INCOME TAX OFFICER, PIRAMAL CHAMBERS V. SONI AJAY JAIN, MUMBAI

ITA 3841/MUM/2025

AI Insights

The case involves an appeal by the Income Tax Officer against the decision of the learned Commissioner of Income Tax (Appeals), which quashed the assessment order for the assessment year 2016-17. The primary contention was regarding the validity of the notice issued under section 148 of the Income Tax Act, 1961, which was challenged on grounds of improper sanctioning authority and non-compliance with the statutory time limits. The Tribunal examined whether the notice was issued by the appropriate authority as per the amended provisions of section 151 and whether it adhered to the time limits set by the Act and relevant judicial precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780763 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 30-05-2025
• Other Referred Cases: Union of India vs Ashish Agrawal, Rajeev Bansal vs Union of India, Salit Gulati Vs ACIT, Circle - 49(1), Delhi and Ors., Ramesh Bachulal Mehta vs Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARY
• Assessee Lawyers: G. V. GINDE
• Keywords: Set aside; Retrospective amendment; Reassessment proceedings; Tax effect; Period of limitation; Reopening of assessment; Capital Gains; Time period of passing order; Bogus
• Section: 147; 144

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.3841/MUM/2025 (Assessment Year: 2016-17) Income Tax Officer, Room No.405, 4th Floor, Piramal Chambers, Lal Baug, Mumbai - 400012 ............... Appellant v/s Soni Ajay Jain, 82, Everest Appartment, Mount Pleasant Road, Malabar Hills, Mumbai – 400006 PAN: AADPJ5126D ……………… Respondent Assessee by : Shri G. V. Ginde Revenue by : Shri Swapnil Choudhary, Sr. DR Date of Hearing – 06/10/2025 Date of Order - 08/10/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The Revenue has filed the present appeal against the impugned order dated 04.03.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2016-17. 2. In this appeal, the Revenue has raised the following grounds: - Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 2 “1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in allowing the exemption of LTCG of Rs. 77,16,925/ -, which has been added as STCG u/s 10(38) of the IT. Act, on account of sale of shares of penny scrips, “Ojas Asset Re-Construction Ltd. (Presently Known as Toyam Sports Ltd?\" 2. “Whether on the facts and circumstances of the case and in law, the La. CIT (A) has erred in allowing the appeal without appreciating the fact that Shri. Jayant Bose And Sunil Kumar Kalyan, an exit providers have admitted on sworn statement that “Ojas Asset was penny scrips were operated only for the beneficiaries to book bogus LTCG and the assessee has one of the beneficiary of such schemes by selling penny scrips amounting to 79,16,925/- ?\" 3. \"Whether, in the facts and circumstances of the case, the learned CIT(A) erred in not remanding the matter to the AO for further clarification on the applicability of TOLA (Taxation and Other Laws Act) in consonance with the existing time limitation under section 149 and provisos thereto, to check the validity of the notice is 148 of the Income Tax Act, 1961, when assessment order passed u/s 147 r.w.s. 144 of the Act?\" 4. \"Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in quashing notice w/s 148 of the Act by stating that the notice was issued beyond the limitation time provided and directed by the Hon'ble Supreme Court in the case of Union of India us Ashish Agrawal (supra) and Rajeev Bansal (supra), without considering the fact that AO issued notice w/s 148 of the Act after considering the time limitation provided under section 149 and provisos thereto, in pursuance of the directions issued by the Hon'ble Supreme Court in the case of Union of India us Ashish Agrawal (supra) and Rajeev Bansal (Supra)? 5. \"Whether on the facts and circumstances of the case and in law, the CIT(A) not appreciated that the Hon'ble Delhi High Court in the case of Salit Gulati Vs ACIT, Circle - 49(1), Delhi and Ors. (supra) has upheld the Revenue's stand that the decision of the Supreme Court in Union of India Vs. Ashish Agarwal (supra) read with the time extension provided by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short TOLA) allows extended reassessment notices to travel hack in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that point.?\" 6.. \" Whether on the facts, in the circumstances of the case and in Law, the Hon'ble CIT(A) has erred in not considering the provision of 148A of the Act which provides for passing order u/s 148A(d) of the Act within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires, and therefore, in the facts of the case, the order w/s 148A(d) & consequent notice u/s 148 were passed well in time?\" 7. The tax effect involved in this case is Rs. 13,02,294/-, which below the prescribed limit mentioned in the CBDT's Circular F.No.279/Misc. 142/2007-ITJ(Pt) amended vide No. 09/2024 dated.17.09.2024, however this case falls under one of the exceptions specified in paragraph 3.1(h) of the of the CBDT's Circular No. 05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving \" Organized Tax Evasion\", in such cases the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.” Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 3 3. During the hearing, the learned Authorized Representative (“learned AR”) submitted that the learned CIT(A) quashed the assessment order, inter alia, on the basis that sanction of the appropriate authority under section 151 of the Act was not sought prior to issuance of notice under section 148 of the Act. The learned AR submitted that in addition to the above, the notice issued under section 148 of the Act, in the present case, is also beyond the limitation period specified under section 149(1) of the Act, and thus, on this basis also, the assessment order passed under section 147 read with section 144 read with section 144B of the Act is void ab initio. 4. The brief facts of the case are that the assessee is an individual and for the year under consideration filed his return of income on 23.07.2016, declaring a total income of Rs.8,94,490/-. Subsequently, on the basis of the information received from the Investigation Wing that the assessee is a beneficiary of accommodation entry transaction of bogus long term capital gains, the AO issued notice under section 148 of the Act on 17.06.2021. 5. Subsequently, in view of the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agrawal reported in (2022) 444 ITR 1 (SC), the original notice issued under section 148 of the Act on 17.06.2021 was deemed to be issued under section 148A(b) of the Act. Vide show cause notice dated 25.05.2022, the information and material relied upon by the Revenue were provided to the assessee and time was granted to the assessee to respond to the same within two weeks in terms of provisions of section 148A(b) of the Act. Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 4 6. Rejecting the objections filed by the assessee on 08.06.2022, an order under section 148A(d) of the Act was passed on 31.07.2022 declaring that it is a fit case for issuance of notice under section 148A of the Act. Thereafter, on the same date, i.e. on 31.07.2022, notice under section 148 of the Act was issued by the Jurisdictional Assessing officer. After considering the submissions of the assessee filed during the reassessment proceeding, the AO passed the order dated 19.05.2023 under section 147 read with section 144 read with section 144B of the Act assessing the total income of the assessee at Rs.88,11,415/-. 7. The learned CIT(A), vide impugned order, allowed the appeal filed by the assessee and quashed the assessment order, by observing as follows: “4.8 It is undisputed in the present appeal, that for issuing the order u/s 148A(d) and issuing notice u/s 148 sanction of Pr. CIT-19, Mumbai was taken. The second undisputed fact is that the sanction of Pr. CIT-19, Mumbai was given on 28.07.2022. As per the binding decision Hon'ble Supreme Court (para114 (d)) in the case of Rajeev Bansal (supra). The PR. CIT had authority to sanction issuance of notice u/s 148 only upto 30.06.2021. Undisputedly the notice u/s 148 in the impugned order of assessment was issued on 31.07.2022 on that date the appropriate sanctioning authority for issuance of this notice was Pr. Chief Commissioner of Pr. Director General or Chief commissioner or Director General. Admittedly the sanctioning authority for issuing notice u/s 148 as on 31.07.2022 was not appropriate authority as per amended provisions of section 151 w.e.f 01.04.2021. 4.9 Secondly, in the case of Ashish Aggarwal (supra) the Hon'ble Supreme Court had decided that the benefit of new regime of re-assessment must be provided retrospectively. The increase in monitory limit for re-opening of assessment beyond the period of three years has to be made applicable with retrospective effect. As per amended provisions of section 149(1)(b) proceedings for re-assessment can be initiated after three years of the end of the AY if the income chargeable to tax which has escaped assessment is Rs. 50,00,000/- or more. In the order passed u/s 148A(d) dated 31.07.2022 the AO had treated Rs. 5,53,430/- only to be the income chargeable to tax which had escaped assessment (para-6.5 and para-7.7 of the order passed u/s 148A(d)). Undisputedly, on 31.07.2022 the period of three years from end of the AY 2016-17 had elapsed. This notice as it was issued after 30.06.2021 will also not get benefit of the period extended upto 30.06.2021 per TOLA. This issue was also adjudicated in the case of Rajeev Bansal (supra). Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 5 \"51. Given section 149(1)(b) of the new regime, re-assessment notices could be issued after three years only if the income chargeable to tax which escaped assessment is more than Rs. 50,00,000/-..........” 4.10 In terms of above discussion the very assumption of jurisdiction to re- assess is found to be unlawful on two counts. Firstly the income chargeable to tax which had escaped assessment as per the information was below Rs. 50,00,000/- and secondly, the sanction for issuing the notice u/s 148 was not given by appropriate authority. Therefore, the impugned order of assessment is not maintainable.” Being aggrieved, the Revenue is in appeal before us. 8. We have considered the submissions of both sides and perused the material available on record. Before proceeding further, it is essential to note the provisions of the Act that are relevant to the issue at hand. The relevant provisions of section 148 of the Act, as amended by Finance Act 2021, read as follows: – “148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: 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 relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice: Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section: ………. Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 6 Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.” 9. Therefore, as per the first proviso to section 148 of the Act, it is evident that for issuing notice under the section, the AO is required to obtain prior approval of the Specified Authority. The second proviso to section 148 further provides that no such approval shall be required where the AO, with the prior approval of the Specified Authority, has passed the order under section 148A(d) of the Act. Further, Explanation 3 clarifies that the Specified Authority for the purpose of section 148 shall be the Specified Authority as referred to in section 151 of the Act. 10. Further, section 151 of the Act deals with the Specified Authority for section 148 and section 148A of the Act, and the same reads as follows: – “151. Specified authority for the purposes of section 148 and section 148A shall be,— (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.” 11. Therefore, from the plain reading of section 151 of the Act, it is evident that in case where more than three years have elapsed from the end of the relevant assessment year, the Specified Authority for the purpose of granting prior approval, as required under section 148 of the Act, is Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 7 12. As per the assessee, in the present case, the period of three years from the end of the relevant assessment year, i.e., 2016-17, expired on 31.03.2020 and even if the extension granted by the Taxation and Other Laws (Regulations and Amendment of Certain Provisions) Act, 2020 (“the TOLA”) is granted, the Specified Authority as per the provisions of section 151(i) of the Act, after its amendment by the Finance Act, 2021 could have granted the approval only till 30.06.2021. However, in the present case, the necessary approval, as per the provisions of section 151, for passing the order under section 148A(d) of the Act, was obtained after the aforesaid date from the Principal Commissioner of Income Tax. Accordingly, as per the assessee, the Revenue has not followed the mandatory provisions of the Act while initiating the reassessment proceedings, and the sanction of the Specified Authority is not in conformity with the law prevalent at the time of grant of sanction. 13. We find that while deciding the similar issue the Hon’ble Jurisdictional High Court in Ramesh Bachulal Mehta vs. Income Tax Officer, reported in (2025) 177 taxmann.com 606 (Bombay), after considering the decision of the Hon’ble Supreme Court in Union of India & Ors. v. Rajeev Bansal, reported in (2024) 469 ITR 46 (SC), held that after the expiry of three years from the end of the relevant assessment year, the Specified Authority as per the provisions of section 151 of the Act is Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. The relevant findings of the Hon’ble High Court, in the aforesaid decision, are reproduced as follows: - Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 8 “8. On bare reading of the above extract of the judgment of Hon'ble Supreme Court in the case of Rajeev Bansal (supra), we find that the Hon'ble Supreme Court had clarified as under: 8.1 Under the substituted provisions of re-assessment as introduced by the Finance Act, 2021, the Assessing Officer is required to obtain prior approval or sanction of the 'Specified Authority' at four stages: (i) at first stage under Section 148A(a); (ii) at second stage under Section 148A(b); (iii) at third stage under Section 148A(d); and (iv) at fourth stage under Section 148. In the case of Ashish Agarwal (supra) the Hon'ble Supreme Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b) of the Act only. Therefore, the Assessing Officer was required to obtain prior approval of the 'Specified Authority' according to Section 151 of the new regime before passing an order under Section 148A(d) or for issuing a notice under Section 148. 8.2 Under new regime, if income escaping assessment is more than Rupees 50 lakhs, a reassessment notice could be issued after the expiry of three years from the end of the relevant assessment year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 8.3 Section 151(ii) of the substituted provisions prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance with the provisions of section 151 vitiates the jurisdiction of the Assessing Officer to issue a notice under section 148. 8.4 Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a reassessment notice. 9. In the present case the period of three years from the end of the Assessment Year 2016-17 fell for completion on 31st March 2020. Since the expiry date fell during the time period of 20th March 2020 and 31st March 2021 contemplated under Section 3(1) of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short \"TOLA\"), the authority specified under Section 151(i) of the new regime could have granted sanction till 30th June 2021. On perusal of the order, dated 13.07.2022, passed under Section 148A(d) of the Act, we find that the aforesaid order was passed after taking approval from Principal Commissioner of Income Tax (Respondent No.2). Since the aforesaid order was passed after the expiry of three years from the end of the Assessment Year 2016-17, as per the substituted provisions of re-assessment, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. Accordingly, we conclude that in the present case the approval has been obtained from the authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime. 10. The Hon'ble Supreme Court in the above case has drawn an illustration in paragraph 78 of it's order in the context of Assessment Year 2017-18, wherein it is categorically held that the authority specified under section 151(i) can accord sanction only upto 30.06.2021. This illustration makes it absolutely clear that when the period of three years from end of relevant Assessment Year expired between 20.03.2020 and 31.03.2021, the extension by virtue of Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 9 TOLA was upto 30.06.2021 and not beyond. Thus, it can be said that the period of three years from the end of the relevant Assessment Year (here AY 2016- 17) expired on 30.06.2021, whereas the Respondent No.1, despite passing the order on 13.07.2022 in repsect of Assessment Year 2016-17, has obtained approval of Respondent No.2 who is not the authority as prescribed under section 151(ii). 11. Non-compliance by Respondent No.1 with the provisions contained in Section 148A(d) read with Section 151(ii) vitiates the jurisdiction of the Respondent No. 1 to issue a notice under Section 148 of the Act. 12. We are clearly of the view that the present matter stands covered by the decision of Hon'ble Supreme Court in the case of UPI v. Rajeev Bansal (supra). We accordingly hold that the order dated 13.07.2022 passed under Section 148A(d) of the Act and the consequential notice issued under section 148 dated 15.07.2022 are bad in law for being violative of the provisions of Section 151(ii) of the Act. Hence they are required to be quashed and set aside. 13. We, accordingly, set aside the impugned order dated 13.07.2022 passed under section 148A(d), the Notice issued under Section 148 and all other proceedings/orders emanating therefrom and allow the writ Petition in terms of Prayer Clause (a) of the petition.” 14. From the perusal of the order dated 31.07.2022 passed under section 148A(d) of the Act, which forms part of the paper book from pages 5 to 12, we find that the same was issued after seeking approval from Principal Commissioner of Income Tax – 19, Mumbai. Furthermore, the three-year period from the end of the relevant assessment year, i.e., 2016-17, as extended by the provisions of the TOLA, also expired in the present case on 30.06.2021. Therefore, respectfully following the decision of the Hon’ble Jurisdictional High Court cited supra, we are of the considered view that notice under section 148 of the Act issued on 31.07.2022 is in contravention of the provisions of section 151 of the Act, as the sanction of the concerned Specified Authority was not obtained. Accordingly, we do not find any infirmity in the findings of the learned CIT(A) in quashing the assessment order on this basis, and therefore, the same are upheld. Printed from counselvise.com ITA No.3841/Mum/2025 (A.Y. 2016-17) 10 15. Since the notice issued under section 148 of the Act has been found to be void ab initio and bad in law on this very jurisdictional aspect, the other grounds challenging the notice are rendered academic and therefore, are left open. Accordingly, the grounds raised by the Revenue are dismissed. 16. In the result, the appeal by the Revenue is dismissed. Order pronounced in the open Court on 08/10/2025 Sd/- PRABHASH SHANKAR ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 08/10/2025 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "