BABU HASAN SHAIKH ,MUMBAI V. INCOME TAX OFFICER WARD 27(1)(1), MUMBAI

ITA 926/MUM/2025

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The case involves Babu Hasan Shaikh, an individual engaged in the business of construction contracts, who appealed against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi. The primary contention was the legality of the reassessment notice issued under section 148 of the Income Tax Act, which the assessee argued was time-barred. The Assessing Officer had initiated reassessment proceedings based on the sale of immovable property by the assessee and other financial transactions. The Tribunal focused on the legal issue of whether the notice was issued within the statutory time limits, particularly examining the amendments to section 149(1) of the Act and relevant judicial precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 313121 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Other Referred Cases: Hexaware Technologies Ltd. vs. ACIT [2024] 162 taxmann.com 225 (Bom.), UOI vs Rajiv Bansal [2024] 167 taxmann.com 70 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: TANZIL R. PADVEKAR
• Keywords: Invalid notice; Reassessment proceedings; Period of limitation
• Section: 147; 148; 132; 153A; 131

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE JUSTICE (RETD.) C V BHADANG, PRESIDENT & MS PADMAVATHY S, AM ITA No.926/Mum/2025 (Assessment Year: 2015-16) Babu Hasan Shaikh, A/801B, Lokhandwala Residency Tower, Manjrekar Lane, Dr. E. Moses Road, Mumbai-400018. PAN: ASHPS4807Q Vs. ITO -Ward-27(1)(1), Room No. 406, 4th Floor, Tower No.6, Vashi Railway Station Commercial Complex, Vashi, Navi Mumbai-400703. Appellant) : Respondent) Appellant /Assessee by : Shri Tanzil R. Padvekar, AR Revenue / Respondent by : Shri Leyaqat Ali Aafaqui, Sr. DR Date of Hearing : 21.04.2025 Date of Pronouncement : 28.04.2025 O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] dated 23.01.2025 for Assessment Year (AY) 2015-16. 2. Brief facts of the case are that the assessee is an individual engaged in the business of contract of construction. The Assessing Officer (AO) based on information from Sub-Registrar, Lonawala noticed that the assessee has sold an 2 ITA No. 926/Mum/2025 Babu Hasan Shaikh immovable property for a consideration of Rs.1,98,00,000/- during the year under consideration. The AO also noticed that the assessee has deposited a sum of Rs. 2,00,000/- in the bank account and has received a contract receipts to the tune of Rs. 1,38,202/-. Since the assessee has not filed the return of income for AY 2015-16 the AO initiated re-assessment proceedings by issue of show-cause notice under section 148A(b) the Income Tax Act (the Act) dated 24.03.2022 and an order under section 148A(d) of the Act on 18.04.2022. The AO also issued the notice under section 148 of the Act on 18.04.2022 and completed the assessment under section 147 of the Act by making an addition to the tune of Rs. 1,77,99,419/-. Aggrieved the assessee filed further appeal before the CIT(A) who confirmed the addition rejecting the contentions of the assessee both on legalilty as well as on merits. The assessee is in appeal before the Tribunal against the order of the CIT(A). Before us also the assessee raised grounds with regard to legality of the reassessment proceedings as well as grounds on the merits of the issue. 3. The ld. AR during the course of hearing submitted that one of the legal contentions is with respect notice under section 148 of the Act dated being barred by limitation. The ld. AR further submitted that if the said ground is held in favour of the assessee then the rest of the grounds would become academic. Accordingly for the purpose of adjudication we will first consider the issue of whether the notice under section 148 dated 18.04.2022 is barred by limitation as per the first proviso to section 149(1) of the Act. 4. The main contention of the ld. AR is that the time limit for issue of notice under section 148 of the Act i.e. six years from the end of the relevant AY expired on 31.03.2022 and therefore the notice issued in assessee's case on 18.04.2022 is time barred and invalid. The ld AR further submitted that the assessee's case is 3 ITA No. 926/Mum/2025 Babu Hasan Shaikh covered under the first proviso to section 149(1) and in this regard relied on the decision of the Hon'ble Bombay High Court in the case of Hexaware Technologies Ltd. vs. ACIT [2024] 162 taxmann.com 225 (Bom.). 5. The ld. DR on the other hand relied on the orders of the lower authorities. 6. We heard the parties and perused the material on record. In order to examine the whether in assessee's case the notice under section 148 is time barred or not, we need to first look at the relevant provisions of the Act and the legal position as per judicial precedence. Section 149(1) of the Act contain the provisions with regard to the time limit for issue of notice under section 148 of the Act and the same reads as under – 149 - Time limit for notice. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021 4 ITA No. 926/Mum/2025 Babu Hasan Shaikh Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: Provided also that for cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,— (a) a search is initiated under section 132; or (b) a search under section 132 for which the last of authorisations is executed; or (c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,— (a) a search under section 132 which is initiated; or (b) a search under section 132 for which the last of authorisations is executed; or (c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A 30[does not exceed seven days], such remaining period shall be 5 ITA No. 926/Mum/2025 Babu Hasan Shaikh extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.—For the purposes of clause (b) of this sub-section, \"asset\" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (1A) & (2) ***** 7. The time limits for issue of notice under section 148 of the Act were amended as above w.e.f. 01.04.2021. Prior to the amendment the relevant provisions of section 149(1) of the Act read as under – 149 - Time limit for notice. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; (c) **** Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. (2) & (3) **** 8. The time limit for issue of notice under section 148 of the Act was revised with effect from 01.04.2021 and the legislature in order to make the amendment prospective introduced the first proviso to section 149(1). The intent of the first proviso is that the revenue does not get the extended time of ten years where the notices were not issued within a period of six years for AYs prior to 2021-22. The said legislative intent has been clearly explained by the Hon'ble Supreme Court in the case of UOI vs Rajiv Bansal [2024] 167 taxmann.com 70 (SC). The relevant of observations of the Apex Court is extracted below – 6 ITA No. 926/Mum/2025 Babu Hasan Shaikh 46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the \"time limits specified under the provisions of\" 149(1)(b) of the old regime. Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime. 47. **** 48. Notices have to be judged according to the law existing on the date the notice is issued. Section 149 of the old regime primarily provided two time limits: (i) four years for all situations and (ii) beyond four years and within six years if the income chargeable to tax which escaped assessment amounted to Rupees one lakh or more. After 1 April 2021, the time limits prescribed under the new regime came into force. The ordinary time limit of four years was reduced to three years. Therefore, in all situations, reassessment notices could be issued under the new regime if not more than three years have elapsed from the end of the relevant assessment year. For example, for assessment year 2018-2019, the four year period would have expired on 31 March 2023 under the old regime. However, if the notice is issued after 1 April 2021, the three year time limit prescribed under the new regime will be applicable. The three year time limit will expire on 31 March 2022. 49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses. 50. to 52. *** 7 ITA No. 926/Mum/2025 Babu Hasan Shaikh 53. The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs. 9. From the perusal of the legislative intent of the first proviso to section 149(1) as laid down by the Hon'ble Supreme Court it is clear that Revenue can not issue notice under section 148 for assessment years prior to AY 2021-22 if six years from the end of the relevant assessment year has expired on the date of issue of such notice. In the light of the above legal position we will now examine the facts in assessee's case. The year under consideration here is AY 2015-16 and therefore the time limit as per the first proviso is applicable. Therefore the time limit as per the old regime, for issue of notice for AY 2015-16 under section 148 of the Act six years from the end of the relevant assessment year i.e. 31.03.2022. Accordingly the notice dated 18.04.2022 issued in assessee's case beyond the time limit and not valid. 10. The argument of the ld DR is that the time allowed to the assessee to respond to the notice issued under section 148A(b) i.e. from 24.03.2022 to 08.03.2022 should be excluded as per the fifth proviso to section 149(1). We are of the considered view, for the purpose applying the exclusion period, the notice should first survive the test of being issued either under section 149(1)(a) or 149(1)(b) under the new regime. In the given case the notice under section 148 of the Act for 8 ITA No. 926/Mum/2025 Babu Hasan Shaikh AY 2015-16 does not survive the test by virtue of the first proviso and therefore the question of applying the fifth proviso for calculating the time limit does not arise. 11. In view of these discussions and considering the provisions of the Act r.w. the ratio laid down by the Hon'ble Supreme Court we hold that the notice issued under section 148 of the Act dated 18.04.2022 is barred by limitation. Accordingly the reassessment proceedings based on the invalid notice does not survive and the additions made therein are liable to be deleted. 12. Since we have deleted the addition considering the legal issue of notice under section 148 of the Act being time barred, the other legal arguments and contentions on merits have become academic not warranting any adjudication. 13. In result the appeal of the assessee is allowed. Order pronounced in the open court on 28-04-2025. Sd/- Sd/- (JUSTICE (RETD.) C V BHADANG) (PADMAVATHY S) President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "