduction under Section 80JJAA of the Act and disallowance of excess claim of Forex loss of Rs.6,90,80,180/-. On the Forex loss, respondent has prima facie accepted the contentions of petitioner that there was a Forex loss. Therefore, the same cannot be justified as an escapement of income.
No, it does not show escapement of income. |
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6 |
Whether respondent no.1 has proposed to reopen:
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Respondent No. 1 has no power to review his own assessment when the same information was provided and considered by him during the original assessment proceedings.
The present case is clearly a case of change of opinion or review of the original assessment order which is not permissible even under the new provisions.
Held, |
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7 |
When the claim of deduction under Section 80JJAA of the Act has been consistently allowed in favour of petitioner by the Assessing Officers/ Appellate Authorities in the earlier years, can the Assessing Officer have a belief that there is escapement of income |
The fact that the claim of deduction under Section 80JJAA of the Act has been allowed to petitioner consistently since Assessment Year 2010-2011 is not disputed. Therefore, respondent no.1 cannot allege that income chargeable to tax has escaped assessment on account of such claim being allowed for Assessment Year 2015-2016 when such claim stands allowed for earlier years on identical facts, i.e., with respect to the same business activity.
The counsel for respondent has failed to appreciate that petitioner has not argued the case on the merits but merely submitted that on merits deduction under Section 80JJAA of the Act has already been allowed in the earlier assessment years, i.e., Assessment Year 2013-2014 and 2014-2015 and the deduction in the Assessment Year 2015-2016 is only consequential as the eligibility to claim deduction was in the Assessment Year 2013-2014 and, therefore, there is no question of reopening the assessment for the relevant assessment to disallow the deduction under Section 80JJAA of the Act. |
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8 |
Whether the approval granted by the Sanctioning Authority was valid |
There was application of mind by the approving authority.
Yes, valid. |
Annexure
The Petitioner submitted the following:
- That the reopening is contrary to Section 149(1)(b) of the Act as no income presented in the form of ‘asset’ has been escaped, This is because the term ‘asset’ is defined in Explanation to Section 149 of the Act to include immovable property being land or building or both, shares and securities, loans and advances, deposit in bank account;
- Approval under Section 151 of the Act has not been obtained;
- All the documentation was provided during the original assessment proceedings;
- Assessee qualifies for as an industrial undertaking for the purposes of 80JJAA;
- There is no escapement of income in case of forex loss as the same was recorded in the balance sheet for the earlier year and the loss was claimed as deduction in the previous year. However, in the current year, the same has been routed in P&L but no deduction has been claimed as it was claimed in the previous year. Further the difference is on account those did not materialise and the same was transferred from balance sheet to P&L account; and
- Pursuant to merger, the assessee has offered all the income in its return of income.
- Time limit to issue notice under for the assessment year in question had already lapsed on 31 March 2022 and therefore the notice issued on 27 August 2022 was beyond the time limit as prescribed under Section 149.
- The impugned notice issued is without DIN and therefore the same is invalid[2]. Further, the impugned notice is issued by the jurisdictional assessing officer and which is not in accordance with the provisions of Section 151A which states that the notice under Section 148 of the Act shall be through automated allocation.
- Respondent cannot review his own assessment when all the details were made available during the assessment proceedings.
Department:
- That the notice issued is within time limits under the old provisions and the same would expire on 31.03.2022
- That the proceedings initiated by end of 31.03.2020 would be extended upto 30.06.2021 by virtue of TOLA
- That the revenue will have upto 10 years to issue notice under Section 148 subject to complying with preconditions mentioned in Section 149(1)(b)
That JAO and NFAC has concurrent jurisdiction
[1] Hexaware Technologies WP No. 1778 of 2023
[2] reference is drawn to CBDT circular no. 19 of 2019 dated 14.08.2019
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