Approval not obtained from PCIT as required under the new provisions – Reassessment notice declared invalid and assessment stood nullified: Mumbai ITAT
The judgment in the case of ACIT-19(1) v. Manish Financial [ I.T.A. No.5055/Mum/2024; Assessment Years: 2015-16 & 2016-17; Dt. of Judgement: 02.12.2024] [“D” Bench, Mum ITAT] stems from reassessment proceedings involving AYs2015-16 and 2016-17, where the legality of reopening assessments under sec.148 of the Act was contested, especially in light of the limitation periods prescribed under the erstwhile and amended laws.
AY 2015-16:
The assessee filed a return on 19.09.2015, declaring a loss. Assessment was completed on 27.12.2017 under section 143(3). The AO reopened the assessment via notice under section 148 dated 29.06.2021 citing fictitious losses and bogus capital gains. The notice became deemed under section 148A(b) as guided by SC in Union of India v. Ashish Agrawal [2022] 444 ITR 1 (SC).
2.Limitations of law on reassessment: The main contents leading contention was regarding the validity of the notice due to the breach of statutory limitation periods under section 149. The provision states that no notice can be issued if three years have elapsed from the end of the relevant assessment year unless certain conditions are met. Additionally, TOLA does not apply to assessment years prior to 2021 if they exceed the prescribed limits.
3.ITAT ruled that since six years had lapsed by 31.03.2022 notice in question was dated 29.07.2022), the notice was deemed barred by limitation. Emphasized that conditions outlined in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC) precluded issuing such notices after the lapse of limitation periods. Consequently, the assessment was quashed, affirming the CIT(A)’s decision to delete the additions made by the AO.
AY 2016-17:
The assessee returned a loss. The assessment was reopened with a notice under section 148 on 23.04.2021. A subsequent notice was issued on 30.07.2022 after steps under sec. 148A(d) were completed.
Legality of Notice: The assessee raised objections regarding non-compliance with the approval process under section 151 before issuance of 148 notices, asserting the need for consent from the appropriate authority as per the new provisions post-1 April 2021. ITAT noted that the relevant approval was not obtained from PCIT as required under the new provisions, thus rendering the reassessment notice invalid. The notice issued without the required approval was quashed, and assessment stood nullified.
Outcome: The reassessment notices for both AYs were quashed; therefore, reassessment order for AY 2016-17 was also invalidated due to procedural lapses in approval for reopening assessments and the expiration of limitation periods for AY 2015-16. The ruling underscores the stringent adherence required by the Revenue authorities regarding statutory limitations and necessary approvals in reassessment procedures. This judgment reiterates that compliance with both the procedural and substantive provisions of the Income Tax Act and that the courts uphold these rigorously to protect taxpayers’.
The copy of the order is as under:
