CONTENTS
Tribute to Hon’ble Justice Late Dr. B. P. Saraf Former Chief Justice, Jammu and Kashmir High Court 23rd August, 1939 - 15th May, 2012 I-4
A Tribute ... I-8
Message from Hon’ble Justice Rajesh Bindal, Judge, Supreme Court of India I-13
Message from Hon’ble Justice Ujjal Bhuyan, Judge, Supreme Court of India I-14
Message from Hon’ble Justice K. R. Shriram, Chief Justice, High Court of Madras I-15
Message from Hon’ble Justice Abhay Ahuja, Judge, High Court of Bombay I-19
Message from Hon’ble Justice Dr. Neela Gokhale, Judge, High Court of Bombay I-20
Message from Justice Somasekhar Sundaresan, Judge, High Court of Bombay I-21
Message by Justice C. V. Bhadang (Former Judge, Bombay High Court), President Income Tax Appellate Tribunal I-24
From the desk of the Editor I-25
From the desk of the Co-Editor I-29
Message from the National President I-34
From the desk of the Chairperson of the Publication Committee I-35
About the All India Federation of Tax Practitioners (AIFTP) I-37
About the Author I-40
Chapter-Heads I-41
1. Introduction to reassessment 1
- Reassessment regime before April 1, 2021 3
- Reassessment Notice issued between April 1, 2021 to June 30, 2021 4
- First round of litigation and decisions of various High Courts 5
- Ashish Agarwal [2022] 444 ITR 1 (SC) and CBDT Instruction No. 1 of 2022 dated May 11, 2022 [2022] 444 ITR 0084(St) 7
- Second round of litigation and decisions of various High Courts 8
- The decision of the Supreme Court in the second round of litigation i.e. UOI v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC) 11
- Reassessment regime between April 1, 2021 to August 31, 2024 13
2. Income escaping assessment [Section 147 of the Act] 14
- Income escaping assessment 14
- Where information does not suggest income has escaped assessment 14
- Change of opinion 16
- Borrowing the concept of “true and full disclosure” beyond four assessment years 16
- Minimum Alternate Tax and Reassessment 17
- Addition on other information found during the course of reassessment while dropping addition on primary information on the basis of which the reassessment Notice is issued 18
- Does a change in the rate of tax amount to information? 21
- Principles of Merger 21
3. Procedure before issuance of notice under section 148 of the Act [Section 148A of the Act] 22
- Conducting inquiry, providing opportunity before issue of notice under section 148 22
- Procedure before issuance of notice under section 148 24
- Non-issuance of show cause notice under section 148A of the Act 26
- Undelivered or refused to accept Notice 27
- Notice under section 148A of the Act is unsigned 27
- Reassessment Notice issued on a deceased person/non-existing entity and whether the existence of PAN amounts to the existence of the entity 28
- Reassessment Notice issued on a deceased person where the Assessee expired amidst proceedings under section 148A of the Act 30
- Jurisdiction has to be seen at the time of issuance of the Notice 30
- Insolvency proceedings 34
- Post Liquidation/Dissolution/Partition proceedings 36
- Law has to be seen at the time of issuance of Notice 38
- Income-tax Officer & Assistant Commissioner/ Deputy Commissioner of Income-tax: Pecuniary Jurisdiction 38
- Enquiry made in Notice issued under section 148A(b) of the Act 39
- Whether the enquiry under section 148A(a) of the Act is mandatory or discretionary 40
- Less than the prescribed time given to respond to Notice 41
- Service of notice through e-mail 42
- Non-issuance of real-time alert to check the portal 43
- Non-consideration of reply of the assessee 44
- Mechanically considering the reply of the assessee 45 - Ex parte Order is not permissible 48 - Factually incorrect information and the duty of available on the portal 48
all information 51of the statement and an opportunity for crossexamination 52
- Can the Assessee be asked to prove a negative fact? 53
- Can a Notice under section 148A of the Act be issued for search and search-related cases? 53
- Mobile chats and other digital evidence as information 54 - Whether the Notice under section 148A of the Act is only to check the existence of the ‘information’ 56a personal hearing 57 -tion in the Order passed under section 148A of the Act? 57
well-settled case laws while passing an Order under section 148A of the Act? 59
- Can the Order passed under section 148A of the 60
- Can the Order passed under section 148A of the Act be revised? 60under section 148A of the Act? 60in passing the Order under section 148A of the Act 61 - Physical response submitted by an Assessee in response to a show cause Notice under section 148A of the Act 61 - An instance where in the case of identical show cause notices, one is dropped and the other is 62
- Can an identical notice be reissued after dropping 62 - Section 148A(4) [Proviso (d) to section 148A in cases] 63 - Faceless collection of information 63 - Direct Notice under section 148 of the Act issued 69
70 4. Issue of notice where income has escaped assessment [Section 148 of the Act] 71 - Issue of notice where income has escaped assessment 71 - Mandatory to issue a Notice 76
77 - Document Identification Number (DIN) 77
& Prosecution 79 - Consequences of disclosing higher income in the return 79 - Risk management strategy 80
- Audit objection 81
- Audit Objection v. Comptroller and Audit General of India 83
- Any information received under an agreement referred to in section 90 or section 90A of the Act 84
- Information under section 135A of the Act 85
- Consequence of order of Tribunal or Court 85
- Survey under section 133A of the Act 85
5. Time limit for notice [Section 149 of the Act] 87
- Time limit for notice 87
- Time limit for notices under sections 148 and 148A 90
- Up to three years from the end of the relevant Assessment year 93
- Beyond three Assessment years from the end of the relevant assessment year and conditions 93
- Understanding First Proviso to section 149 of the Act 95
- 96 - Income has to be seen and not the value of the transaction 98
- Removal of aggregation of escaped income 98
- Explanation of asset 99
6. Sanction for issue of notice [Section 151 of the Act] 101
- Reassessment non est in the absence of sanction 102 - Power of sanction 103
- Unsigned sanction 104
- Sanction by the wrong authority 105
- Sanction by superior instead of lower authority 106
7. Faceless assessment of income escaping assessment [Section 151A of the Act] 107
- Faceless assessment of income escaping assessment 107
(2022) 442 ITR 198 (St) 108 - v. Faceless 108
- Notice and Order under section 148A of the Act 110
- Central and International Charge 111
8. Miscellaneous provisions relating to reassessment [Sections 148B, 150 and 152 of the Act] 112
- Prior approval for assessment, reassessment or recomputation in certain cases 112
- Prior approval necessary for assessment in cases of search or requisition 113
- The provisions are also applicable to cases covered under section 153C of the Act 113
- Recording of satisfaction without application of mind 113
- Without recording satisfaction in the assessment Order 114
- Revision of such Orders 114
- No requirement for an opportunity to be heard 114
- Section 153D of the Act is not required to be complied with in remand proceedings 115
- Provision for cases where assessment is in pursuance of an order on appeal, etc. 115
- Sanction under section 151 of the Act 116
- Scope of the provision 116 - 118 - Extended limitation not to apply in certain cases 118
- Other provisions 119
- Minimum Alternate Tax 120
- Protection of cases from getting time-barred (Savings clause) 121
9. Filing the return and participating in reassessment proceedings [Sections 139, 142(1), 143(2), 143(3), 144, 144B, 147, 148 and 153 of the Act] 123
- Mandatory issuance of Notice under section 143(2) of the Act 123
compliance 124
- Time to be given for responding to a Notice issued under section 142(1) of the Act 125
- Time to be given for responding to a Show Cause Notice 125
- Cross-examination 126
- Personal hearing 128
- Adhering to the Standard Operating Procedure 128
- Re-assessment Order against adjournment letter 128
- Where a Best Judgment Assessment is not permissible 129
- Remand of Best Judgment Assessment 129
- The time limit for competition of reassessment 130
10. Appeal & Revision vis-à-vis Reassessment 131
- Before the First Appellate Authority 131
- Before the Income-tax Appellate Tribunal in Assessee’s Appeal 131
- Before the Income-tax Appellate Tribunal in the Department’s Appeal 133
- Revision proceedings under section 263 of the Act 134
11. Penalties 137
- Mens rea 137
- Under-reporting of income 139
- Misreporting of income 140
- Penalty levied not as per show cause notice 141
- Not specifying the limb of misreporting 142
- A challenge to quantum in penalty proceedings 142
- Immunity from Penalty 143
- Penalty under section 271AAC of the Act where the addition under sections 68, 69, 69A, 69B, 69C and 69D of the Act 143
- Penalty for false entry in books of account 144
- Penalty for cash transactions or for repayment 144
- Reply to Penalty Notice 145
12. Offences and prosecutions 148
- Terminologies 153
- Wilful 153
- Mala fide 153
- Reasons beyond control 153
- Reasonable cause 154
- The benefit of the doubt 154
- Presumption as to culpable mental state 154
- Requirement of sanction before launching prosecution 157
- Age limit for launching prosecution 158
- Prosecution in cases of juridical persons 159
- Prosecution launched before confirmation of penalty 159
- Non-filing of return of income 160
- Compounding of Offences 160
- Procedure for Compounding 161
- Liability of a Chartered Accountant or Lawyer 161
- Limitation for initiation of prosecution proceedings 163
13. Writ remedies (constitutional remedies) in reassessment proceedings 165
- What is Writ Jurisdiction? 165
- Maintainability of Writ Petitions in Taxing Statutes 166
- 171 - Maintainability v. Entertainability of a writ petition 171
- Types of Writs 172
- Habeas Corpus 172
- Mandamus 174 - Prohibition 176
- Certiorari 176
- Quo-Warranto 177
- Supervisory jurisdiction of High Courts under Article 227 of the Constitution of India 178
- The binding nature of decisions of a High Court 180
- Locus standi 182
- Territorial Jurisdiction 183
- Territorial Jurisdiction of the Supreme Court 183
- Territorial Jurisdiction of High Courts 183
- Power of High Courts to issue certain writs 184
- Period of Limitation for Filing Writ Petition 184
- The doctrine of clean hands 185
- Conclusion 186
14. A practical guide and checklist on preparing a response to a notice issued under section 148A of the Act 187
ANNEXURES
Annexure 1: CBDT Instruction No. 5051 of 1991, dated February 7, 1991 193
Annexure 2: CBDT vide Instruction No. 1 of 2011, dated January 31, 2011 197
Annexure 3: CBDT Circular No. 19 of 2019, dated August 14, 2019 198
Annexure 4: CBDT Instruction F. No. 225/135 of 2021, dated December 10, 2021 201
Annexure 5: CBDT Notification No. 137 of 2021, dated December 13, 2021 204
Annexure 6: CBDT Instruction No. 1 of 2022, dated May 11, 2022 213
Annexure 7: CBDT guidelines for issuance of Notice under section 148 of the Act, dated August 1, 2022 218
Annexure 8: CBDT guidelines, dated August 22, 2022 235
Annexure 9: Standard Operating Procedure (SOP) for the Assessment Unit (AU), Verification Unit (VU), Technical Unit (TU) and Review Unit (RU) under the Faceless Assessment provisions of section 144B of the Act, dated August 3, 2022 238
Annexure 10: CBDT guidelines for issuance of Notice under section 148 of the Act, dated June 28, 2024 293
PROCEDURE BEFORE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT [SECTION 148A OF THE ACT]
Section 148A of the Act as it stood before September 1, 2024, is reproduced as under:
Conducting inquiry, providing opportunity before issue of notice under section 148.
“148A. The Assessing Officer shall, before issuing any notice under section 148,—
(a) conduct any enquiry, if required, with the prior information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, 1, by serving upon him a notice to show cause within such less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it
1. Omitted vide Finance Act, 2022.
Procedure before Issuance of Notice
by passing an order, with the prior approval of
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:
Provided that the provisions of this section shall not apply in a case where,—
(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or
approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee; or
pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.
Explanation.—For the purposes of this section, specified authority means the specified authority referred to in ”
Procedure before Issuance of Notice
Section 148A of the Act as of September 01, 2024, is reproduced as under:
Procedure before issuance of notice under section 148.
“148A. (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.
(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
Explanation.—For the purposes of this section and section 148, “specified authority” means the specified authority ”
A comparative chart between the provisions as they stood immediately before Finance (No. 2) Act, 2024 [2024] 467 ITR 1 (St) and after is as under:
Sr. No. Prior to Finance (No. 2) Act, 2024
Procedure before Issuance of Notice
Amended provisions vide Finance (No. 2) Act, 2024
1. Section 148A(a) There is no corresponding provision.
Comments
The erstwhile provision allowed an inquiry to form a basis if a show cause notice is required or not. This kept a check on roving requirement of sanction under section 151 of the Act. The omission of this section was not necessary.
2. Section 148A(b) Section 148(1) 1. The time prescribed to responding to the Notice is removed.
2. Requirement for furnishing the information to the Assessee has received statutory backing. The amendment of this section is welcomed.
3. 148A(c) 148A(2) The section is more or less the same.
4. 148A(d) 148A(3) The section is more or less the same. The period of limitation to pass an order is removed. Now the Assessee’s won’t know if their proceedings are dropped or not.
5. Proviso (a), (b) and (c) to section 148A
There is no corresponding provision.
As search and search related cases are removed from the ambit of reassessment, they will now form part of proceedings under section 158BC and 158BD of the Act.
6. Proviso (d) to section 148A 148A(4) There is no change in the provision.
Procedure before Issuance of Notice
The Union Finance Minister pursuing the agenda of simplifying taxation during the presentation of the Finance (No. 2) Bill, 2024 [2024] 465 ITR 30 (St), (paras 137 and 140), announced the introduction of a comprehensive review of the Income-tax Act, 1961 and simplification of reassessment. It can be seen from the amended section 148A of the Act that provisos are removed and made simpler to understand.
It can be observed that the statute in procedure in principle is quite similar to the law introduced vide Finance Act, 2021. Therefore, some of the jurisprudence developed over the last couple of years will be helpful in interpreting and understanding the amended provisions.
- Non-issuance of show cause notice under section 148A of the Act.
Unless the case of Assessee falls within section 148A(4) [Proviso to section 148A in cases prior to September 1, 2024], the issuance of a show cause notice is mandatory.
The Hon’ble Kerala High Court in the case of Nambiar Balakrishnan Narendran v. ITO WP(C) 18182 of 2022 dated November 25, 2022 (Ker) (HC) wherein it was held that where Notice under section 148A was not issued to the Assessee the Notice under section 148 of the Act was quashed.
A similar view has been taken by the Hon’ble Karnataka High Court in the case of Vasanthi Ramdas Pai v. ITO [2024] 159 taxmann.com 392/267 ITR 150 (Karn) (HC), where it was observed that Section 148A of the Act, which assumes pivotal relevance in the matter has a heading which runs “Conducting inquiry and providing opportunity before issue of notice under section 148.” This provision apparently employs the word ‘shall’, and in its text, nothing being repugnant, one can safely assume it to be mandatory. Thus, the issuance of notice to the Assessee as to why a notice under section 148 of the Act should not be issued to assess his ‘escaped income’ is a sine qua non.
Procedure before Issuance of Notice
- Undelivered or refused to accept Notice
A Notice that is undelivered is held to be a valid Notice. The Hon’ble Allahabad High Court in the case of Dr. Sheo Murti Singh v. CIT [2015] 64 taxmann.com 276/383 ITR 174 (All)(HC) held that as per Order V Rule 17 of Civil Procedure Code clearly indicates that when the notice cannot be served, the serving officer shall affix the copy of the summons on the outer door or at some other conspicuous part of the house in which the petitioner ordinarily resides or carries on business.
Even refusal to accept a Notice issued under section 148 of the Act is a valid service.
- Notice under section 148A of the Act is unsigned.
Signing of a Notice, whether manually or through digital signature is a ministerial act and should be considered mandatory.
The Hon’ble High Court of Calcutta in the case of CIT v. Aparna Agency (P.) Ltd. [2004] 139 Taxman 132/267 ITR 150 (Cal)(HC) held that the provisions of section 292(B) of the Act do not provide for a cure when the notice under the Act is invalid by virtue of it not having a signature affixed as is required under the relevant provisions. Further, another judgment of the High Court of Calcutta in the case of B.K Gooyee v. CIT [1966] 62 ITR 109 (Cal) (HC) and a judgment of a Division Bench of the Madhya Pradesh High Court in Umashankar Mishra v. CIT [1982] 136 ITR 330/11 Taxman 75 (MP) (HC) held that that absence of a signature on notice is an invalid notice in the eyes of law and such an infirmity amounts to no notice at all.
The Hon’ble Bombay High Court in the case of Prakash Krishnavtar Bharadwaj v. ITO [2023] 451 ITR 27/150 taxmann.com 60 (Bom) (HC) considering the above decisions, held that where a reopening notice under section 148 of the Act was issued upon assessee without the
Procedure before Issuance of Notice
signature of Assessing Officer affixed on it either digitally or manually, said notice was invalid and same would not vest Assessing Officer with any further jurisdiction to proceed to reassess income of the assessee.
However, the Hon’ble Delhi High Court has taken a different view. In the case of Suman Jeet Agarwal v. ITO [2022] 449 ITR 517/[2023] 290 Taxman 493 (Delhi) (HC), inter alia, it was held that where notices were sent through the registered e-mail ID of respective Assessing Officers, though not digitally signed, it will be held to be valid service of notice and date and time of dispatch as recorded in ITBA portal will be taken as date of issuance of notice in this regard.
The Hon’ble Delhi High Court in the case of Sonia Gandhi v. ACIT [2018] 97 taxmann.com 150/407 ITR 594 (Delhi) (HC) held that not digitally signing a mail is an irregularity and not an illegality.
- Reassessment Notice issued on a deceased person/ non-existing entity and whether the existence of PAN amounts to the existence of the entity.
It is a settled position in law that a Notice cannot be issued to a deceased person or a non-existing entity.
The Hon’ble Supreme Court in the case of PCIT v. Maruti Suzuki India Ltd. [2019] 416 ITR 613/265 Taxman 515 (SC) held that where the assessee company was amalgamated with another company and thereby lost its existence, an assessment order passed subsequently in the name of said non-existing entity, would be without jurisdiction and was to be set aside.
This has been extended to even deceased persons as the Notice has to be issued to the legal heirs of the deceased or the estate of the deceased.
The Hon’ble Bombay High Court in the case of Rupa Shyamsundar Dhumatkar v. ACIT [2020] 420 ITR 256/275 Taxman 453 (Bom) (HC) held that where the petitioner,
Procedure before Issuance of Notice
a widow of the original assessee, produced the death certificate of her deceased husband, which indicated that the notice under section 148 of the Act was issued against a dead person, impugned notice was invalid and was to be set aside.
It is pertinent to note that, the Hon’ble Supreme Court a subsequent decision in the case of PCIT v. Mahagun Realtors (P.) Ltd. [2022] 443 ITR 194/287 Taxman 566(SC) considering the decision of Maruti Suzuki (Supra), inter alia, held that where post amalgamation, no indication was given to Assessing Officer during a search conducted at the premises of assessee-amalgamating company about amalgamation and return filed pursuant to the notice issued under section 153A of the Act suppressed fact of amalgamation since the conduct of assessee reflected that it consistently held itself as the assessee, assessment order passed in name of assessee-amalgamating company was valid.
A decision of the Hon’ble Income-tax Appellate Tribunal - Pune Bench in the case of DCIT v. Barclays Global Service Centre Private Ltd. [2023] 103 ITR 100 (Pune) (Trib.) observed that the Assessee relied on the decision of the Hon’ble Supreme Court in the case of PCIT v. Maruti Suzuki India Ltd. (2019) 416 ITR 613/107 taxmann. com 375 (SC). However, the Department relied on a subsequent judgment of the Hon’ble Supreme Court in the case of PCIT v. Mahagun Realtors (P.) Ltd. [2022] 443 ITR 194/137 taxmann.com 91 (SC). It was held that in the case of Mahagun (supra), the assessee had not disclosed the change in the assessee’s existence and that the subsequent case does not distinguish the case of Maruti Suzuki (Supra).
Therefore, the difference in the decisions is that when an entity is non-existent or deceased, it is the duty to inform the Department about the changes. If the Department still chooses to proceed on the wrong footing, then the Notice can be held to be bad in law.
