NICKSON MORRIS RODRICKS ,MUMBAI V. ITO WARD 42(1)(3), MUMBAI

ITA 180/MUM/2025

AI Insights

The case involves an appeal by M/s. Nickson Morris Rodricks against the reassessment notice issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The primary legal contention raised was the validity of the notice under Section 148, arguing that the procedural requirements under Sections 147 to 151A were not fulfilled, specifically the requirement of obtaining prior approval from the appropriate authority as stipulated under the new regime of the Act. The Tribunal admitted an additional ground of appeal concerning the legal validity of the notice and proceeded to quash the reassessment proceedings based on the judicial precedents and statutory provisions cited.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470969 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: NTPC Vs. CIT, ACIT Vs. Ramchand Thakurdas Jhamtani, Union of India vs. Rajeev Bansal
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: DHARAN GANDHI; ASHUTOSH PATARE; SERVING UPON
• Keywords: Reassessment proceedings; Non compliance
• Section: 147; 148; 250; 11; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & HON’BLE SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No. 180/Mum/2025 (Assessment Year: 2017-18) M/s. Nickson Morris Rodricks A-801, Trishal Tower, Above State Bank of India, Borivalli (W), Mumbai. Vs. ITO – 42(1)(3) Room No. 735, Kautilya Bhavan, BKC Mumbai. PAN/GIR No. AIIPR1426R (Applicant) (Respondent) Assessee by Shri Dharan Gandhi & Shri Ashutosh Patare Revenue by Shri Leyaqat Ali Aafaqui, Sr. AR Date of Hearing 19.03.2025 Date of Pronouncement 26.03.2025 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the assessee challenging the impugned order dated 19.11.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A), for the A.Y 2017-18. 2. At the very outset, we noticed that assessee has filed an application for admission of additional ground. 2 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai 3. We have heard the counsels for both the parties on this application for admission of additional ground. From the records, we found that the said ground now being raised by the assessee is ‘purely legal’ in nature and all the facts for adjudicating the same are already on record. Therefore, while placing reliance on the decision of Hon’ble Supreme Court in the case of NTPC Vs. CIT, 229 ITR 383 and also considering the fact that this ground goes to the roots of the case, therefore allow the assessee to raise the additional ground. Consequently the application filed by the assessee is allowed and this additional ground is admitted for adjudication on merits. 4. Since, we have admitted the additional ground which goes to the roots of the case therefore we have decided to adjudicate the same. The assessee has raised the additional ground of appeal: 1. The notice u/s 148 of the Act is bad in law as the condition u/s 147 to 151A of the Act are not fulfilled and therefore, the reassessment proceedings are bad in law. 5. Ld. AR appearing on behalf of the assessee submitted that the notice u/s 148 of the Act dated 24.07.2022 3 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai issued by the department to the assessee is bad in law as the conconditions u/s 147 to 151(A) of the Act are not fulfilled. Therefore it was submitted that the reassessment proceedings may be declared as bad in law. In this regard Ld. AR relied upon the decision of Coordinate Bench of ITAT in ITA No. 3551/Mum/2024 in the case of ACIT Vs. Ramchand Thakurdas Jhamtani . 6. On the other hand, Ld.DR relied upon the orders passed by the revenue authorities. 7. We have heard the counsels for both the parties, perused the material placed on record and judgments cited before us and the orders passed by the revenue authorities. It is undisputed fact that the impugned notice u/s 148 of the Act was issued by the department on 29.07.2022 for the year under consideration as in sub para (3) of the impugned notice it clearly mentioned that the said notice is being issued after obtaining the prior approval of PCIT instead of PCCIT as is required u/s 151 of the Act. In this regard, we placed reliance upon the decision of the Coordinate Bench of ITAT in ITA No. 3551/Mum/2024 (supra), wherein the ‘identical issue’ was decided in favour of assessee and the operative portion of the decision is reproduced herein below: 4. We have heard both the sides and have perused the 4 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai material on record in relation to this issue. We have also taken into consideration the judicial precedents cited during the course of hearing. 5 In the facts and circumstances of the present case the issue that arises for consideration is whether the Principal Commissioner of Income Tax or the Principal Chief Commissioner of Income Tax was the Specified Authority for seeking approval for passing order under Section 148A(d) of the Act and issuance of notice under Section 148 of the Act (new regime) for the Assessment Year 2017-18. 6 In this regard we deem it appropriate to refer to judgment of the Hon’ble Supreme Court in the case Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC)[03/10/2024]. The Hon’ble Supreme Court had, while dealing with the issue of approval from specified authority in terms of Section 151 of the Act, made the following observations: “74. The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief 5 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai Commissioner or Principal Commissioner or Commissioner. 75. After 1 April 2021, the new regime has specified different authorities for granting sanctions under section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 76. 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. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non- compliance by the assessing officer with the strict time limits prescribed under section 6 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai 151 affects their jurisdiction to issue a notice under section 148. 77. Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre-conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will accordingly extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021. 78. For example, the three year time limit for assessment year 2017-2018 falls for completion on 31 March 2021. It falls during the time period of 20 March 2020 and 31 March 2021, contemplated under section 3(1) of TOLA. Resultantly, the authority specified under section 151(i) of the new regime can grant sanction till 30 June 2021. 79. Under Finance Act 2021, the assessing officer was required to obtain prior approval or sanction of the specified authorities at four stages: a. Section 148A(a) - to conduct any enquiry, if 7 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai required, with respect to the information which suggests that the income chargeable to tax has escaped assessment; b. Section 148A(b) - to provide an opportunity of hearing to the assessee by serving upon them a show cause notice as to why a notice under section 148 should not be issued based on the information that suggests that income chargeable to tax has escaped assessment. It must be noted that this requirement has been deleted by the Finance Act 2022; c. Section 148A(d) - to pass an order deciding whether or not it is a fit case for issuing a notice under section 148; and d. Section 148 - to issue a reassessment notice; 80. In Ashish Agarwal (supra), this Court directed that Section 148 notices which were challenged before various High Courts \"shall be deemed to have been issued under section 148-A of the Income- tax Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b).\" Further, this Court dispensed with the requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a). Under Section 148A(b), an assessing officer was required to obtain prior approval from the specified authority before issuing a show cause notice. When this Court deemed the Section 148 notices under the old regime as Section 148A(b) notices under the new regime, it impliedly waived the requirement of obtaining prior approval from the specified authorities under section 151 for Section 148A(b). It is well established that this Court while exercising its jurisdiction under Article 142, is not bound by the procedural requirements of law High Court Bar Association v. State of U P [2024] 160 8 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai taxmann.com 32/299 Taxman 21 (SC)/[2024] 6 SCC 267. 81. This Court in Ashish Agarwal (supra) directed the assessing officers to \"pass orders in terms of Section 148-A(d) in respect of each of the assesses concerned.\" Further, it directed the assessing officers to issue a notice under Section 148 of the new regime \"after following the procedure as required under section 148-A.\" Although this Court waived off the requirement of obtaining prior approval under section 148A(a) and Section 148A(b), it did not waive the requirement for Section 148A(d) and Section 148.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 issuing a notice under section 148. These notices ought to have been issued following the time limits specified under section 151 of the new regime read with TOLA, where applicable.” (Emphasis Supplied) 7 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: (a) Under new regime introduced by the Finance Act, 2021 Assessing Officer was required to obtain prior approval or sanction of the ‘Specified Authority’ at four stages – at first stage under Section 148A(a), at second stage under Section 148A(b), at third stage under Section 148A(d), and 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’ 9 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai according to Section 151 of the new regime before passing an order under Section 148A(d) or issuing a notice under Section 148. (b) Under new regime if income escaping assessment is more than Rupees 50 lakhs a reassessment notice could be issued after expiry of three years from the end of the relevant previous year only after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. (c) The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20th March 2020 and 31st March 2021, then the ‘Specified Authority’ under Section 151(i) has an extended time till 30th June 2021 to grant approval. (d) Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non-compliance by the assessing officer with the strict time limits prescribed under section 151 affects their jurisdiction to issue a notice under section 148 (e) Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under section 148 to issue a 10 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai reassessment notice. 8 In the present case the period of 3 years from the end of the Assessment Year 2017-2018 fell for completion on 31st March 2021. The expiry date fell during the time period of 20th March 2020 and 31st March 2021, contemplated under Section 3(1) of TOLA. Resultantly, 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 30/07/2022, 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. Since the aforesaid order was passed after the expiry of 3 years from the end of the Assessment Year 2017-2018, as per the new regime, the authority specified under Section 151(ii) of the Act (i.e. Principal Chief Commissioner or Chief Commissioner) was required to grant approval. We note that even the notice, dated 30/07/2022, was issued under Section 148 of the Act (new regime) after obtaining the prior approval of the Principal Commissioner of Income Tax. Accordingly, we conclude that in the present case the approval has been obtained by authority specified under Section 151(i) of the new regime instead of the authority specified under Section 151(ii) of the new regime. 9 The non-compliance by the Assessing Officer with the provisions contained in Section 148A(d) read with Section 151(ii) of the new regime affects the jurisdiction of the Assessing Officer to issue a notice under Section 148 of the Act. Accordingly, the order, dated 30/07/2022 passed under Section 148A(d) of the Act, the consequential reassessment proceedings and the order, dated 25/05/2023, passed under Section 147 read with Section 11 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai 144B of the Act are quashed as bad in law being violative of the provisions contained in Section 148A(d), Section 148 and Section 151(ii) of the Act. Thus, Cross-Objection raised by the Assessee is allowed and accordingly, all the grounds raised by the Revenue in the departmental appeal in relation to the relief granted by the CIT(A) on merits are dismissed as having been rendered infructuous. 8. Since the year under consideration is also identical to that of in the case of ACIT Vs. Ramchand Thakurdas Jhamtani (supra), and in the present case also the period of 3 years from the end of the assessment year 2017-18 fell for the completion on 31.03.2021. Since the expiry fell during the time period of 20.03.2020 and 31.03.2021 as contemplated u/s 3(1) of TOLA. Resultantly, the authority specified u/s 151(i) of the new regime could have granted sanction till 30.06.2021. Further on perusal of the order, we find that the same was passed after taking approval from PCIT. Since the aforesaid order was passed after the expiry of 3 years from the end of the A.Y 2017-18. Therefore as per the new regime the authority specified u/s 151(ii) of the Act (i.e PCIT or Chief Commissioner) was required to grant approval. 9. Since in the present case the notice was issued on 29.07.2022 u/s 148 of the Act after obtaining the approval of PCIT, accordingly we conclude that in the present case the approval has been obtained by the authority specified 12 ITA No. 180/Mum/2025 Nickson Morris Rodricks, Mumbai u/s 151(i) of the new regime instead of authority specified u/s 151(ii) of the new regime. Non compliance by the AO with the provisions contained in Sec. 148A(d) r.w.s 151(ii) of the new regime affects jurisdiction of the AO to issue a notice u/s 148 of the Act. Accordingly, we quash the proceedings being in violation of the provisions of the Act. 10. In the result the appeal filed by the assessee stands allowed. Order pronounced in the open court on 26.03.2025. Sd/- Sd/- (RENU JAUHRI) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 26/03/2025 KRK, PS आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u000eथ / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मु\u0003बई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, स\u000eािपत ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai "