Bombay High Court
Prabhakar Nerulkar vs Principal Commissioner Of Income Tax ... on 21 July, 2025
Author: Bharati Dangre
Bench: Bharati Dangre
WP 443 OF 2024.ODT
2025:BHC-GOA:1381-DB
Esha
IN THE HIGH COURT OF BOMBAY AT GOA
WRIT PETITION NO. 443 OF 2024
Prabhakar Nerulkar, aged 49 years,
residing at House No. 208, near
Hanuman Temple, Verem, Bardez, Goa. ... PETITIONER
Versus
1. Principal Commissioner of Income
Tax, Panaji, having office at Aaykar
Bhavan, Plot No. 5, EDC Complex, Patto
Plaza, Panaji, Goa -- 403 001.
2. National Faceless Assessment Centre,
Delhi, having office at 2nd Floor, E-
Ramp, Jawaharlal Nehru Stadium,
Delhi -- 110 003.
3. Income-tax Officer, Ward 2(1),
Panaji, having office at Aaykar Bhavan,
Plot No. 5, EDC Complex, Patto Plaza,
Panaji, Goa -- 403 001.
4. The Union of India, Through the
Secretary, Ministry of Finance,
Government of India, North Block, New
Delhi - 110 001. ... RESPONDENTS
***
Mr. Dhiren Gandhi with Ms. Shweta Parulekar, Advocates for the
Petitioner.
Ms. Susan Linhares, Standing Counsel with Ms. Swati Kamat
Wagh, Advocate for Respondent Nos. 1, 2 and 3.
CORAM: BHARATI DANGRE &
NIVEDITA P. MEHTA, JJ.
RESERVED ON: 25th JUNE 2025
PRONOUNCED ON: 21st JULY 2025
Page 1 of 29
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JUDGMENT:
(per BHARATI DANGRE, J.)
1. The Petitioner, a resident of Goa, assessed under the Income
Tax Act, 1961, is aggrieved by the notice issued under Section 148
of the Income Tax Act by the Income Tax Department on
31.03.2021 for the Assessment Year (AY) 2014-15 and 2016-17. He
is also aggrieved by the order dated 21.03.2022 passed by the
Income Tax Department under Section 147 read with Section 144
and Section 144B of the Income Tax Act and consequential action
taken, including an order passed under Section 264 of the Act on
14.11.2023.
A writ of mandamus is prayed for quashing and setting aside
the aforesaid orders and restraining the Respondents from taking
any steps whatsoever, in implementation of the notice under
Section 148 as well as the assessment order and also the order
passed under Section 264 by the Income Tax Act.
2. We have heard Mr. Dhiren Gandhi for the Petitioner and
Advocate Ms. Susan Linhares for the Revenue.
While issuing notice on 10.06.2024, this Court had directed
that till the next date, no cohesive steps shall be taken against the
Petitioner.
On the pleadings being completed, we deem it appropriate
to issue 'Rule' and have taken up the Petition for final hearing.
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3. The Petitioner, engaged in real estate business and during
the course of his business activity, purchases plot/plots and
develop the same for its sale.
Upto the AY 2010-11, the Petitioner regularly filed his
Income Tax Returns, however, for the subsequent years from AY
2011-12 till 2016-17, the Tax Returns on his behalf were not filed
as the Petition plead that though the Petitioner submitted his
Books of Account to the Tax Consultant, the process of filing the
Returns was not complete and the Petitioner was under the belief
that the Returns on his behalf were regularly filed. The Petitioner,
therefore, engaged a new Tax Consultant in the year 2016 and as
the time limit for filing the Returns for the previous years had
elapsed, the Petitioner availed the opportunity to make disclosures
under the Income Disclosure Scheme (IDS), 2016.
4. The Petitioner offered his income under the IDS, including
his income from the real estate business. Since he was covered
under Section 5A of the Income Tax Act, half of his income was
subjected to tax in the name of his wife, Mrs. Madhuri Prabhakar
Nerulkar and they opted for presumptive taxation scheme under
Section 44AD of the Income Act, which gives an option to an
Assessee to offer his income from the business at the rate of 8% of
the gross receipts or higher sum to tax. Taking advantage of the
said provision, the Petitioner, along with his Wife, offered their
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income from the real estate business to tax under Section 44AD of
the Income Tax Act for the AY 2011-12 to AY 2015-16.
It was accompanied by a declaration that the amount of
undisclosed income offered under the IDS was credited to the
Bank Account, the details of which were also furnished. According
to the Petitioner, he had disclosed the transactions in immovable
properties involving sale and purchase, and this included the
disclosure by his wife.
The Petitioner, therefore, took benefit of the IDS in 2016,
which permitted any person to make a declaration on or after the
commencement of the scheme i.e. 01.06.2016, but before
30.09.2016, to be accompanied with a declaration of undisclosed
income chargeable to tax prior to the Financial Year 2016-17 to be
made to the jurisdictional Principal Commissioner or
Commissioner in such form as prescribed in the Income
Declaration Scheme Rules, 2016.
5. The assessment of the Petitioner for the AY 2011-12, AY
2012-13 and AY 2013-14 was reopened by the Assessing Officer in
relation to his business of real estate involving the purchase and
sale of properties, in which, the Petitioner participated through his
Tax Consultant.
For the AY 2015-16, the Income Tax Officer, Panaji, issued a
notice under Section 148 of the Income Tax Act on 31.03.2021 and
two other notices were issued on 08.10.2021 and 25.11.2021.
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Similarly, notices were also issued for the AY 2014-15 and AY
2016-17. The Petitioner filed his Return of Income under Section
148 on 01.02.2022, which resulted in issuance of notice under
Section 143(2) on 11.02.2022, which disclose that the assessment
was reopened on account of the fact that the Petitioner had
entered into some transactions of purchase and sale of property,
but he had not filed his Return of Income and therefore, his
Returns did not take into consideration his income in the
declaration filed under the IDS.
This was followed by a show cause notice in form of draft
assessment order dated 22.02.2022, alleging that the Petitioner
had failed to comply with the notices and therefore, the Income
Tax Officer proposed to make the best judgment assessment by
adding all the amounts which were the basis of reopening the
assessment and five days time was given to file his Returns, but
the Petitioner failed to respond.
This resulted in passing of the final assessment order by
Respondent No. 2 to the best of his judgment on 21.03.2022, to be
followed by a notice of demand issued by Respondent No. 1 under
Section 156 of the Income Tax Act. A notice was also issued under
Section 274 asking the Petitioner to show cause as to why a
penalty should not be imposed.
6. Being aggrieved, the Petitioner filed an Application under
Section 264 of the Income Tax Act on 21.09.2022, alleging that his
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income declared under the IDS was not taken into consideration.
The Petitioner also made an attempt to explain the source of
the purchase of the property, and also alleged that in respect of
sale transactions, deduction of the cost of acquisition has not been
allowed, apart from the fact that the stamp duty value of the
property, which did not depict the true fair value of the property,
has been accepted as the basis.
Upon a notice of hearing being issued to the Petitioner, by
order dated 14.11.2023, Respondent No. 1, disposed of the
Application, by partially rejecting the Application, by referring to
the income declared by the Assessee and his Spouse under the IDS
for AY 2013-14 and AY 2014-15. However, the objection raised by
the Assessee regarding the sale consideration came to be rejected
by directing the Assessing Officer to pass the consequential order,
which resulted in passing of the order by Respondent No. 1 on
11.03.2024.
7. The learned Counsel for the Petitioner, Mr. Dhiren Gandhi
while raising the challenge to the order dated 31.03.2021, to be
followed by the consequential orders, would submit that the notice
under Section 148 of the Income Tax Act, 1961, suffers from a
gross error as the same is issued after obtaining necessary
satisfaction of the Principal Commissioner of Income Tax (PCIT),
Panaji.
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Inviting our attention to Section 151 of the Income Tax Act
as substituted by the Finance Act, 2015 w.e.f. 01.06.2015, he
would submit that his case is covered by sub-section (2) of Section
151 and according to him, under the said clause, no notice shall be
issued by an Assessing Officer, unless the Joint Commissioner is
satisfied on the reasons recorded by such Assessing Officer that it
is a fit case for issuance of a notice. Submitting that the order
issued under Section 148 on 31.03.2021 for the AY 2015-16, with
the applicability of Taxation and Other Laws (Relaxation and
Amendment of Certain Provisions) Act, 2020 (TOLA, 2020), as
the new regime came into effect from 01.04.2021, he would submit
that the provisions of grant of sanction in operation from the said
date is covered by the decision of the Apex Court in Union of
India Vs. Rajeev Bansal1.
He would also place reliance on the decision of the Bombay
High Court in the case of Ghanshyam K. Khabrani Vs.
Assistant Commissioner of Income Tax Circle-1 2, in
support of his submission that when the Income Tax Act has
conferred the power of sanction by according the satisfaction of
the distinct Authorities, then the mandate of the statute must be
strictly followed and when the statute mandates the satisfaction of
a particular functionary for exercise of the power, the satisfaction
must be of that Authority alone.
1 [2024] 167 taxmann.com 70 (SC)
2 [2012] 20 taxmann.com 716 (Bom)
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Reliance is also placed upon a further decision of the
Bombay High Court in the case of Commissioner of Income
Tax, Central-4 Vs. Aquatic Remedies (P) Ltd.3
8. Contesting the stand of the Petitioner, Ms. Linhares for the
Revenue, has placed before us the approval under Section 151 of
the Income Tax Act with respect to the assessment of the
Petitioner for AY 2015-16 and according to her, from the said
document, it is evident that for the income escaping assessment
computed at Rs.2,05,90,000/- and the date of proposal is
mentioned as 27.03.2021 and the recommendation remarks in
Column No. 3, record as below:-
"The reasons recorded by the A.O. is seen. I am
satisfied that it is a fit case for reopening the
assessment. Accordingly, recommended for approval."
9. The approving Authority in the said approval order is Mr.
Amrapalli Das, PCIT, Panaji, and the approval order record that
information having been received by the DIT (Intelligence &
Criminal Investigation), Bengaluru through system for AY 2015-
16, in respect of immovable properties transaction, cash deposit in
case of Prabhakar Gajanan Nerulkar, who had sold and purchased
various properties.
3 [2018] 96 taxmann.com 609 (Bom)
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The information received was verified by the ITO (I & CI) on
the basis of the sale deeds from various Sub-Registrars, Bank
Statements from the Bank and it was noted that the Assessee had
gone for IDS in the F.Y. 2014-15 and had shown negligible income
and has also admitted that they are not maintaining any Books of
Account and are unable to furnish the sources of purchase and
explain whether income on sales has been accounted or not.
10. In the wake of this, the PCIT, Panaji, recorded thus:-
"(4) In view of the above, I have reason to believe
that Rs.2,05,90,000/- assessable in respect of AY
2015-16 has escaped assessment within the meaning of
Section 147 read with Explanation 2(b) of the Income
Tax Act, 1961, which needs to be brought to tax and
hence, it is a fit case to invoke the provisions of Section
147 of the Income Tax Act, 1961.
(5) In this case more than four years have lapsed
from the end of the assessment year under
consideration. Hence, necessary sanction to issue
notice under Section 148 has been obtained separately
from the Principal Commissioner of Income Tax,
Panaji, as per the provision of Section 151 of the
Income Tax Act, 1961."
11. According to Ms. Linhares, the case of the Petitioner,
including that of his Wife, is governed by the old regime and as per
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clause (1) of Section 151 of the Income Tax Act, and therefore, the
approval is obtained by the PCIT.
By relying upon the affidavit of the Income Tax Officer i.e.
Respondent No. 3, she would submit that the Petitioner is an
individual and governed by Section 5A under the Portuguese Civil
Code and the Petitioner's case for AY 2015-16 was reopened under
Section 148 of the Income Tax Act, 1961, on 31.03.2021, after
obtaining approval from the competent Authority as the Petitioner
had entered into financial transactions of Rs.2,05,90,000/- and
declared a negligible income of Rs.2,65,721/- under the IDS for AY
2015-16. By referring to the financial transactions carried out by
the Petitioner and his Spouse during the FY 2014-15, an income of
Rs.2,05,90,000/- was found to have escaped assessment,
according to her, the assessment under Section 147 read with
Section 144 along with Section 144B of the Income Tax Act for the
AY 2015-16 was completed by the National Faceless Assessment
Centre on 21.03.2022. This was preceded by issuance and service
of notices on the Petitioner and thereafter, in absence of no
response from the Petitioner, by order dated 21.03.2022, the
income was assessed at Rs.20,89,65,850/- after the addition of
Rs.2,05,90,000/- under Section 69A of the Income Tax Act.
12. An exhaustive reply is iled on the merits of the matter, but
since Mr. Gandhi has restricted his case only on the point as to
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whether the case of the Petitioner would be governed by sub-section
(1) or sub-section (2) of Section 151 of the Income Tax Act, an
additional aidavit in reply is iled, wherein it is stated that the
notice was issued on 31.03.2021 for the AY 2015-16, after expiry of
four years from the relevant assessment year and therefore, sanction
was obtained under Section 151(1) of the Income Tax Act before
notice was issued under Section 148, as per the law in force as on
that date. It is categorically stated in the aidavit that for AY 2015-
16, six years limitation expired on 31.03.2022 and therefore, the
provisions of the Relaxation Act are not applicable and the time to
issue notice may have been extended under the TOLA, but it would
not amount to amending the provisions of Section 151 of the Act.
13. Without prejudice to the aforesaid contention, a specific
statement is made on affidavit by stating thus:
6. Without Prejudice to the above, I say that in the
petitioner's case, on 27.03.2021, the reasons recorded
by the A.O were seen by the Range-I, Panaji that is the
Additional Commissioner/Joint Commissioner and
upon satisfaction it was found to be a fit case for re-
opening the assessment. Accordingly, it was
recommended for approval. On 30.03.2021, the PCIT,
Panaji, the approving authority found it to be fit case
for issue of Notice u/sec. 148 of the IT Act.
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In short, the case of the Respondents that notice under
Section 148 is issued after expiry of four years from the end of
relevant assessment year with the satisfaction of the PCIT in
accordance with Section 151 of the Income Tax Act and Section
151(2) is not applicable and therefore, the satisfaction of the Joint
Commissioner was not required.
14. In order to appreciate the counter arguments advanced, it is
necessary to reproduce Section 151 as it stood substituted in the
Income Tax Act, 1961 by the Finance Act, 2015 w.e.f. 01.06.2015.
151. (1) No notice shall be issued under section 148 by an
Assessing Officer, after the expiry of a period of four
years from the end of the relevant assessment year,
unless the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or
Commissioner is satisfied, on the reasons recorded by
the Assessing Officer, that it is a fit case for the issue of
such notice.
(2) In a case other than a case falling under sub-
section (1), no notice shall be issued under section 148 by
an Assessing Officer, who is below the rank of Joint
Commissioner, unless the Joint Commissioner is
satisfied, on the reasons recorded by such Assessing
Officer, that it is a fit case for the issue of such notice.
(3) For the purposes of sub-section (1) and sub-
section (2), the Principal Chief Commissioner or the Chief
Commissioner or the Principal Commissioner or the
Commissioner or the Joint Commissioner, as the case
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may be, being satisfied on the reasons recorded by the
Assessing Officer about fitness of a case for the issue of
notice under section 148, need not issue such notice
himself.]
15. Section 148 is the provision pertaining to issuance of notice
where income has escaped assessment and provision 148, prior to
its amendment by Finance Act, 2024 reads thus:
148. Issue of notice where income has escaped
assessment.--Before making the assessment,
reassessment or recomputation under section 147, and
subject to 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
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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.
Provided also that any return of income, required to be
furnished by an assessee under this section and
furnished beyond the period allowed shall not be
deemed to be a return under section 139.
16. By Finance (No. 2) Act of 2024, amended Section 148 and
Section 148A read thus:
148. Issue of notice where income has escaped
assessment.--(1) Before making the assessment,
reassessment or recomputation under Section 147, the
Assessing Officer shall, subject to the provisions of
Section 148-A, issue a notice to the assessee, along with
a copy of the order passed under sub-section (3) of
Section 148-A, requiring him to furnish, within such
period as may be specified in the notice, not exceeding
three months from the end of the month in which such
notice is issued, a return of his income or income of any
other person in respect of whom he is assessable under
this Act during the previous year corresponding to the
relevant assessment year:
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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:
Provided further that where the Assessing Officer has
received information under the scheme notified under
Section 135-A, no notice under this section shall be
issued without prior approval of the specified
authority.
(2) The return of income required under sub-section
(1) shall be furnished in such form and verified in such
manner and setting forth such other particulars, as
may be prescribed, and the provisions of this Act shall,
apply accordingly as if such return were a return
required to be furnished under Section 139:
Provided that any return of income required under
sub-section (1), furnished after the expiry of the period
specified in the notice under the said sub-section, shall
not be deemed to be a return under Section 139.
(3) For the purposes of this section and Section 148-
A, the information with the Assessing Officer which
suggests that the income chargeable to tax has escaped
assessment means,--
(i) any information in the case of the assessee for the
relevant assessment year in accordance with the risk
management strategy formulated by the Board from
time to time; or
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(ii) any audit objection to the effect that the
assessment in the case of the assessee for the relevant
assessment year has not been made in accordance with
the provisions of this Act; or
(iii) any information received under an agreement
referred to in Section 90 or Section 90-A of the Act; or
(iv) any information made available to the Assessing
Officer under the scheme notified under Section 135-A;
or
(v) any information which requires action in
consequence of the order of a Tribunal or a Court; or
(vi) any information in the case of the assessee
emanating from survey conducted under Section 133-
A, other than under sub-section (2-A) of the said
section, on or after the 1st day of September, 2024.
148-A. Procedure before issuance of notice under
Section 148.--(1) Where the Assessing Officer has
information which suggests that income chargeable to
tax has escaped assessment in the case of an assessee
for the relevant assessment year, he shall, before
issuing any notice under Section 148 provide an
opportunity of being heard to such assessee by serving
upon him a notice to show cause as to why a notice
under Section 148 should not be issued in his case and
such notice to show cause shall be accompanied by the
information which suggests that income chargeable to
tax has escaped assessment in his case for the relevant
assessment year.
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(2) On receipt of the notice under sub-section (1), the
assessee may furnish his reply within such period, as
may be specified in the notice.
(3) The Assessing Officer shall, on the basis of
material available on record and taking into account
the reply of the assessee furnished under sub-section
(2), if any, pass an order with the prior approval of the
specified authority determining whether or not it is a
fit case to issue notice under Section 148.
(4) The provisions of this section shall not apply to
income chargeable to tax escaping assessment for any
assessment year in the case of an assessee where the
Assessing Officer has received information under the
scheme notified under Section 135-A.
17. Section 148A prescribe the procedure to be followed before
issuance of notice under Section 148 and contemplate the
information received by the Assessing Officer, suggesting that the
income chargeable to tax has escaped assessment for the relevant
Assessment Year and in such a case, he shall, before issuing any
notice, provide opportunity of hearing to such Assessee by serving
upon him a notice to show cause as to why a notice under Section
148 should not be issued and this shall be accompanied with the
information, suggesting which income chargeable to tax had
escaped assessment in his case for the relevant years. Upon receipt
of the reply from the Assessee and on the basis of the material
available, it is open for the Assessing Officer to pass an order with
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the prior approval of the specified Authority, determining whether
or not it is a fit case to issue notice under Section 148.
18. Another provision which was amended is Section 149,
setting out the time limit for the notices under Sections 148 and
148A, which reads thus:
149. Time limit for notices under Sections 148 and 148-
A.--(1) No notice under Section 148 shall be issued for
the relevant assessment year,--
(a) if three years and three months have elapsed
from the end of the relevant assessment year, unless
the case falls under clause (b);
(b) if three years and three months, but not more
than five years and three months, 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 related to any asset or
expenditure or transaction or entries which show that
the income chargeable to tax, which has escaped
assessment, amounts to or is likely to amount to fifty
lakh rupees or more.
(2) No notice to show cause under Section 148-A
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);
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(b) if three years, but not more than five years, have
elapsed from the end of the relevant assessment year
unless the income chargeable to tax which has escaped
assessment, as per the information with the Assessing
Officer, amounts to or is likely to amount to fifty lakh
rupees or more.
19. Section 151, which is substituted w.e.f. 01.09.2024 now
reads thus:
151. Sanction for issue of notice.--Specified authority
for the purposes of Sections 148 and 148-A shall be the
Additional Commissioner or the Additional Director or
the Joint Commissioner or the Joint Director, as the
case may be.
20. It is necessary to take into account the regime, which was
enforced by introducing a statute to provide for amendments and
relaxations of certain Acts and matters connected therewith in
form of the Taxation and Other Laws (Relaxation and Amendment
of Certain Provisions) Act, 2020 which came into force on
31.03.2020 and granted relaxation, where any time limit had been
specified, prescribed or notified under specified Act, which
included the Income Tax Act, 1961, which fall during the period
between 20.03.2020 till 31.12.2020, or such other date after
31.12.2020, which the Central Government may by Notification
may specify for completion or compliance of the contemplated
action.
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21. Chapter III of the said Act incorporated the amendments to
the Income Tax Act, 1961, and it has enumerated various
provisions of the Income Tax Act, which were substituted in the
wake of the enactment of the Act of 2020 in view of the COVID
pandemic. It also introduced a provision for faceless jurisdiction of
Income Tax Authorities w.e.f. 01.11.2020 and also introduced a
provision of faceless inquiry or valuation in the form of Section
142B w.e.f. 01.11.2020.
The Hon'ble Apex Court in the case of Rajeev Bansal
(supra) had an occasion to deal with the provisions of the Income
Tax Act including Section 148 and Section 148A, Section 149,
Section 151 being juxtaposed against Section 3 of TOLA Act, 2020
and in the background of the Finance Act, 2021, which amended
the provisions dealing with reassessment procedure w.e.f.
01.04.2021.
The background facts disclose that the Notifications dated
23.01.2021 and 27.04.2021, issued by the Central Government
under Section 3(1) of TOLA contain an explanation declaring that
the provisions under the old regime shall apply to the
reassessment proceedings initiated under them and directed the
Assessing Officers to apply the provisions of the old regime for
reassessment notices issued after on 01.04.2021 and accordingly,
the Assessing Officer issued reassessment proceedings between
01.04.2021 to 30.06.2021 by relying upon the provisions under
Section 148 under the old regime.
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When these reassessment notices were challenged by the
Assessee before the various High Courts, the High Court allowed
the Writ Petitions and quashed the reassessment notices, issued
between 01.04.2021 and 30.06.2021 under the old regime on the
ground that Sections 147 to 151 were substituted by the Finance
Act, 2021 w.e.f. 01.04.2021 and in the absence of any saving
clause, the Revenue could initiate proceedings after 01.04.2021
only in accordance with the provisions of the new regime since
they were more beneficial to the Assessee.
22. In Union of India Vs. Ashish Agarwal4, the Apex Court
held that it was in agreement with the view taken by various High
Courts in holding that the benefit of the new provisions shall be
made available even in respect of the proceedings relating to past
assessment years, provided Section 148 notice has been issued on
or after 01.04.2021. However, it was held that the Revenue issued
the reassessment notices, under a bonafide belief that the
amendments may not have been enforced and therefore, by
exercising jurisdiction under Article 142 in order to balance the
interest of the Revenue and the Assessee, it was directed that the
reassessment notices issued under the old regime shall be deemed
to have been issued under Section 148A(b) of the new regime.
4 [2022] 138 taxmann.com 64/286
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23. However, on 11.05.2022, the Central Board of Direct Taxes
issued instructions for the implementation of the decision in
Ashish Agarwal (supra) and clarified that the decision will apply
to all cases where extended reassessment notices have been
issued, irrespective of the fact whether notices have been
challenged or not. The instructions issued were based on the
presumption that notices issued under Section 148 of the new
regime, travel back in time with their original date i.e. the actual
date on which the Section 148 notice under the old regime was
issued. Based on this, the Assessing Officers considered the replies
furnished by the Assessee and passed orders under Section
148A(d). The notices were thereafter issued under Section 148 of
the new regime between July and September 2022 for the AY
2013-14, 2014-15, 2015-16, 2016-17 and 2017-18. These notices
came to be challenged before several High Courts, which declared
the notices to be invalid on the ground that they were time-barred
and issued without the appropriate sanction of the specified
authority.
24. The aforesaid decisions included the decision of the Bombay
High Court in J.M. Financial and Investment Consultancy
Services Private Limited Vs. Assistant CIT, Circle 3(2)(1)
& Others5 (Writ Petition No. 1050 of 2022). The Petition came to
be allowed by setting aside the notice dated 31.03.2021 issued
5 [2023] 451 ITR 205 (Bom)
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under Section 148 for the AY 2015-16, by expressing that since
four years have expired from the end of the relevant assessment
year as provided under Section 151(1), it is only the Principal Chief
Commissioner or the Chief Commissioner or the Principal
Commissioner or the Commissioner, who could have accorded the
approval and not the Additional Commissioner of Income Tax.
25. The Three-Judges Bench of the Apex Court in Rajeev
Bansal (supra) considered the provisions of TOLA as introduced
in the Income Tax Act and clarified that a notice could be issued
under Section 148 of the new regime for the AY 2021-22 and
before, only if the time limit for issuance of such notice continued
to exist under Section 149(1)(b) of the old regime. It was clarified
that the notices have to be judged according to the law, existing on
the date the notice is issued and Section 149 of the old regime
provided two time limits; (i) four years for all situations and (ii)
beyond four years and within six years, if the income that escaped
assessment amounted to Rupees One Lakh or more.
After 01.04.2021, the time limit prescribed under the new
regime came into force, when the ordinary time limit of four years
was reduced to three years and 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.
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26. Specifying that the first proviso 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 2021-22 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 which ensured that the new time limit of ten years
prescribed under Section 149(1)(b) of the new regime applies
prospectively. In absence of the proviso to Section 149(1)(b) of the
new regime, the Revenue could have had the power to reopen
assessment for the year 2012-13, if it had escaped assessment
amounting to Rupees Fifty Lakhs or more, but the proviso had
limited the retrospective operation of Section 149(1)(d) to protect
the interests of the Assessee. As such by a conjoint reading of the
proviso along with Section 149(1)(b), reassessment notices could
be issued after three years only if the income charged is more than
Rupees Fifty Lakhs and the proviso to Section 149(1)(b) limits the
retrospectivity of that provision with respect to the time limits
specified in Section 149(1)(b) of the old regime.
27. In paragraph 73 of the decision, with reference to Section
151, as regards obtaining the sanction of the specified Authority so
as to save the Assessee from harassment, resulting from the
mechanical reopening of assessment, by representing the
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prescription under the old regime and the new regime, has
categorically set out as under:
73. Section 151 imposes a check upon the power of
the Revenue to reopen assessments. The provision
imposes a responsibility on the Revenue to ensure that
it obtains the sanction of the specified authority before
issuing a notice under Section 148. The purpose behind
this procedural check is to save the assesses from
harassment resulting from the mechanical reopening
of assessments (Srikrishna Private Ltd v. ITO), (1996) 9
SCC 534 [4]. A table representing the prescription
under the old and new regime is set out below:
Regime Time limits Specified authority
Section 151(2) Before expiry of four years Joint Commissioner
of the old from the end of the relevant
regime assessment year
Section 151(1) After expiry of four years Principal Chief Commissioner
of the old from the end of the relevant or Chief Commissioner or
regime assessment year Principal Commissioner or
Commissioner
Section 151(i) Three years or less than Principal Commissioner or
of the new three years from the end of Principal Director or
regime the relevant assessment Commissioner or Director
year
Section 151(ii) More than three years have Principal Chief Commissioner
of the new elapsed from the end of the or Principal Director General
regime relevant assessment year or Chief Commissioner or
Director General
28. In paragraph 74, the correlation of the Authority with the
time when the notice is issued is clearly set out as below:
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:
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(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 Commissioner or
Principal Commissioner or Commissioner.
29. The test to determine whether the provisions of TOLA apply
to Section 151 of the new regime was set out by stating as below:
"If the time limit of four years from the end of an
assessment year falls between 20.03.2020 and
31.03.2021, then the specified Authority under Section
151(i) has an extended time till 30.06.2021 to grant
approval. In case of Section 151 of the old regime, the
test is, "if the time limit of four years from the end of
the assessment year falls between 20.03.2020 and
31.03.2021, then the specified Authority under Section
151(2) has the time till 31.03.2021 to grant approval.
The time limit for Section 151 of the old regime expires
on 31.03.2021 because the new regime comes into effect
on 01.04.2021."
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30. The case before us clearly falls within the aforesaid time line
as the AY 2015-16 and the period of four years from the end of the
assessment year clearly fell between 20.03.2020 and 31.03.2021
and therefore, the case is governed by the old regime as the new
regime came into effect from 01.04.2021.
Hence, the case of the Petitioner is governed by clause (2),
where it is the Joint Commissioner, who should be satisfied with
the reasons recorded by the Assessing Officer that it is a fit case for
issuance of notice, and it is not a case governed by clause (1) of
Section 151. However, the notice under Section 148 records that it
is being issued after obtaining the satisfaction of the PCIT, Panaji,
who is not the competent Authority.
31. The observations in the case of Ghanshyam K. Khabrani
(supra) clearly come into play where it was observed thus:
"There is merit in the contention raised on behalf of the
assessee that the requirement of section 151(2) could
have only been fulfilled by the satisfaction of the Joint
Commissioner that this is a fit case for the issuance of a
notice under section 148. Section 151(2) mandates that
the satisfaction has to be of the Joint Commissioner.
That expression has a distinct meaning by virtue of the
definition in section 2(28C). The Commissioner of
Income-tax is not a Joint Commissioner within the
meaning of section 2(28C). In the present case, the
Additional Commissioner of Income-tax forwarded the
proposal submitted by the Assessing Officer to the
Commissioner of Income-tax. The approval which has
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been granted is not by the Additional Commissioner of
Income-tax but by the Commissioner of Income-tax.
There is no statutory provision here under which a
power to be exercised by an officer can be exercised by
a superior officer. When the statute mandates the
satisfaction of a particular functionary for the exercise
of a power, the satisfaction must be of that authority.
Where a statute requires something to be done in a
particular manner, it has to be done in that manner. In
a similar situation the Delhi High Court in CIT v. SPL's
Siddhartha Ltd. (ITA No. 836 of 2011 decided on
September 14, 2011)--since reported in (2012) 345 ITR
223 (Delhi) held that powers which are conferred upon
a particular authority have to be exercised by that
authority and the satisfaction which the statute
mandates of a distinct authority cannot be substituted
by the satisfaction of another. We are in respectful
agreement with the judgment of the Delhi High Court."
32. In the wake of the above, since we are of the view that the
Authority at whose satisfaction must have issued the notice under
Section 148 was not the PCIT, Panaji, but the Joint Commissioner
as contemplated under sub-section (2) of Section 151, the notice
issued under Section 148 on 31.03.2021 at Annexure D-1, is liable
to be quashed and set aside as a consequence, the assessment
order passed under Section 147 dated 21.03.2022 as well as the
order dated 14.11.2023 under Section 264 of the Income Tax also
cannot be sustained and are liable to be quashed and set aside.
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33. The Petition is made absolute in terms of prayer clause (a).
No order as to costs.
NIVEDITA P. MEHTA, J. BHARATI DANGRE, J.
Signed by: ESHA SAINATH
Designation: Personal Assistant 21st July 2025
Date: 31/07/2025 14:44:46
