[Cites 17, Cited by 0]

Bombay High Court

Global Earthproperties And Developers ... vs Union Of India And 4 Other on 12 January, 2026

Author: B. P. Colabawalla

Bench: B. P. Colabawalla

  2026:BHC-OS:1072-DB


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       Digitally                     IN THE HIGH COURT OF JUDICATURE AT BOMBAY
       signed by
       TRUSHA
TRUSHA TUSHAR
TUSHAR MOHITE                             ORDINARY ORIGINAL CIVIL JURISDICTION
MOHITE Date:
       2026.01.16
       12:46:12
       +0530

                                                  WRIT PETITION NO. 1154 OF 2022


                    Global Earth Properties &
                    Developers Pvt.Ltd.                                                   .. Petitioner

                              Versus

                    Union of India & Ors.                                                 .. Respondents

                         Mr.Madhur Agarwal i/b Ms.Aasavari Kadam and Mr.Punit Shah,
                         Advocate for the Petitioner.

                         Mr.Subir Kumar a/w Ms.Niyanta Trivedi a/w Ms.Diksha Pandey,
                         Advocate for the Respondents.

                                       CORAM:               B. P. COLABAWALLA &
                                                            FIRDOSH P. POONIWALLA, JJ.

                                       DATE:            JANUARY 12, 2026

                    P. C.

1. Rule. Respondents waive service. With the consent of the parties,

Rule made returnable forthwith and the Petition is heard finally.

2. By this Petition, the Petitioner has challenged (i) the notice dated

March 31, 2021 issued under section 148 of the Income-tax Act, 1961 ("the

Act") for Assessment Year 2015-16; (ii) the order dated January 31, 2022

rejecting the objections of the Petitioner to the reopening of the assessment

for the Assessment Year 2015-16; (iii) the final assessment order passed

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under section 147 r.w.s 144 r.w.s 144B of the Act dated March 30, 2022; and

(iv) the Show-Cause Notice issued under section 274 r.w.s. 271(1)(c) of the

Act dated March 30, 2022 during the operation of the ad-interim stay

granted by this Court on March 07, 2022.

3. The facts relevant for the purpose of this petition are that the

Petitioner filed its original return of income for the year under consideration

on September 24, 2015, and subsequently filed a revised return of income on

October 23, 2015, declaring a total income of Rs. 1,49,32,563/-. The

Petitioner had claimed "Loss on derivatives" of Rs. 3,86,36,313/- under the

head "other expenses" in the Statement of Profit & Loss forming part of the

said return of income. The loss on derivatives is also disclosed in "Note 20:

Other Expenses", which provides a breakup of other expenses debited to the

profit and loss account in the books of accounts of the Petitioner.

4. The case of the Petitioner was selected for scrutiny assessment,

and the Assessing Officer called for and scrutinized various details in relation

to the return filed by the Petitioner. The Assessing Officer then passed an

assessment order u/s 143(3) on June 30, 2017 making certain additions to

the returned income of the Petitioner.

5. Subsequently, the impugned notice under section 148 of the Act

dated March 31, 2021 was issued by Respondent No. 3 alleging that he had

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reason to believe that income chargeable to tax for Assessment Year 2015-16

has escaped assessment. The impugned notice mentions that the said notice

is issued after obtaining necessary satisfaction of the Principal Commissioner

of Income-tax, Mumbai - 4, who is Respondent No. 5 in the present Writ

Petition.

6. The Petitioner filed its return of income under protest pursuant

to the said notice, and sought a copy of the reasons recorded prior to the

initiation of the reassessment proceedings. A notice under section 143(2) of

the Act, dated August 12, 2021, was issued to the Petitioner and the annexure

to the said notice is stated to be the reasons recorded by Respondent No. 3

for initiating the reassessment proceedings. The reasons so provided to the

Petitioner read as under:

"In this case, information is received with regard to non-genuine profits/loss on illiquid derivatives on BSE and USE, in which assessee is a beneficiary, the details of which are totaled up as under:

S. Case Packet Packet Source Source Information No Source Description Name Type value Non-Genuine Fictitious Profits/Loss On losses Illiquid Equity/ Pilot Derivatives On Kayan Securities Derivative in 1 Project BSE And USE Pvt Ltd. Trading Rs.3,34,26,750/-

                     Non-Genuine                              Fictitious
                     Profits/Loss On                          losses
                     Illiquid                                 Equity/
       Pilot         Derivatives On        Kayan Securities   Derivative
     2 Project       BSE And USE           Pvt Ltd.           Trading          in Rs.9,98,400/-
                                                              Total            Rs. 3,44,25,100/-

                                        JANUARY 12, 2026
Mohite





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In view of the above facts and after due application of mind after analyzing all the relevant information in the case of the assessee in totality, I have reason to believe that income of Rs3,44,25,100/- has escaped assessment for A.Y.2015-16 and the same is therefore required to be reopened for scrutiny assessment."

7. The Petitioner filed its objections dated August 24, 2021 against the

reassessment proceedings initiated by the impugned notice. The Petitioner

inter alia submitted that the impugned notice is issued beyond a period of

four years from the end of relevant Assessment Year, and therefore, as per

the proviso to section 147 of the Act (as it stood on the date of issuance of

notice being March 31, 2021), no notice can be issued unless there is a failure

on part of an assessee to disclose fully and truly all material facts necessary

for assessment of such Assessment Year. The Petitioner pointed out that

during the year under consideration, the Petitioner had claimed a loss on

derivatives of Rs. 3,86,36,313/- under the head "other expenses" in its profit

and loss account, and the same was also disclosed during the course of the

original assessment proceedings. Therefore, there is no failure on part of

assessee to disclose fully and truly all material facts necessary for assessment

of such Assessment Year.

8. Respondent No. 4 passed an order dated January 31, 2022

disposing of the Petitioner's objections, inter alia, by merely stating that the

reasons recorded do reflect that there was failure on part of the assessee to

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disclose fully and truly all material facts. Respondent No. 4 further stated

that jurisdiction of the competent authority under section 151 of the Act

cannot be challenged. Respondent No.4 opined that the notice is issued

within a period of four years from the end of the relevant Assessment Year,

and therefore, the requirements of the proviso to section 147 of the Act are

not attracted.

9. The Petitioner, thereafter, filed the present petition challenging

the impugned notice dated March 31, 2021 and the impugned order disposing

of the objections dated January 31, 2022. This Court, vide order dated March

07, 2022, granted ad-interim relief to the Petitioner in terms of prayer clause

(d) which read as under:

"that pending the hearing and final disposal of the present petition, this Hon'ble Court may be pleased to stay the operation of the notice dated 31/03/2021 ("Exhibit-O" hereto) issued by Respondent No. 3 and the order dated 31/01/2022 ("Exhibit-T" hereto) passed by Respondent No. 4 and grant an injunction restraining the Respondents, their subordinates, servants, agents, successors-in-office from taking any steps in furtherance or in implementation of the notice dated 31/03/2021 ("Exhibit-O" hereto) issued by Respondent No. 3 and the order dated 31/01/2022 ("Exhibit-T" hereto) passed by Respondent No. 4"

10. However, Respondent No. 4 issued a show cause notice, under

section 144 of the Act, dated March 27, 2022, alleging that the Petitioner did

not prove that the loss from derivatives is not fictitious. The Petitioner filed a

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response to the said notice providing a copy of the order of this Court

granting ad-interim relief to the Petitioner. However, to the surprise of the

Petitioner, Respondent No. 4 proceeded to pass the impugned final

assessment order under section 147 r.w.s 144 of the Act dated March 30,

2022, making an addition of Rs. 3,44,25,100/-, being loss on derivatives,

which was considered as fictitious.

11. Aggrieved, the Petitioner amended the present petition to

challenge the subsequent notices as well as orders passed by Respondent No.

12. In this factual backdrop, Mr. Agarwal, the learned counsel

appearing on behalf of the Petitioner, at the outset, submitted that the

impugned notice has been issued in respect of Assessment Year 2015-16 on

March 31, 2021, and therefore the provisions of section 147 to 151 of the Act,

as they stood prior to amendment with effect from April 01, 2021, are

applicable. He submitted that the period of four years from the end of the

relevant Assessment Year, i.e. Assessment Year 2015-16, would end on March

31, 2020, and since the date of issuance of notice falls within the period of

March 20, 2020 and March 31, 2021, the time limit shall stand extended for

grant of sanction in terms of section 151 of the Act as per the Taxation and

Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020,

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("TOLA") as held in paragraphs 73, 74 and 77 of the judgment of the Hon'ble

Supreme Court in the case of Union of India v. Rajeev Bansal [2024] 469 ITR

46 (SC).

13. He, therefore, submits that, as the reopening is treated to be

within a period of four years from the end of the relevant Assessment Year,

the specified authority as per section 151(2) of the Act is the Joint

Commissioner of Income-tax, which authority ought to have granted sanction

for issuance of the impugned notice under section 148 of the Act. The

impugned notice under section 148 of the Act itself mentions that the said

notice has been issued with the prior approval of the Principal Commissioner

of Income-tax, Mumbai - 4. He submitted that since the authority at whose

satisfaction the notice under section 148 of the Act must be issued, is not the

Principal Commissioner, but the Joint Commissioner, the notice issued

under section 148 of the Act on March 31, 2021 is liable to be quashed and set

aside. Consequently, the final assessment order passed under section 147

dated March 30, 2022 also cannot be sustained and is liable to be quashed

and set aside. In this regard, Mr. Agarwal relied on the decision of the Goa

bench of this Court in case of Prabhakar Nerulkar v. PCIT [2025] 177

taxmann.com 580 (Bombay HC), where on identical facts, considering the

decision of the Supreme Court in the case of Union of India v. Rajeev Bansal

(supra), held that sanction by an authority other than the specified authority

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renders the notice invalid and liable to be quashed and set aside. He also

relied upon the decision of this Court in the case of Ghanshyam K. Khabrani

v. ACIT [2012] 346 ITR 443 (Bombay HC) , where the Court has held that

when the statute mandates the satisfaction of a particular functionary for

exercise of the power, the satisfaction must be of that Authority alone and

cannot even be of a superior authority.

14. This apart, Mr. Agarwal submitted that the reasons for re-

opening the assessment are completely vague, cryptic, and do not record any

basis for formation of belief that income chargeable to tax in the case of the

Petitioner has escaped assessment. The recorded reasons start with the

phrase "information is received with regard to non-genuine profit/loss on

illiquid derivatives on BSE and USE ", and further states that the Petitioner is

allegedly a beneficiary therein. He states that Respondent No. 3 has not even

referred as to what is the information that is received; from which authority

has this information been received; whether it is their case that the Petitioner

has claimed illiquid profit or illiquid loss. Respondent No. 3 does not even

record as to what tangible material has been relied upon by him to have a

reason to believe that income chargeable to tax has escaped assessment. He

submits that the recorded reasons are bald allegations made against the

Petitioner, without any basis to substantiate the same. He further submitted

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that no information has been provided to the Petitioner to justify the

reopening of the assessment.

15. Per contra, Mr. Kumar, the learned counsel appearing on behalf

of the Respondents, submits that section 149(1)(b) of the Act would be

applicable as the impugned notice under section 148 of the Act is dated

March 31, 2021, which is issued beyond a period of four years from the end of

the relevant Assessment Year 2015-16. Therefore, the Principal

Commissioner of Income-tax is the specified authority for granting sanction

under section 151(1) of the Act. He further states that all the conditions of

section 147 of the Act have been satisfied and the Assessing Officer had

reason to believe that income chargeable to tax in the case of the Petitioner

has escaped assessment within the meaning of 147 of the Act. He further

argued that the failure of the Petitioner to disclose fully and truly material

facts is apparent from the reasons as recorded because the Petitioner has

made an incorrect claim in the return of income. He therefore submitted that

the validity of the impugned notice under section 148 of the Act, dated March

31, 2021 as well as the impugned final assessment order dated March 30,

2022, passed under section 147 of the Act, should be upheld. Mr. Kumar

submits that mere absence of the sentence "Failure to disclose" in the reasons

to believe would not make the notice under section 148 of the Act invalid. It is

a matter of record that the petitioner failed to disclose the transactions in

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securities at the time of filing the return and even during the scrutiny

proceedings. At the stage of issuance of notice under section 147, complete

satisfaction under phrase "reasons to believe" is not required. In this regard,

reliance is placed on the judgment of Hon'ble Supreme Court in the case of

Assistant Commissioner of Income Tax v.Rajesh Jhaveri Stock Brokers Pvt

Ltd. [2007] 161 Taxman 316 (SC). He accordingly submitted that the Writ

Petition be dismissed.

16. In rejoinder, Mr. Agarwal, referred to paragraph 7 of the

affidavit-in-reply to the present Petition filed by Respondent No. 3, wherein

Respondent No. 3 has made the following averment:

"Further, the time limit prescribed under section 151(1) of the Act stood extended from 31.03.2020 to 31.03.2021. Therefore, the Petitioner's claim that the notice was issued beyond four years from the end of the relevant assessment year is incorrect."

17. Learned Counsel therefore stated that the learned Counsel

appearing on behalf of the Respondents cannot make an argument contrary

to the Affidavit-in-reply filed by the Assessing Officer. Learned Counsel

further stated that the argument made by the Revenue is contrary to the

stand taken by them in the Apex Court and also contrary to the decision of

the Hon'ble Apex Court in case of Union of India v. Rajeev Bansal (supra) .

Without prejudice to the foregoing arguments, Mr. Agarwal submitted that

even if the argument that the notice is issued beyond four years from the end

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of the relevant Assessment Year was to be accepted, the impugned notice

under section 148 of the Act still suffers from manifest illegality. He submits

that, as per proviso to section 147 of the Act, a notice under section 148 of the

Act can be issued beyond a period of four years from the end of the relevant

Assessment Year only if there has been a failure on the part of Petitioner to

disclose fully and truly all material facts necessary for assessment of such

Assessment Year. The reasons recorded prior to issuance of notice, as

provided to the Petitioner, nowhere even remotely mention that there has

been a failure on part of the Petitioner to disclose fully and truly all material

facts necessary for assessment of such Assessment Year. He submits that the

law on this aspect has been settled by this Court in case of Hindustan Lever

Ltd. v. R.B. Wadkar, ACIT [2004] 268 ITR 332 (Bombay HC) , wherein it is

opined that in the reasons recorded, the Assessing Officer is required to form

his opinion and reach a conclusion that there has been a failure on the part of

an Assessee to disclose fully and truly all material facts necessary for

assessment of such Assessment Year when proceedings under section 147 are

sought to be initiated beyond a period of four years from the end of the

relevant Assessment Year. This view is also supported by a decision of this

Court in case of Stock Holding Corporation of India Ltd. v. ACIT [2025] 178

taxmann.com 191 (Bombay HC), where the Assessing Officer therein did not

even mention in the reasons recorded that there has been a failure on the

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part of the Assessee to disclose fully and truly all material facts necessary for

assessment of such Assessment Year, and followed the decision of the

coordinate bench of this Court in case of Hindustan Lever Ltd. v. R.B.

Wadkar, ACIT (supra). He submitted that the fact that the Petitioner had

losses on derivatives has been mentioned in the return of income as well as in

the books of accounts of the Petitioner.

18. We have heard both parties at length and also perused the

documents, proceedings and affidavits filed by the parties in the present

petition.

19. We are in agreement with the primary contention of the

Petitioner that the impugned notice issued under section 148 of the Act on

March 31, 2021, for Assessment Year 2015-16, falls within the period of

March 20, 2020 and March 31, 2021. Therefore, the relaxation on account of

the provisions of TOLA stand applicable in respect of sanction under section

151 of the Act. Consequently, the impugned notice must be construed to have

been issued within a period of four years from the end of the relevant

Assessment Year 2015-16. In our view, the Apex Court in its decision in the

case of Union of India v. Rajeev Bansal (supra) has settled the issue and held

that TOLA extends the period of limitation with respect to sanction under

section 151 of the Act. The Apex Court has been categoric in expressing its

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views in paragraphs 73, 74 and 77 of the said judgment, where the Court held

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 Sri krishna (P.) Ltd. v. ITO [1996] 87 Taxman 315/221 ITR 538 (SC)/[1996] 9 SCC 534. A table representing the prescription under the old and new regime is set out below:

            Regime                 Time limits                  Specified authority
                                   Before expiry of four
                                   years from the end of
            Section 151(2) of the the relevant assessment
            old regime             year                         Joint Commissioner
                                   After expiry of four         Principal Chief Commissioner
                                   years from the end of        or Chief Commissioner or
            Section 151(1) of the the relevant assessment       Principal Commissioner or
            old regime             year                         Commissioner
                                   Three years or less than
                                   three years from the end     Principal Commissioner or
            Section 151(i) of the of the relevant               Principal Director or
            new regime             assessment year              Commissioner or Director
                                   More than three years        Principal Chief Commissioner
                                   have elapsed from the        or Principal Director General
            Section 151(ii) of the end of the relevant          or Chief Commissioner or
            new regime             assessment year              Director General

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

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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.

......

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"

(emphasis supplied).

20. The coordinate bench of this Court in the case of Prabhakar

Nerulkar v. PCIT (supra) has also followed the decision in Union of India v.

Rajeev Bansal (supra). The facts in Prabhakar Nerulkar (Supra) are almost

identical to the facts of the Petitioner's case. Accordingly, we are unable to

accept the argument of the of the Respondents that the impugned notice

issued under section 148 of the Act falls beyond the period of four years from

the end of the relevant Assessment Year 2015-16. Firstly, such an argument is

contrary to the decision of the Apex Court in case of Union of India v. Rajeev

Bansal (supra). Secondly, the argument of the learned counsel of the

Respondents cannot be accepted because it is contrary to the averment made

by Respondent No. 3 in the affidavit-in-reply to the present Petition, because

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Respondent No. 3 has made a categorical averment that the contention of the

Petitioner that the impugned notice being beyond a period of four years from

end of relevant Assessment Year is incorrect.

21. Hence, the case of the Petitioner is governed by Section 151(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

under section 148 of the Act. However, the notice under section 148 of the Act

has been issued after obtaining the sanction of Respondent No. 5 i.e. the

Principal Commissioner of Income-tax, Mumbai - 4, who is not the

competent Authority to grant sanction under section 151 of the Act to the

impugned notice dated 31st March 2021 issued under section 148 of the Act.

Where the Income-tax Act has conferred the power of sanction to a specified

and distinct Authority, 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 and not of any other authority. This view is also supported by

the decision of the coordinate bench of this Court in case of Ghanshyam K.

Khabrani v. ACIT (supra) . Hence, the Petition is liable to succeed on this

ground alone.

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22. Be that as it may, even assuming that the argument of the

learned counsel of the Respondents is to be considered, namely, that the

impugned notice under section 148 of the Act dated March 31, 2021 was

issued beyond a period of four years, then, in view of the first proviso to

section 147 of the Act, the said notice could have been issued only if there is a

failure on part of the assessee to disclose fully and truly all material facts

necessary for assessment. We say this because in the present case an

assessment order was already passed on June 30, 2017 under section 143(3)

of the Act. In the reasons as recorded for issuing the notice under section 148

of the Act, we see that there is not even an allegation that the income of the

Petitioner has escaped assessment on account of failure on the part of the

Petitioner to disclose fully and truly any material fact in relation to

Assessment Year 2015-16. Further, there is nothing in the reasons which

would even indicate that there is any failure to disclose any material fact

necessary for the assessment. In the reasons recorded, Respondent No. 3

must disclose which fact or material was not disclosed by the assessee fully

and truly necessary for assessment. Further, it is settled law that the reasons

are required to be read as they were recorded by the Assessing Officer and

cannot be allowed to be improved subsequently. The law, in this regard, has

been settled by the decision of the coordinate bench of this Court in the case

of Hindustan Lever Ltd. v. R.B. Wadkar, ACIT (supra) . The same is, in fact,

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followed by decision of this Bench (B. P. Colabawalla and Firdosh P.

Pooniwalla, JJ) in case of Stock Holding Corporation of India Ltd. v. ACIT

(supra).