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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION NO. 4888 OF 2022

Siemens Financial Services Pvt Ltd.)

Plot no.2, Sector No.2, Kharghar S. O.)

Kharghar, Raigarh, Navi Mumbai 410 201) ...Petitioner

Vs.

1. Deputy Commissioner of Income Tax)

Circle-8(2)(1), Mumbai, Room No.624,)

6

th

floor, Aayakar Bhavan, Maharshi Karve)

Road, Mumbai 400 020 )

2. The Principal Chief Commissioner of )

Income Tax Mumbai, Room No.624,)

6

th

floor, Aayakar Bhavan, Maharshi Karve)

Road, Mumbai 400 020 )

3. The Principal Chief Commissioner of )

Income Tax Mumbai-8, Room No.611, )

6

th

floor, Aayakar Bhavan, Maharshi Karve)

Road, Mumbai 400 020 )

4. Union of India )

Through Joint Secretary & Legal Adviser,)

Branch Secretariat, Department of Legal)

Affairs, Ministry of Law and Justice,)

2

nd

Floor, Aayakar Bhavan, M. K.Road,)

New Marine Lines, Mumbai 400 020 ) ..Respondents

----

Mr. P. J. Pardiwalla, Senior Advocate a/w Mr. Jeet Kamdar i/b Mr. Atul K

Jasani for Petitioner.

Mr. Suresh Kumar a/w Ms Mohinee Chougule for Respondents.

----

CORAM : K.R. SHRIRAM &

Dr. N. K. GOKHALE, JJ

DATED : 25

th

AUGUST 2023

(ORAL JUDGMENT PER K. R. SHRIRAM J.)

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1 Rule. Rule made returnable forthwith as pleadings are completed.

Petitioner is registered with the Reserve Bank of India (RBI) as Non-

Banking Finance Company and is classified as an Asset Finance Company.

On 28

th

November 2016, petitioner filed its return of income for A.Y.-2016-

2017 declaring a total income of Rs.44,92,46,370/-. Later petitioner filed

revised return of income on 28

th

March 2018 declaring a total income of

Rs.50,67,32,580/-.

2 The return of income was selected for scrutiny and a notice dated 5

th

September 2018 under Section 143(2) of the Income Tax Act 1961 (the Act)

was issued. This was followed by notice dated 5

th

December 2018 under

Section 142(1) of the Act. Petitioner responded by its letter dated 6

th

December 2018 and submitted the transaction wise summary on

expenditure on software consumables. Respondent no.1 passed an

assessment order dated 23

rd

December 2018 under Section 143(3) of the

Act without making any adjustments to the total income as reported by

petitioner in its revised return of income.

3 Almost three years later, petitioner received notice dated 25

th

June

2021 under Section 148 of the Act, stating that there was reason to believe,

petitioner’s income chargeable to tax for A.Y. 2016-2017 has escaped

assessment within the meaning of Section 147 of the Act. The impugned

notice mentioned that necessary satisfaction of Range 8(2), Mumbai has

been obtained. Petitioner was also provided with the reasons recorded for

reopening the assessment in response to the request made by petitioner.

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4 Petitioner by its letter dated 22

nd

July 2021 replied to the notice

issued under Section 148 of the Act and submitted that the notice has been

issued as per the provisions of Sections 147 to 151 of the Act as they stood

prior to their substitution vide Finance Act, 2021 and respondent no.1

should assume jurisdiction post 1

st

April 2021 in terms of the amended

provisions. Petitioner pointed out that the notice dated 25

th

June 2021 is

bad in law and requested respondent no.1 to drop the assessment

proceedings.

5 Petitioner was served with the notice dated 26

th

November 2021

under Section 142(1) of the Act. Petitioner responded vide its letter dated

20

th

December 2021.

Thereafter, respondent no.1 issued the letter / show cause notice

dated 31

st

May 2022 under Section 148A(b) of the Act, wherein respondent

no.1 had referred to the notice issued on 25

th

June 2021 under Section 148

of the Act. In the said notice dated 31

st

May 2022, respondent no.1 referred

to various writ petitions that had been filed in Bombay High Court as well as

the other courts challenging the validity of the notices issued under Section

148 of the Act and also referred to the order of the Apex Court in Union of

India Vs. Ashish Agarwal

1

and stated that the notice under Section 148 of

the Act shall be deemed to be issued under Section 148A of the Act as

substituted by the Finance Act 2021 and shall be treated as show cause

notice in terms of Section 148A(b) of the Act. Respondent no.1, therefore,

1. (2022) 138 taxmann.com 64(SC)

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treated the notice issued under Section 148 of the Act as show cause notice

in terms of Section 148A(b) of the Act. Respondent no.1 also relied on

information and material annexed to the show cause notice suggesting that

the income chargeable to tax has escaped assessment within the meaning of

Section 147 of the Act and also relied on the approval of the competent

authority annexed to the impugned show cause notice.

6 The annexure to the impugned show cause notice mentioned the

following:

a) On perusal of the records, it is noticed that the Petitioner has

debited an amount of Rs. 6,41,87,931/- on account of software

consumables as other expenses to the profit and loss account and as

per the information gathered Respondent No. 1 alleged that the said

expense is a capital expenditure which is not allowable as per section

37 of the Act and attracts depreciation at 60%. Thus, the remaining

40% of the software consumable amounting to Rs. 2,56,75,172/-

should be disallowed and added back to the business income of

petitioner.

b) Respondent no.1 alleged that it resulted in underassessment of

income of Rs. 2,56,75,172/-. The reasons recorded relied on the

finding of respondent no.1 to form the basis for reason to believe that

income chargeable to tax of Rs. 2,56,75,172/- has escaped assessment

within the meaning of section 147 of the Act.

c) The reasons recorded alleged that the requisite material facts were

embedded in such a manner that material evidence could not be

discovered by respondent no.1 and the issues were never examined by

respondent no.1 during the course of regular assessment. The reasons

alleged that petitioner has failed to disclose fully and truly all material

facts necessary for its assessment and therefore, it is a fit case for

reopening the assessment within the meaning of section 147 of the

Act.

d) Respondent no.1 alleged that CBDT vide Notification No. 20/2021

has revised the due date relating to issuing the notice under section

148 of the Act as per the time limit specified in section 149 or

sanction under section 151 of the Act if it expires on March 31, 2021

to April 30, 2021.

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7 Petitioner responded vide its communications dated 9

th

June 2022 and

7

th

July 2022. Various grounds were taken in its response. Respondent no.1,

by an order dated 31

st

July 2022 passed under Section 148A(d) of the Act,

rejected the submissions of petitioner and in paragraph 9 of the impugned

order stated as under:

“9. In response to notice issued u/s 148A(b) of the I.T. Act dated

01.06.2022, the assessee has filed reply vide letter dated 05.07.2022.

The reply of the assessee is considered carefully, however, the same is

not acceptable. The assessee has not submitted any documentary

evidence in support of its claim. Overall, the submission made by the

assessee is not satisfactory.”

8 Respondent no.1 issued an intimation letter for notice under Section

148 of the Act on 31

st

July 2022 and thereafter issued the notice dated 31

st

July 2022 under Section 148 of the Act stating that respondent no.1 has

information suggesting that income chargeable to tax has escaped

assessment within the meaning of Section 148 of the Act. None of the boxes

in the said notice have been ticked and respondent no.1 has not provided

what information is available with him for issuing the impugned notice. At

this stage, petitioner filed this petition impugning the show cause notice

dated 31

st

May 2022, the order dated 31

st

July 2022 passed under Section

148A(d) of the Act and the notice dated 31

st

July 2022 under Section 148 of

the Act.

9 Mr. Pardiwalla appearing for petitioner submitted that the impugned

notice dated 31

st

May 2022, order dated 31

st

July 2022 and intimation letter

dated 31

st

July 2022 are: a) beyond limitation, b) signed by the wrong

specified authority, c) lack “information” as required under Section 148, d)

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results from change of opinion and e) is in violation of Section 151A of the

Act.

10Mr. Pardiwalla on the suggestions made by the court confined his

submissions primarily to “signed by the wrong specified authority” and

“change of opinion”. The court felt, if petitioner succeeds on these two

points and primarily on the point of wrong ‘specified authority’, the court

need not go into the other grounds raised.

11On the wrong ‘specified authority’, Mr. Pardiwalla submitted as under:

a) The provisions of Section 149(1)(b) as introduced by the Finance

Act, 2021 provides that a notice under section 148 of the Act can be issued

beyond a period of three years and upto a period of ten years from the end

of the relevant assessment year only if the Assessing Officer has in his

possession books of account or other documents or evidence which reveal

that income chargeable to tax represented in the form of an asset which has

escaped assessment amounts to or is more than Rs. 50 lakhs.

b) There is no income chargeable to tax which is represented in the

form of an “asset” which has escaped assessment as expenditure on

computer software consumables cannot be the asset as per Section 149 of

the Act. Hence, the extended period of time limits specified in Section 149

(1)(b) cannot apply to petitioner and hence notice issued on 31

st

July 2022

is bad-in-law.

c) As per section 151 of the Act, the specified authority who has to

grant his sanction for the purposes of section 148 and section 148A is the

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Principal Chief Commissioner or Principal Director General or where there is

no Principal Chief Commissioner or Principal Director General, the Chief

Commissioner or Director General if more than three years have elapsed

from the end of the relevant assessment year.

d) For A.Y.-2016-2017, three years elapsed on 31

st

March 2020 and

hence the provisions of Section 151(i) and 151(ii) of the Act would have to

be fulfilled, which have not been complied with.

e) Respondent no.1 has mentioned in the impugned order dated 31

st

July 2022 that prior approval has been taken from respondent no.3 under

Section 151 (i) of the Act. Such sanction would be bad in law as respondent

no.1 should have complied with Section 151(ii) and not Section 151(i) of

the Act. Hence, respondent no.3 cannot be a specified authority as per

Section 151 of the Act.

f) Respondent no.1 cannot rely on the provisions of the Taxation and

other laws (Relaxation and Amendment of certain provisions) Act, 2020

(TOLA) and the notification issued thereunder as Section 151 of the Act has

been amended by Finance Act 2021 and the provisions of amended Section

would have to be complied with by respondent no.1, w.e.f. 1

st

April 2021.

Hence, as the sanction of the specified authority has not been obtained, the

impugned order and impugned notice both dated 31

st

July 2022 are bad-in-

law and should be quashed and set aside.

g) The approval given by respondent no.3 is without any application

of mind and is mechanical approval as respondent no.3, if properly

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instructed, could never have granted such approval on the facts and

circumstances of the case of petitioner.

h) In any event, deduction of expenditure on computer software as

revenue expenditure was correct and query had been raised during the

assessment proceedings by the Assessing Officer. Petitioner has provided all

the details in addition to the documents which were filed alongwith return

of income and the Assessing Officer has accepted the explanation given by

petitioner. Relying on the judgment of Aroni Commercials Ltd. Vs. Deputy

Commissioner of Income Tax-2(1)

2

, Mr. Pardiwalla submitted that once a

query is raised during the assessment proceedings and the assessee has

replied to it, it follows that the query raised was a subject of consideration

of the Assessing Officer while completing the assessment. It is not necessary

that an assessment order should contain reference and/or discussion to

disclose his satisfaction in respect of the query raised.

i) The change in the language of Section 147 of the Act has not made

any difference because if we accept what revenue says that will still give

arbitrary powers to the Assessing Officer to reopen the assessments on the

basis of mere change of opinion which cannot be per se reason to reopen.

There is a conceptual difference between power to review and power to re-

assess. If we accept revenue’s submissions then in the garb of re-opening the

assessment review would take place. The concept of change of opinion is an

in-built test to check abuse of power by the Assessing Officer, as held in the

2. (2014) 44 taxmann.com 304(Bombay)

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judgment of the Apex Court in CIT Vs. Kelvinator of India Ltd.

3

j) Even the recent judgment of Learned Single Judge of Madras High

Court in Dr. Mathew Cherian Vs. Assistant Commissioner of Income Tax

4

,

the court has held that whether under old or new regime of reassessment, it

is settled position that the issues decided categorically by judicial precedent

should not be revisited in the guise of reassessment.

12Mr. Suresh Kumar for revenue, at the outset, submitted that sanction

of the authority has been taken in view of the instructions given by the

Central Board of Direct Taxes on 11

th

May 2022. Mr. Suresh Kumar

submitted that the instructions reads as under :

“Hon'ble Supreme Court has upheld the views of High Courts that the

benefit of new law shall be made available even in respect of

proceedings relating to past assessment years Decision of Hon'ble

Supreme Court read with the time extension provided by TOLA will

allow extended reassessment notices to travel back in time to their

original date when such notices were to be issued and the new section

149 of the Act is to be applied at that point.

Based on above, the extended reassessment notices are to be dealt

with as under:

(i) AY 2013-14, AY 2014-15 and AY 2015-16: Fresh notice under

section 148 of the Act can be issued in these cases, with the approval

of the specified authority, only if the case falls under clause (b) of sub-

section (1) of section 149 as amended by the Finance Act, 2021 and

reproduced in paragraph 6.1 above. Specified authority under section

151 of the new law in this case shall be the authority prescribed

under clause (ii) of that section.

(ii) AY 16-17. AY 17-18: Fresh notice under section 148 can be issued

in these cases. with the approval of the specified authority, under

clause (a) of sub-section (1) of new section 149 of the Act, since they

are within the period of three years from the end of the relevant

assessment year. Specified authority under section 151 of the new

law in this case shall be the authority prescribed under clause (i) of

that section.”

3. 320 ITR 561 (SC)

4. (2023) 151 taxmann.com 154 (Madras)

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13Mr. Suresh Kumar also submitted as under:

a) That in the instance case, the period that has elapsed is three years

or less than three years because the assessment year is of AY-2016-2017, as

provided under Section 3 of TOLA and extended by Notification dated 31

st

March 2020 and subsequently until 31

st

March 2021, the three years would

have expired on 31

st

March 2020 and has got extended till 30

th

June 2021.

The provisions of TOLA read with judgment of the Apex Court in Ashish

Agarwal (Supra), the sanction has been rightly granted by the Principal

Commissioner and there is no violation of Section 151 of the Act as alleged

or at all.

b) The contention of petitioner that TOLA only seeks to extend the

period of limitation and does not affect the scope of section 151 is

misplaced because Section 151 is time dependent and that the notice as

issued being within three years, it is only Section 151(i) which would apply.

c) If petitioner’s submissions are accepted, it would apply to a hybrid

view in the sense that petitioner seeks to partly apply unamended law and

partly the amended law. As held by the Apex Court in Ashish Agarwal

(Supra), the notice issued by the Department after 1

st

April, 2021 is deemed

to be a Notice under the amended Section 148A(b). This would mean that

on 31

st

March 2020 the time period of 3 years would have expired and

hence, TOLA would be and is squarely applicable.

d) The judgments prior to TOLA are not applicable because the

amended provisions were not considered at that stage.

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e) Under TOLA, time for issuing notice stood extended and hence the

notice issued under Section 149(1)(b) was within time. The same principle

would apply to a notice issued under Section 148A(d) or notice issued

under Section 148 alongwith order passed under Section 148A(d).

The main thrust,however, was on instructions dated 11

th

May 2022.

14On the change of opinion, Mr. Suresh Kumar submitted:-

(a) In view of the change in the language of amended Section 147 of

the Act, it would not be applicable.

(b) In any event, the material furnished expressly records that the

income of the year under consideration has escaped assessment because of

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

necessary for his assessment for the assessment year under consideration.

The Assessing officer has noted that assessee has not fully and truly

disclosed the material facts.

The Assessing Officer has also recorded that even though assessee has

produced books of account, audited profit and loss account and balance

sheet, requisite material facts as noted in the reasons for reopening were

embedded in such manner that material evidence could not be discovered

by the Assessing Officer with due diligence and accordingly attracted the

provisions of explanation of sub Section (1) of Section 147 of the Act.

c) Therefore, it is not a case of change of opinion but the case where

assessee has failed to make true and full disclosure.

15In rejoinder, Mr. Pardiwalla submitted that in the instructions dated

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11

th

May 2022, it is expressly mentioned that it applies only to the notices

that were issued between 1

st

April 2021 and ending on 30

th

June 2021 and

in any event, even assuming if what Mr. Suresh Kumar argues that it would

travel back in time to their original date is accepted, will not be applicable

to the case at hand because:

a) The instructions itself restricted it to notice issued during the

period between 1

st

April 2021 and 30

th

June 2021, where paragraph no.1

reads as under:

1. Hon'ble Supreme Court, vide its judgment dated 04.05.2022 (2022

SCC Online SC 543), in the case of Union of India v. Ashish Agarwal

has adjudicated on the validity of the issue of reassessment notices

issued by the Assessing Officers during the period beginning on 1

st

April, 2021 and ending with 30

th

June 2021, within the time extended

by the Taxation and Other Laws (Relaxation and Amendment of

Certain Provisions) Act. 2020 [hereinafter referred to as "TOLA"] and

various notifications issued thereunder (these reassessment notices

hereinafter referred to as "extended reassessment notices").

b) In any case in Tata Communications Transformation Services Ltd.

Vs. Assistant Commissioner of Income Tax

5

this court held that only the time

for issuance of notice was extended and the law has not been amended.

The court has also expressly observed that TOLA is not applicable to

A.Y.-2015-2016 or any subsequent years and, therefore, reliance on TOLA

would be of no assistance. In Ashish Agarwal (Supra), the Apex Court did

not interfere with this view expressed by the Bombay High Court.

c) This court in J. M. Financial & Investment Consultancy Services Pvt Ltd.

Vs. Assistant Commissioner of Income Tax, Circle 3(2)(1) & ors

6

has held

5. (2022) 443 ITR 49 (Bombay)

6. (Order passed in Writ Petition No. 1050 of 2022 dated 4-4-2022)

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that for A.Y. 2015-2016, the six years limitation was expiring on 31

st

March

2022, TOLA will not be applicable and in any event, the time to issue notice

may have been extended but that would not amount to amending the

provisions of Section 151 of the Act.

Mr. Pardiwalla emphasised on paragraphs 6 and 7 of the order in

J.M.Financial (Supra) which read as under:

6. Even for a moment we agree with the view expressed by the

Principal Commissioner of Income Tax, still it applies to only cases

where the limitation was expiring on 31 st March 2020. In the case at

hand, the assessment year is 2015-2016 and, therefore, the six years

limitation will expire only on 31 st March 2022. Certainly, therefore,

the Relaxation Act provisions may not be applicable. In any event, the

time to issue notice may have been extended but that would not

amount to amending the provisions of Section 151 of the Act.

7. In our view, since four years had expired from the end of the

relevant assessment year, as provided under Section 151(1) of the

Act, it is only the Principal Chief Commissioner or Chief

Commissioner or Principal Commissioner or Commissioner who could

have accorded the approval and not the Additional Commissioner of

Income Tax. On this ground alone, we will have to set aside the notice

dated 31

st

March 2021 issued under Section 148 of the Act, which is

impugned in this petition. In view thereof, the consequent orders and

notices will also have to go.

d) This court in case of Sidhmicro Equities (P) Ltd. Vs. Deputy

Commissioner of Income Tax

7

had followed its own judgment in the case of

J. M. Financial (supra) and held that the sanction that was given, was

invalid. The Apex Court in Deputy Commissioner of Income Tax Vs.

Sidhmicro Equities (P) Ltd.

8

upheld the view expressed by the Bombay High

Court.

7. (2023) 150 taxmann.com 460 (Bombay)

8. (2023) 150 taxmann.com 461 (SC)

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OUR FINDINGS / CONCLUSIONS:-

16Before we proceed further, it would be useful to reproduce Sections

147, 148, 148A, 149 and 151 of the Act as it was then applicable :

“147. Income escaping assessment—If any income chargeable to tax,

in the case of an assessee, has escaped assessment for any assessment

year, the Assessing Officer may, subject to the provisions of sections

148 to 153, assess or reassess such income or recompute the loss or

the depreciation allowance or any other allowance or deduction for

such assessment year (hereafter in this section and in sections 148 to

153 referred to as the relevant assessment year).

Explanation.—For the purposes of assessment or reassessment or

recomputation under this section, the Assessing Officer may assess or

reassess the income in respect of any issue, which has escaped

assessment, and such issue comes to his notice subsequently in the

course of the proceedings under this section, irrespective of the fact

that the provisions of section 148A have not been complied with.

148. Issue of notice where income has escaped assessment.—Before

making the assessment, reassessment or recomputation under

section147, and subject to the provisions ofsection148A, the Assessing

Officer shall serve on the assessee a notice, along with a copy of the

order passed, if required, under clause (d) ofsection148A, 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 section139:

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 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) ofsection148A 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

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an assessee under this section and furnished beyond the period

allowed shall not be deemed to be a return under section139.

Explanation 1.—For the purposes of thissectionandsection148A, 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;

(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

insection90 orsection90A of the Act; or

(iv) any information made available to the Assessing Officer under the

scheme notified under section135A; or

(v) any information which requires action in consequence of the order

of a Tribunal or a Court.

Explanation 2.—For the purposes of this section, where,—

(i) a search is initiated under section132 or books of account, other

documents or any assets are requisitioned under section132A, on or

after the 1st day of April, 2021, in the case of the assessee; or

(ii) a survey is conducted under section133A, other than under sub-

section(2A) of that section, on or after the 1st day of April, 2021, in

the case of the assessee; or

(iii) the Assessing Officer is satisfied, with the prior approval of the

Principal Commissioner or Commissioner, that any money, bullion,

jewellery or other valuable article or thing, seized or requisitioned

under section132 or under section132A in case of any other person on

or after the 1st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of

Principal Commissioner or Commissioner, that any books of account

or documents, seized or requisitioned under section132

orsection132A 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, the Assessing Officer shall be deemed

to have information which suggests that the income chargeable to tax

has escaped assessment in the case of the assessee where the search is

initiated or books of account, other documents or any assets are

requisitioned or survey is conducted in the case of the assessee or

money, bullion, jewellery or other valuable article or thing or books of

account or documents are seized or requisitioned in case of any other

person.

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Explanation 3.—For the purposes of this section, specified authority

means the specified authority referred to insection151.

148A. Conducting inquiry, providing opportunity before issue of

notice under section148.—The Assessing Officer shall, before issuing

any notice under section148,—

(a) conduct any enquiry, if required, with the prior approval of

specified authority, with respect to the information which suggests

that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, with the

prior approval of specified authority, by serving upon him a notice to

show cause within such time, as may be specified in the notice, being

not 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 section148 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 is a fit case to issue a notice

under section148, by passing an order, with the prior approval of

specified authority, within one month from the end 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 section132 or books of account, other

documents or any assets are requisitioned under section132A in the

case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the

Principal Commissioner or Commissioner that any money, bullion,

jewellery or other valuable article or thing, seized in a search under

section132 or requisitioned under section132A, in the case of any

other person on or after the 1st day of April, 2021, belongs to the

assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the

Principal Commissioner or Commissioner that any books of account or

documents, seized in a search under section132 or requisitioned

under section132A, 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.

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Explanation.—For the purposes of this section, specified authority

means the specified authority referred to insection151.

149. Time limit for notice.—(1) No notice under section148 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);

(b) if three years, but not more than ten years, 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

which reveal that the income chargeable to tax, represented in the

form of—

(i) an asset;

(ii) expenditure in respect of a transaction or in relation to an event

or occasion; or

(iii) an entry or entries in the books of account, which has escaped

assessment amounts to or is likely to amount to fifty lakh rupees or

more:

Provided that no notice under section148 shall be issued at any time

in a case for the relevant assessment year beginning on or before 1st

day of April, 2021, a notice under section148 orsection153A

orsection153C could not have been issued at that time on account of

being beyond the time limit specified under the provisions of clause

(b) of sub-section(1) of thissectionorsection153A orsection153C, as

the case may be, as they stood immediately before the

commencement of the Finance Act, 2021:

Provided further that the provisions of this sub-section shall not apply

in a case, where a notice under section153A, orsection153C read

withsection153A, is required to be issued in relation to a search

initiated under section132 or books of account, other documents or

any assets requisitioned under section132A, on or before the 31st day

of March, 2021:

Provided also that for cases referred to in clauses (i), (iii) and (iv) of

Explanation 2 to section148, where,— (a) a search is initiated under

section132; or

(b) a search under section132 for which the last of authorisations is

executed; or

(c) requisition is made under section132A,

after the 15th day of March of any financial year and the period for

issue of notice under section148 expires on the 31st day of March of

such financial year, a period of fifteen days shall be excluded for the

purpose of computing the period of limitation as per this section and

the notice issued under section148 in such case shall be deemed to

have been issued on the 31st day of March of such financial year:

Provided also that where the information as referred to in Explanation

1 to section148 emanates from a statement recorded or documents

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impounded under section131 or section133A, as the case may be, on

or before the 31st day of March of a financial year, in consequence of,

—

(a) a search under section132 which is initiated; or

(b) a search under section132 for which the last of authorisations is

executed; or

(c) a requisition made under section132A,

after the 15th day of March of such financial year, a period of fifteen

days shall be excluded for the purpose of computing the period of

limitation as per this section and the notice issued under clause (b)

ofsection148A in such case shall be deemed to have been issued on

the 31st day of March of such financial year:

Provided also that for the purposes of computing the period of

limitation as per this section, the time or extended time allowed to the

assessee, as per show-cause notice issued under clause (b)

ofsection148A or the period during which the proceeding under

section148A is stayed by an order or injunction of any court, shall be

excluded:

Provided also that where immediately after the exclusion of the

period referred to in the immediately preceding proviso, the period of

limitation available to the Assessing Officer for passing an order under

clause (d) ofsection148A does not exceed seven days, such remaining

period shall be extended to seven days and the period of limitation

under this sub-section shall be deemed to be extended accordingly.

Explanation.—For the purposes of clause (b) of this sub-section,

"asset" shall include immovable property, being land or building or

both, shares and securities, loans and advances, deposits in bank

account.

(1A) Notwithstanding anything contained in sub-section(1), where

the income chargeable to tax represented in the form of an asset or

expenditure in relation to an event or occasion of the value referred to

in clause (b) of sub-section(1), has escaped the assessment and the

investment in such asset or expenditure in relation to such event or

occasion has been made or incurred, in more than one previous years

relevant to the assessment years within the period referred to in

clause (b) of sub-section(1), a notice under section148 shall be

issued for every such assessment year for assessment, reassessment or

recomputation, as the case may be.

(2) The provisions of sub-section(1) as to the issue of notice shall be

subject to the provisions of section151 .

151. Sanction for issue of notice.—Specified authority for the

purposes ofsection148 andsection148A shall be,—

(i) Principal Commissioner or Principal Director or Commissioner or

Director, if three years or less than three years have elapsed from the

end of the relevant assessment year;

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(ii) Principal Chief Commissioner or Principal Director General or

Chief Commissioner or Director General, if more than three years

have elapsed from the end of the relevant assessment year :

Provided that the period of three years for the purposes of clause (i)

shall be computed after taking into account the period of limitation as

excluded by the third or fourth or fifth provisos or extended by the

sixth proviso to sub-section(1) ofsection149.”

SPECIFIED AUTHORITY :-

17Section 148 provides that 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 alongwith a

copy of the order passed, if required under clause (d) of Section 148A. It

also says no notice under Section 148 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 and the Assessing Officer has obtained prior

approval of the specified authority to issue such notice. No such approval

shall be required where the Assessing Officer, with the prior of the 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 Section 148 of

the Act.

18Section 148A provides that the Assessing Officer shall, before issuing

any notice under Section 148 ………….. (d)- decide, on the basis of

material available on record including reply of the assessee, whether or not

it is a fit case to issue a notice under Section 148, by passing an order, with

the prior approval of specified authority, within one month from the end of

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the month …………………”. The explanation below Section 148A says - for

the purposes of this Section, specified authority means the specified

authority referred to in Section 151.

19Under Section 149(1)(a), no notice under Section 148 shall be issued

for the relevant assessment year if three years have elapsed from the end of

the relevant assessment year, unless the case falls under clause (b). Clause

(b) of Section 149(1), provides if three years, but not more than ten years,

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 which reveal that the income chargable to tax, represented in

the form of an asset, (as relevant to this case) which has escaped assessment

amounts to or is likely to amount to fifty lakh rupees or more for that year.

Explanation below 4

th

proviso says that for the purposes of clause (b) of

this sub section, “asset” shall include immovable property being land or

building or both, shares and securities, loans and advances, deposits in bank

account.

20Under Section 151 “specified authority” for the purposes of Section

148 and Section 148A shall be, if three years or less than three years have

elapsed from the end of the relevant assessment year, Principal

Commissioner or Principal Director or Commissioner or Director. If more

than three years have elapsed from the end of the relevant assessment year,

then Principal Chief Commissioner or Principal Director General or Chief

Commissioner or Director General.

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21Admittedly, in this case, the approval/sanction for order under Section

148A(d) of the Act has been granted by the Principal Commissioner of

Income Tax-8. The entire controversy is, therefore, (a) whether the Principal

Commissioner was the specified authority, who could have granted the

approval / sanction ?, (b) if not, the effect thereof ?

22In our view, the approval is not valid. Hence, the impugned order

passed under Section 148A(d) read with notice issued under Section 148 of

the Act dated 31

st

July 2022 is not valid and has to be quashed and set

aside.

23The first proviso to section 148 of the Act refers to the approval of the

specified authority being obtained before a notice under section 148 of the

Act can be issued. Explanation 3 to section 148 of the Act specifies that the

meaning of the term ‘specified authority’ as provided for in section 151 of

the Act is to apply for the purpose of section 148.

Section 148A(d) of the Act also requires the Assessing Officer to pass

an order after considering the reply of the assessee as to whether or not it is

a fit case to issue a notice under section 148 of the Act and such an order

under section 148A(d) of the Act has to be passed with the prior approval of

the specified authority. The Explanation to section 148A of the Act also

incorporates the meaning of ‘specified authority’ as provided for in section

151 of the Act.

24As per section 151 of the Act, the ‘specified authority’ who has to

grant his sanction for the purposes of section 148 and section 148A is the

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Principal Chief Commissioner or Principal Director General or where there is

no Principal Chief Commissioner or Principal Director General, the Chief

Commissioner or Director General if more than three years have elapsed

from the end of the relevant assessment year. The present petition relates to

the AY 2016-17, and as the impugned order and impugned notice are issued

beyond the period of three years which elapsed on 31

st

March, 2020 the

approval as contemplated in section 151(ii) of the Act would have to be

obtained which has not been done by the Assessing Officer. The impugned

notice mentions that the prior approval has been taken of the ‘Principal

Commissioner of Income-tax – 8’ (‘PCIT-8’) which is bad in law as the

approval should have been obtained in terms of section 151(ii) and not

section 151(i) of the Act and the PCIT-8 cannot be the specified authority as

per section 151 of the Act. Further, even in the affidavit-in-reply, the

department has accepted that the approval obtained is of the ‘Principal

Commissioner of Income-tax – 8’ and, hence, such an approval would be

bad in law.

25TOLA, enacted on 29

th

September 2020 and came into force on 31

st

March 2020. It inter alia, provided for a relaxation of certain provisions of

the Income-tax Act, 1961. Where any time limit for completion or

compliance of an action such as completion of any proceedings or passing of

any order or issuance of any notice fell between the period 20

th

March 2020

to 31

st

December 2020, the time limit for completion of such action stood

extended to 31

st

March 2021. Thus, TOLA only seeks to extend the period of

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limitation and does not affect the scope of section 151.

26The Assessing Officer cannot rely on the provisions of TOLA and the

notifications issued thereunder as section 151 has been amended by Finance

Act, 2021 and the provisions of the amended section would have to be

complied with by the Assessing Officer, w.e.f., 1

st

April 2021. Hence, the

Assessing Officer cannot seek to take the shelter of TOLA as a subordinate

legislation cannot override any statute enacted by the Parliament. Further,

the notification extending the dates from 31

st

March 2021 till 30

th

June 2021

cannot apply once the Finance Act, 2021 is in existence. The sanction of the

specified authority has to be obtained in accordance with the law existing

when the sanction is obtained and, therefore, the sanction is required to be

obtained by applying the amended section 151(ii) of the Act and since the

sanction has been obtained in terms of section 151(i) of the Act, the

impugned order and impugned notice are bad in law and should be quashed

and set aside.

27This Court, in a series of judgments, has held that TOLA cannot apply

in respect of reassessment proceedings for AY 2015-16 and subsequent

years:-

(a)Tata Communications Transformation Services Ltd (supra), paragraph

49(c) reads as under:

“49. Some more reasons why the reopening notices must go are:

(a) ……………..

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(b) ……………..

(c) In any case, Relaxation Act is not applicable for Assessment Years

2015-2016 or any subsequent year and, hence, the question of

applicability of the Notification Nos.20 and 38 of 2021 does not arise.

The time limit to issue notice under section 148 of the Act for the

Assessment Years 2015- 2016 onwards was not expiring within the

period for which section 3(1) of Relaxation Act was applicable and,

hence, Relaxation Act could never apply for these assessment years.

As a consequence, there can be no question of extending the period of

limitation for such assessment years.”

(b)Judgment in Tata Communications (Supra) has been affirmed by the

Supreme Court in Ashish Agarwal (supra) in paragraph 7, where, the

Supreme Court states that it is in complete agreement with the view of the

High Courts. It reads as under:

“7. Thus, the new provisions substituted by the Finance Act, 2021

being remedial and benevolent in nature and substituted with a

specific aim and object to protect the rights and interest of the

assessee as well as and the same being in public interest, the

respective High Courts have rightly held that the benefit of 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 1st April, 2021. We are in complete agreement

with the view taken by the various High Courts in holding so.”

(c)J.M. Financial (supra) – paragraphs 5 to 7 read as under:

“5Respondents have relied upon a letter dated 18

th

March 2021

issued by one Income Tax Officer, who has given an opinion to the

Additional Commissioner of Income Tax that in view of the Taxation

and other Laws (Relaxation of Certain Provisions) Act, 2020

(Relaxation Act), limitation, inter alia, under provisions of Section

151(1) and Section 151(2), which were originally expiring on 31

st

March 2020 stand extended to 31

st

March 2021. According to the

Income Tax Officer, in view of the above, Assessment Year 2015-2016

which falls under the category within four years as on 31

st

March

2020, the statutory approval for issuance of notice under Section 148

of the Act for the Assessment Year 2015-2016 may be given by the

Range Head as per the said provisions. Mr. Sharma clarifies that the

Income Tax Officer is only conveying the view of the Principal

Commissioner of Income Tax because this letter has been issued on

the letterhead of Principal Commissioner of Income Tax.

6Even for a moment we agree with the view expressed by the

Principal Commissioner of Income Tax, still it applies to only cases

where the limitation was expiring on 31

st

March 2020. In the case at

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hand, the assessment year is 2015-2016 and, therefore, the six years

limitation will expire only on 31

st

March 2022. Certainly, therefore,

the Relaxation Act provisions may not be applicable. In any event, the

time to issue notice may have been extended but that would not

amount to amending the provisions of Section 151 of the Act.

7In our view, since four years had expired from the end of the

relevant assessment year, as provided under Section 151(1) of the

Act, it is only the Principal Chief Commissioner or Chief

Commissioner or Principal Commissioner or Commissioner who

could have accorded the approval and not the Additional

Commissioner of Income Tax. On this ground alone, we will have to

set aside the notice dated 31

st

March 2021 issued under Section 148

of the Act, which is impugned in this petition. In view thereof, the

consequent orders and notices will also have to go.”

(d)MA Multi-Infra Development Pvt Ltd v. ACIT

9

– paragraph 7 reads as

under:

“7. Be that as it may, in our view, the present case is squarely covered

by the view taken by this Court in J.M. Financial & Investment

Consultancy Services (P) Ltd. (Supra). We accordingly hold that the

approval for issuance of notice u/s. 148 ought not have been obtained

from the Additional Commissioner of Income Tax but from the

authority specifcally mentioned u/s. 151(ii) of the Act.”

(e)DCW Limited v. ACIT

10

– paragraphs 5,6, 7 & 8 read as under:

“5. In the aforementioned case, which also pertained to assessment

year 2015-16 and in which approval was granted on 26 th March

2021 by the ‘Additional Commissioner of Income Tax’, was held to be

bad inasmuch as it was held that having been issued beyond the

period of four years from the relevant assessment year, the approval

ought to have been accorded by the Principal Chief Commissioner or

Chief Commissioner or Principal Commissioner or Commissioner of

Income Tax and not by the Additional Commissioner of Income Tax.

The Court also held that the provisions of the Taxation and Other

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

(‘Relaxation Act’) may have extended the time to issue a notice under

section 148 of the Act but did not have the effect of amending the

provisions of section1 151 of the Act. This Court held :

“5 Respondents have relied upon a letter dated 18th March

2021 issued by one Income Tax Offcer, who has given an opinion to

the Additional Commissioner of Income Tax that in view of the

Taxation and other Laws (Relaxation of Certain Provisions) Act, 2020

(Relaxation Act), limitation, inter alia, under provisions of Section

9. (WP No. 1650 of 2022 dated 9-1-2023)

10. [WP No. (L) 6546 of 2022 dated 4-7-2022]

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151(1) and Section 151(2), which were originally expiring on 31st

March 2020 stand extended to 31st March 2021. According to the

Income Tax Officer, in view of the above, Assessment Year 2015-2016

which falls under the category within four years as on 31st March

2020, the statutory approval for issuance of notice under Section 148

of the Act for the Assessment Year 2015-2016 may be given by the

Range Head as per the said provisions. Mr. Sharma clarifes that the

Income Tax Offcer is only conveying the view of the Principal

Commissioner of Income Tax because this letter has been issued on

the letterhead of Principal Commissioner of Income Tax.

6 Even for a moment we agree with the view expressed by

the Principal Commissioner of Income Tax, still it applies to only cases

where the limitation was expiring on 31st March 2020. In the case at

hand, the assessment year is 2015-2016 and, therefore, the six years

limitation will expire only on 31st March 2022. Certainly, therefore,

the Relaxation Act provisions may not be applicable. In any event, the

time to issue notice may have been extended but that would not

amount to amending the provisions of Section 151of the Act.”

6. In the present case, counsel for the respondents reiterated the stand

of the revenue as was taken before the Court in the aforementioned

case. However, we do not fnd any reason to take a view different from

the one which has already been taken by this Court in the

aforementioned judgment.

7. Without going into any other issues, since the issue of grant of

approval by an authority, as prescribed under section 151 of the Act

goes to the root of the matter, we wish to deal only with the said issue

and hold that even in the present case, the approval ought to have

been granted by either the Principal Chief Commissioner or Chief

Commissioner or Principal Commissioner and not by the Additional

Commissioner of Income tax.

8. Since the notice was being issued beyond the four years period

prescribed under the un-amended provisions of section 151(1) of the

Act, it ought to have the satisfaction accorded by the Principal Chief

Commissioner or Chief Commissioner or Principal Commissioner or

Commissioner of Income Tax which is not so in the present case.”

(f)Soumya Girdhari Agarwal v. ITO

11

– paragraph 4 read as under:

“4. On a reading of Section 151 it is clear that a notice under Section

148 of the Act, 1961 cannot be issued after the expiry of 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 was satisfed, on the reasons recorded

by the A.O., that it was a ft case for the issue of such a notice.

In the present case, it is clear that assessment year under

consideration was 2015-16 and, therefore, the notice impugned dated

29

th

March, 2021 was admittedly beyond the four years period for

11. (WP No. 3354 of 2022 dated 25-7-2022)

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which the approval ought to have been granted by any one of the

aforementioned four authorities and not by the Joint Commissioner. It

is clear that, the A.O. fell in error in holding that the case at hand fell

within the four years period, from the end of the assessment year

under consideration, which on the face of it appears to be erroneous.”

(g)Voltas Limited v. ACIT

12

– paragraphs 6, 19 to 24 read as under:

“(6) In the petition, petitioner has also raised an objection that the

sanction obtained under section 151 of the Act was not a valid

sanction since the proposed reopening is more than 4 years after

expiry of relevant assessment year. As provided under sub-section (1)

of section 151 of the Act only a Principal Chief Commissioner or Chief

Commissioner or Principal Commissioner or Commissioner could grant

the sanction. Since in this case, admittedly, sanction has been granted

by an Additional Commissioner of Income Tax, it is not a valid

sanction and therefore, notice issued based on an invalid sanction is

also not valid and has to be quashed.

**************************

(19) It is also petitioner’s case that the approval obtained for issuing

notice under section 148 of the Act is not in accordance with the

mandate of Section 151 as the said approval is of Additional

Commissioner of Income Tax instead of Principal Commissioner of

Income Tax. It is petitioner’s case that the reasons put up for approval

on 26.03.2021, which is after the expiry of four years from the end of

the relevant assessment year 2015-2016 and approval was granted on

30.03.2021. Therefore, Mr. Joshi submitted that as per Section 151 of

the Act, as four years have elapsed at the time of reopening, the

sanction is required to be obtained from the Principal Chief

Commissioner or Chief Commissioner or Principal Commissioner or

Commissioner of Income Tax and since the sanction has not been

obtained from any of these four Commissioners of Income Tax, the

notice issued is bad in law.

(20) Sub-Section 1 of Section 151 of the Act provides that 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 ft case for

the issue of such notice.

(21) Admittedly in this case, four years from the end of the relevant

assessment year A.Y. 2015-16 has expired before the issuance of notice

and the approval also has been obtained from the Additional

Commissioner of Income Tax and not Principal Commissioner of

Income Tax. In the affidavit-in-reply fled through Yashraj Nain,

affirmed on 25.03.2022, these facts have not been disputed but

according to respondents, the approval granted by the Additional

12. (WP No. 1180 of 2022 dated 5-4-2022)

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Commissioner of Income Tax was a valid approval.

(22) Respondents have relied upon Taxation and other Laws

(Relaxation of Certain Provisions) Act, 2020 (Relaxation Act),

limitation to submit, inter alia, under provisions of Section 151(1) and

Section 151(2), which were originally expiring on 31 st March 2020

stand extended to 31 st March 2021. According to the Income Tax

Officer, the statutory approval for issuance of notice under Section 148

of the Act for the Assessment Year 2015-2016 may be given by the

Range Head as per the said provisions.

(23) Even for a moment, we agree with the view expressed by

respondents, still it applies to only cases where the limitation was

expiring on 31 st March 2020. In the case at hand, the assessment year

is 2015-16 and, therefore, the six years limitation will expire only on

31 st March 2022. Certainly, therefore, the Relaxation Act provisions

will not be applicable. In any event, the time to issue notice may have

been extended but that would not amount to amending the provisions

of Section 151 of the Act.

(24) In our view, since four years had expired from the end of the

relevant assessment year, as provided under Section 151(1) of the Act,

it is only the Principal Chief Commissioner or Chief Commissioner or

Principal Commissioner or Commissioner who could have accorded

the approval and not the Additional Commissioner of Income Tax. On

this ground alone, we will have to set aside the notice dated

31.03.2021 issued under Section 148 of the Act, which is impugned in

this petition.”

Similarly in Johnson and Johnson v. DCIT

13

, Equitable Financial Consultancy

Services Pvt Ltd v. ITO

14

and Asian Paints Ltd. v. ACIT

15

28The interpretation placed by the CBDT in paragraph 6.1 of Instruction

No. 1 / 2022 dated 11

th

May 2022 cannot be countenanced as it is not open

to them to clarify that the law laid down by the Apex Court means that the

extended reassessment notices will travel back in time to their original date

when such notices were to be issued and, then, the new section 149 of the

Act is to be applied as this is contrary to the judgment of this court in Tata

Communications (supra) wherein it is held that TOLA does not envisage

traveling back of any notice. However, even assuming that it is held that

13. [WP (L) No. 7733 of 2022 dated 4-5-2022]

14. (WP No. 43 of 2022 dt. 27-4-2022)

15. [WP (L) No. 6385 of 2022 dated 26-4-2022]

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these notices travel back to the date of the original notice issued on 25

th

June 2021, even then the approval of the Principal Chief Commissioner of

Income Tax should be obtained in terms of section 151(ii) of the Act as a

period of three years from the end of the relevant assessment year ended on

31

st

March 2020 for AY 2016-17.

29Further, the CBDT in Instruction no.1/2022 at paragraph 6.2(ii) has

wrongly stated that the notices issued under section 148 of the Act for AY

2016-17 are to be considered as having been issued within a period of three

years from the end of the relevant assessment year and, on that basis, has

wrongly mentioned that the approval of the specified authority under

section 151(i) should be taken. This conclusion is premised on the basis that

these notices travel back to 31 March 2020 which premise is completely

erroneous as explained hereinbefore. The notice under section 148 of the

Act is issued on 31 July 2022 and, hence, is issued beyond period of three

years from the end of the relevant assessment year and, accordingly, the

approval of the specified authority under section 151(ii) of the Act should

be taken.

30This court in Tata Communications (Supra), has rejected that

argument of the Revenue on the issue of travel back. This court in

paragraph 37 of Tata Communications (Supra) has held that Section 3(1)

of TOLA does not provide that any notice issued under Section 148 of the

Act, after 31

st

March 2021 will relate back to the original date or that the

clock is stopped on 31

st

March, 2021 such that the provision as existing on

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such date will be applicable to notices issued relying on the provision of

TOLA. The court held that Section 3(1) of TOLA merely extends the

limitation provided in the specified Acts including Income-tax Act for doing

certain Acts but such Acts must be performed in accordance with the

provisions of the specified Acts. The court had also recorded that the Delhi

High Court had considered and rejected the contention of the Revenue that

the notice issued after 1st April 2021 relates back to an earlier period. The

Delhi High Court had considered and rejected the argument of the Revenue

that TOLA creates a legal fiction such that the notices issued under Section

148 of the Act are deemed to be issued on 31st March, 2021. TOLA only

granted power to the Central Government to notify the period during which

actions are required to be taken that can fall within the ambit of TOLA, and

the power to extend the time limit within which those actions are to be

taken. There was no amendment to the provisions of Sections 147 to 151 of

the Act. The court also observed that amendments to the substantive

provisions of the Act were envisaged under Section 3 of TOLA, which was

only a relaxation provision dealing with time limits under various

enactments. The Assessing Officer could have assumed jurisdiction while

issuing the impugned notices only after complying with the amended

Section 147 which has not been done. In Tata Communications (Supra),

this court also held that TOLA was not applicable for A.Y.-2015-2016 or any

subsequent years. Hence question of applicability of notification issued

under TOLA also would not arise. Paragraphs 34 to 49 of Tata

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Communications (Supra) read as under:

34 It is well settled that the validity of a notice issued under Section

148 of the Act must be judged on the basis of the law existing on the

date on which such notice is issued. Even the Revenue accepts this

well settled position. Further, the provisions of Sections 147 to 151

are procedural laws and accordingly, the provisions as existing on the

date of the notice would be applicable. Even the revenue accepts this

legal position and the CBDT Circular No.549 of 1989, that Mr. Mistri

relied upon, explaining the provisions of the Finance Act, 1989

specifically sets out that any notices issued by Revenue after the

amendment made by the Finance Act, 1989 must comply with the

amended provision of the law. Therefore, any notice issued after 1

st

April, 2021 must comply with the amended provisions of the Act

which was amended with effect from 1

st

April, 2021. This contention

has also been considered and upheld by the Delhi High Court and the

Allahabad High Court.

35 We have to also note the well settled proposition that when the Act

specifies that something is to be done in a particular manner, then,

that thing must be done in that specified manner alone, and any other

method/(s) of performance cannot be upheld. Hence, notices issued

under Section 148 of the Act after 1

st

April, 2021 must comply with

the amended provisions of law and cannot be sustained on the basis

of the erstwhile provision.

36 In order to uphold the arguments of the Revenue in this regard,

either a savings clause, or a specific legislative enactment deferring

applicability of the amended provisions and the repeal of the old

provisions of the Act, would be required. Plainly no such savings

clause or enactment is available.

37 Section 3(1) of Relaxation Act does not provide that any notice

issued under Section 148 of the Act, after 31

st

March 2021 will relate

back to the original date or that the clock is stopped on 31

st

March,

2021 such that the provision as existing on such date will be

applicable to notices issued relying on the provision of Relaxation Act.

A plain reading of Relaxation Act, as Mr. Mistri rightly submitted,

makes it clear that Section 3(1) of Relaxation Act merely extends the

limitation provided in the specified Acts (including Income-tax Act)

for doing certain Acts but such Acts must be performed in accordance

with the provisions of the specified Acts. Therefore, if there is an

amendment in the specified Act, the amended provision of the

specified Act would apply to such actions of the Revenue. The Delhi

High Court has considered and rejected the contention of the Revenue

that the notice issued after 1

st

April 2021 relates back to an earlier

period.

38 The Delhi High Court has considered and rejected this argument of

the Revenue that Relaxation Act creates a legal fiction such that the

notices issued under Section 148 of the Act are deemed to be issued

on 31

st

March, 2021. The so-called legal fiction is directly contrary to

the Revenue’s own Circular No.549 of 1989, which is binding on them

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as well as the well settled principle that the validity of a notice is to be

judged on the basis of the law that prevails at the time of its issue.

39 Even though Relaxation Act was in existence when the Finance

Act, 2021 was passed, the parliament has specifically made the

amended provisions of Sections 147 to 151 of the Act as being

applicable with effect from 1

st

April, 2021. Therefore, the intention of

the legislature is clear that substituted provisions must apply to

notices issued with effect from 1

st

April, 2021. No savings clause has

been provided in the Act for saving the erstwhile provisions of

Sections 147 to 151 of the Act, like in Section 297 of the Act where,

the Parliament when it intended, has specifically provided the savings

clause.

40 On a plain reading of Relaxation Act it is clear that the only

powers granted to the Central Government by Relaxation Act is the

power to notify the period during which actions are required to be

taken that can fall within the ambit of Relaxation Act, and the power

to extend the time limit within which those actions are to be taken. A

plain reading of the impugned Explanations in Notification Nos.20 of

2021 and 38 of 2021 shows that it purports to “clarify” that the

unamended provisions of Sections 147 to 151 of the Act will apply for

the purposes of issue of notices under Section 148 of the Act, which is

clearly ultra vires Relaxation Act.

41 In our view, the reopening notices issued after 1

st

April, 2021 are

unsustainable and bad in law even if one was to apply the

Explanations to the Notification Nos.20 of 2021 and 38 of 2021. The

Explanation seeks to extend the applicability of erstwhile Sections

148, 149 and 151. The impugned Explanation does not cover Section

147, which (as amended) empowers the revenue to reopen an

assessment subject to Sections 148 to 153, which includes Section

148A. Thus, even if Explanations are valid, the mandatory procedure

laid down by Section 148A has not been followed and hence, without

anything further, the notices under Section 148 of the Act are invalid

and must be struck down for this reason as well. This proposition has

also been upheld by the Delhi High Court.

42 As regards Revenue’s arguments that Relaxation Act being a

beneficial legislation must be given purposive interpretation’, the

purpose of Section 3(1) of Relaxation Act is to extend limitation

periods as provided in a specified Act (including the Income-tax Act).

The purpose of Section 3(1) of Relaxation Act is not to postpone the

applicability of amended provisions of a Specified Act. Though

Relaxation Act was in existence when the Finance Act, 2021 was

passed, the Parliament has specifically enacted the new, (amended)

provisions of Section 147 to 151 of the Act and made them applicable

with effect form 1

st

April, 2021. Therefore, it is clear that amendment

is to be applied from 1

st

April, 2021. Further, when there is no

ambiguity on the applicability of the provision, there is no question of

resorting to purpose test.

43 As regards liberty granted by the Allahabad High Court, certainly,

if the law permits issuance of notices under Section 148 of the Act (as

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amended), afresh, then no liberty is required to be granted by the

Court, and it would be within the Assessing Officer’s powers to initiate

proceedings as per the amended law. The Madras High Court has

considered this very plea and granted liberty to initiate reassessment

proceedings in accordance with the provisions of the amended Act, “if

limitation for it survives”.

44 As submitted by Mr. Mistri, with whom we agree, Chapter II of

Relaxation Act provide for – “Relaxation of Certain Provisions of

Specified Act”and Section 3 forms part of this Chapter. Further

Chapter III provides for amendment to Income Tax Act, 1961 and

various Sections of the Act have been amended in Chapter III. From

this the following propositions emerge :

(a) Wherever the Parliament thought fit, the Parliament has

itself amended the provision of the Income Tax Act, 1961 and not left

it for the CBDT to make the amendment. Therefore, it is clear that no

power is given under Relaxation Act to postpone the applicability of

provisions of the Income Tax Act.

(b) Chapter II of Relaxation Act is only for ‘Relaxation of

Certain Provisions of Specified Act’ and, therefore, there is no

question of the Revenue relying on this Chapter and Section 3 to

justify the postponement of applicability of certain provisions of the

Income Tax Act. If the Parliament wanted to give some right to the

CBDT, it would have formed part of Chapter III, however, there is no

such provision in Chapter III of the Act.

45 As submitted by Mr. Pardiwalla there are other Sections in the

Finance Act, 2021 which have amended other provisions of the

Income Tax Act from dates other than 1

st

April, 2021. Like for example

Section 12 of the Finance Act inserted a proviso in Section 43CA. Had

the intention of the legislature, while amending Sections 147 to 153,

been to give it effect from 1

st

July, 2021, a similar savings clause could

have been inserted, which has not been done. We agree with Mr.

Pardiwalla because as per Section 1(2)(a) of the Finance Act, 2021,

the amendments to Sections 147 to 153 of the Act shall come into

force on 1

st

April, 2021. Similarly, the Memorandum explaining the

provisions of the Finance Bill, 2021 clarifies that these amendments

will take effect from 1

st

April, 2021. Section 12 of the Finance Act

inserted a proviso in Section 43CA which inter alia provides that the

words ‘one hundred and ten percent’ in the first proviso will be

substituted by the words ‘one hundred and twenty percent’ if the

transfer of residential units takes place during the period beginning

from 12

th

day of November, 2020 and ending on the 30

th

day of June,

2021. Therefore, had the intention of the legislature, while amending

Sections 147 to 153, was to give it effect from 1

st

July, 2021, a similar

savings clause could have been inserted, which has not been done.

46 Mr. Pardiwalla submitted that only Section 4 of Relaxation Act

which amended the Act and no such amendments to the substantive

provisions of the Act were envisaged under Section 3 of Relaxation

Act, which was only a relaxation provision dealing with time limits

under various enactments.

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47 As noted earlier, it is Revenue’s case that Section 3 of Relaxation

Act enabled the Central Government to issue notifications which

would permit the Assessing Officers to issue notices under Section

148 of the Act after 1

st

April, 2021 in terms of the erstwhile provisions

of Sections 147 to section 151, even though the said provisions were

repealed with effect from 1

st

April, 2021 by the Finance Act, 2021. It

is, however, pertinent to note that Section 3 of Relaxation Act falls in

Chapter II of the said Act, which is titled ‘Relaxation of Certain

Provisions of Specified Act’. In contradistinction, Section 4 of

Relaxation Act which does amend several provisions of the Act falls in

Chapter III, which is titled ‘Amendments to the Income Tax Act, 1961’.

It will be apposite to notice that the amendments provided for in

Section 4 were made by the Legislature itself in terms of the said

Section and no such power to amend the Act was delegated to the

Central Government. Therefore, we would agree with Mr. Pardiwalla

that it is only Section 4 of Relaxation Act which amended the Act and

no such amendments to the substantive provisions of the Act were

envisaged under Section 3 of Relaxation Act, which was only a

relaxation provision dealing with time limits under various

enactments.

48 Mr. Pardiwalla submitted that even assuming for a moment that

the primary contention of petitioners that the Explanations in the

notifications are invalid is not accepted, still the impugned notices

will be bad in law as the Explanation only seeks to effectuate the

provisions of the erstwhile Sections 148, 149 and 151 of the Act. It

does not cover the erstwhile Section 147 of the Act. As rightly

submitted by Mr. Pardiwalla, the Assessing Officer could have

assumed jurisdiction while issuing the impugned notices only after

complying with the amended Section 147. The same has not been

done by the Assessing Officers as (a) his assumption of jurisdiction is

on the basis of his ‘reason to believe’ that income chargeable to tax

has escaped assessment, a concept, which is no longer recognised in

the amended Section 147; and (b) the amended Section 147 is in any

event subject to Sections 148 to 153, which would also include the

procedure contained in Section 148A, which has not been followed.

Therefore, the impugned notices do not even comply with the

relevant statutory provisions, even if we do not find fault with the

Explanations in the two notifications. Infact the Delhi High Court in

paragraph 84 of Mon Mohan Kohli (Supra) has also considered and

accepted this aspect of the matter.

49 Some more reasons why the reopening notices must go are :

(a) Section 297 of the Act provides a saving clause for

applicability of various provisions of the 1922 Act, even though the

Act itself had been repealed. In the absence of such a saving clause for

applicability of erstwhile Sections 147 to 151 of the Act, the amended

provision of the Act would apply from 1

st

April, 2021.

(b) Moreover, the reopening notices issued after 1

st

April,

2021 are bad in law even if one was to apply the Explanations to the

Notification Nos.20 and 38. The Explanations seek to extend the

applicability of erstwhile Sections 148, 149 and 151. They do not

cover Section 147, which empowers revenue to reopen subject to

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Section 148 to 153, which includes Section 148A. Thus, even if

Explanation are valid, procedure of Section 148A is not followed and

hence, notices are invalid.

(c) In any case, Relaxation Act is not applicable for

Assessment Years 2015-2016 or any subsequent year and, hence, the

question of applicability of the Notification Nos.20 and 38 of 2021

does not arise. The time limit to issue notice under Section 148 of the

Act for the Assessment Years 2015-2016 onwards was not expiring

within the period for which Section 3(1) of Relaxation Act was

applicable and, hence, Relaxation Act could never apply for these

assessment years. As a consequence, there can be no question of

extending the period of limitation for such assessment years.

These findings of the Bombay High Court have not been disturbed by

the Apex Court in Ashish Agarwal (Supra). The Apex Court only modified

the orders passed by the respective High Courts to the effect that the notices

issued under Section 148 of the Act which were subject matter of writ

petitions before various High Courts shall be deemed to have been issued

under Section 148A(b) of the Act and the Assessing Officer was directed to

provide within 30 days to the respective assessee the information and

material relied upon by the Revenue so that the assessee could reply to the

show cause notices within two weeks thereafter. The Apex Court held that

the Assessing Officer shall thereafter pass orders in terms of Section

148A(d) in respect of each of the concerned assessees. Thereafter, after

following the procedure as required under Section 148A may issue notice

under Section 148 (as substituted). The Apex Court also expressly kept open

all contentions which may be available to the assessee including those

available under Section 149 of the Act and all rights and contentions which

may be available to the concerned assessee and revenue under the Finance

Act 2021 and in law, shall be continued to be available.

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31Notwithstanding this, the CBDT has issued instruction No.1 of 2022

contary to what the courts have held. Even by the finding of the Apex Court

in Ashish Agarwal (Supra), only the original notice issued under Section 148

of the Act was converted into a notice deemed to have been issued under

Section 148A(b) of the Act. The Apex Court held that the Assessing Officer

shall thereafter pass orders in terms of Section 148A(b) in respect of each of

the assessee and after following the procedure as required under Section

148 of the Act. Even judgment in Ashish Agarwal (supra) does not

anywhere indicate the notices that could be issued for eternity like in this

case, on 31

st

July 2022, would be sanctioned by the authority other than

sanctioning authority defined under the Act.

32We have to also note that the instructions dated 11

th

May 2022, on

which respondents have relied upon, has no applicability to the facts of this

case. These instructions expressly provides that it applies only to the issue of

reassessment notice issued by the Assessing Officer during the period

beginning 1

st

April 2020 and ending with 30

th

June 2021 within the time

extended under TOLA and various notifications issued thereunder. Since the

impugned notice in this case is dated 31

st

July 2022, certainly the

instructions no.1 of 2022 dated 11

th

May 2022 shall have no applicability at

all. Even for a moment, if we accept Mr. Suresh Kumar’s arguments that

Apex Court’s findings in Ashish Agarwal (Supra) read with time extension

provided by TOLA will allow extended reassessment notices to travel back to

their original date when such notices were issued and then new Section 149

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of the Act is to be applied at that time, the extended reassessment notices

are defined under the instructions to be notice issued between 1

st

April 2021

and ending with 30

th

June 2021. Therefore, the instructions would not help

respondents’ case at all.

33As held by this court in J. M. Financials (Supra), Sidhmicro Equities

(P) Ltd. (Supra) and confirmed by the Apex Court that any notice issued

without the sanction of the correct sanctioning authority will be invalid.

This court in Godrej Industries Limited v. DCIT

16

has held that an

assessment can be reopened under section 147 and 148 of the Act only on

the jurisdictional preconditions being satisfied strictly. This Court held that

sanction of a superior officer to the reasons recorded in terms of section 151

should be obtained before issuing the notice under section 148 of the Act

and all jurisdictional requirements are required to be satisfied cumulatively

and even if one of the numerous jurisdictional requirements necessary for

issuing the notice under section 148 of the Act are not satisfied, the

reopening of an assessment would fail. Hence, in the present facts also since

the approval of the specified authority in terms of section 151(ii) of the Act

is a jurisdictional requirement and in the absence of complying with this

requirement, the reopening of assessment would fail.

The Calcutta High Court in K K Agarwal and Sons HUF v. ITO

17

while

dealing with the reopening of the assessment for AY 2016-17 held that the

approval granted by the PCIT is not in accordance with section 151(ii) of

16. (2015) 377 ITR 1 (Bom)

17. (WPA No. 25770 of 2022)

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the Act and such approval is not sustainable in law. Hence, the Court held

that the show cause notice under section 148A(b) and all subsequent

proceedings were not sustainable in law and were quashed.

CHANGE OF OPINION :-

34 On the facts of this case, as regards change of opinion, the information

made available is the same reason to believe. If one considers it clearly, it

indicates change of opinion. Paragraphs 2 to 6 of the information read as

under:

“2. Brief details of information collected/ received by AO: On perusal

of the records it is noticed that the assessee company has debited an

amount of Rs.6,41,87,931/- on account of Software consumables as

other expenses to the Profit and Loss account.

3. Analysis of information collected/received: As per the information

gathered from case record, the assessee company has debited an

amount of Rs.6,41,87,931/- on account of Software consumables. As

the said expenses is a capital expenditure. This attract depreciation at

the rate of 60%. Remaining 40% of software consumable, which

comes at Rs.2,56,75,172/- should have been disallowed and added

back to the business income of the assessee. This has resulted in

underassessment of income of Rs.2,56,75,172/-.

4. Enquiry made by the AO: The assessment records of assessee for

year under consideration has been analysed and as per the

information gathered from case record the assessee company has

debited an amount of Rs.35,90,19,339/- as other expenses. On perusal

of details of other expenses, it is noticed that the assessee has claimed

the software consumable of Rs.6,41,87,931/-on account of Software

consumable. Expenses on acquiring software consumable is a capital

expenditure. Section 37(1) provide for deduction for any expenditure

(not being expenditure of the nature described in sections 30 to 36

and not being in the nature of capital expenditure or personal

expenses of the assessee), laid out or expended wholly and exclusively

for the purposes of the business or profession under the head "Profit

and gain of business or profession". Hence capital expenditure

incurred for acquisition of an intangible asset should have been

disallowed and added back the total income after allowing

depreciation at the applicable rate of 60%, which resulted into

underassessment of income of Rs.2,56,75,172/-.

5. Finding of the AO: In this case, an amount of Rs.6,41,87,931/- had

been debited in P&L A/c. on account of Software consumable. As

expenses on acquiring computer software consumable is a capital

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expenditure, the same is not allowable as per the provision of section

37 of Income Tax Act, 1961. Hence capital expenditure incurred for

acquisition of an intangible asset should have been disallowed and

added back the total income after allowing depreciation at the

applicable rate of 60%, which resulted into underassessment of

income of Rs. 2,56,75,172/-.

6. Basis of forming reason to believe and details of escapement of

income: In view of the finding of AO (as mentioned in para 5 above), I

have a reason to believe that the Income chargeable to tax of Rs.

2,56,75,172/-, has escaped assessment under the meaning of section

147 of the Income tax Act, 1961. The AO has carefully applied his

mind to the facts and circumstances of the case. The information in

possession of the AO gives a substantial basis for the formation of a

reason to believe to initiate re-assessment u/s. 147 of the Income Tax

Act, 1961.”

35During the course of assessment proceedings, notice had been issued

to petitioner. In reply to the notice under Section 143(2), petitioner had by

its letter dated 6

th

December 2018 recorded, “……… based upon our

discussion during the course of the hearing ……………...”. The transaction

wise summary of the software consumable was made available. This was

considered during the assessment proceedings and the assessment order

accepting revised return came to be passed.

36We would agree with the submissions of Mr. Pardiwalla that if change

of opinion concept is given a go by, that would result in giving arbitrary

powers to the Assessing Officer to reopen the assessments. It would in effect

be giving power to review which he does not possess. The Assessing Officer

has only power to reassess not to review. If the concept of change of opinion

is removed as contended on behalf of the Revenue, then in the garb of re-

opening the assessment, review would take place. The concept of change of

opinion is an in-built test to check abuse of power by the Assessing Officer.

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As held in Dr. Mathew Cherian (Supra), whether under old or new regime

of reassessment, it is settled position that the issues decided categorically

should not be revisited in the guise of reassessment. That would include

issues where query have been raised during the assessment and query have

been answered and accepted by the Assessing Officer while passing the

assessment order. As held in Aroni Commercials (supra) even if assessment

order has not specifically dealt with that issue, once the query is raised it is

deemed to have been considered and the explanation accepted by the

Assessing officer. It is not necessary that an assessment order should contain

reference and/or discussion to disclose his satisfaction in respect of the

query raised.

The Division Bench of this court in Aroni Commercials Ltd. (supra)

held it is not necessary that the assessment order should contain reference

and/or discussion to disclose its satisfaction in respect of the query raised.

Paragraph 14 of Aroni Commercials Ltd. (supra) read as under:

“14. We are of the view that once a query is raised during the

assessment proceedings and the assessee has replied to it, it follows

that the query raised was a subject of consideration of the Assessing

Officer while completing the assessment. It is not necessary that an

assessment order should contain reference and/or discussion to

disclose its satisfaction in respect of the query raised. If an Assessing

Officer has to record the consideration bestowed by him on all issues

raised by him during the assessment proceeding even where he is

satisfied then it would be impossible for the Assessing Officer to

complete all the assessments which are required to be scrutinized by

him under Section 143(3) of the Act. Moreover, one must not forget

that the manner in which an assessment order is to be drafted is the

sole domain of the Assessing Officer and it is not open to an assessee

to insist that the assessment order must record all the questions raised

and the satisfaction in respect thereof of the Assessing Officer. The

only requirement is that the Assessing Officer ought to have

considered the objection now raised in the grounds for issuing notice

under Section 148 of the Act, during the original assessment

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proceedings. There can be no doubt in the present facts as evidenced

by a letter dated 8 September 2012 the very issue of taxability of sale

of shares under the head capital gain or the head profits and gains

from business was a subject matter of consideration by the Assessing

Officer during the original assessment proceedings leading to an order

dated 12 October 2010. It would therefore, follow that the reopening

of the assessment by impugned notice dated 28 March 2013 is merely

on the basis of change of opinion of the Assessing Officer from that

held earlier during the course of assessment proceeding leading to the

order dated 12 October 2010. This change of opinion does not

constitute justification and/or reasons to believe that income

chargeable to tax has escaped assessment.”

37The Assessing Officer does not have any power to review his own

assessment when during the original assessment petitioner provided all the

relevant information which was considered by him before passing the

assessment order under section 143(3) of the Act dated 23

rd

December

2018. Petitioner had debited an amount of Rs.6,41,87,931/- on account of

software consumables in the profit and loss account and a detailed break-up

of the said expenses were submitted before the Assessing Officer during the

course of assessment proceedings vide a letter dated 6

th

December 2018. It is

settled law that proceedings under section 148 cannot be initiated to review

the earlier stand adopted by the Assessing Officer. The Assessing Officer

cannot initiate reassessment proceedings to have a relook at the documents

that were filed and considered by him in the original assessment

proceedings as the power to reassess cannot be exercised to review an

assessment. In petitioner’s case the Assessing Officer having allowed the

amount of software consumables as a revenue expenditure now seeks to

treat the same as capital expenditure which is a clear change of opinion.

Various judicial precedents have held that reassessment proceedings

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initiated on the basis of a mere change of opinion are invalid and without

jurisdiction.

38The Apex Court in Kelvinator of India Ltd.(Supra) emphasised on the

difference between a power to review and the power to reassess. The Apex

Court held that the Assessing Officer has no power to review but has only

the power to reassess. The concept of ‘change of opinion’ must be treated as

an in-built test to check abuse of power by the Assessing Officer. The

relevant extract of the judgement is reproduced as under:-

“…….However, one needs to give a schematic interpretation to the

words "reason to believe" failing which, we are afraid, section 147

would give arbitrary powers to the Assessing Officer to re-open

assessments on the basis of "mere change of opinion", which cannot

beper sereason to reopen. We must also keep in mind the conceptual

difference between power to review and power to re-assess. The

Assessing Officer has no power to review; he has the power to

reassess. But reassessment has to be based on fulfilment of certain

pre-condition and if the concept of "change of opinion" is removed, as

contended on behalf of the Department, then, in the garb of re-

opening the assessment, review would take place. One must treat the

concept of "change of opinion" as an in-built test to check abuse of

power by the Assessing Officer. Hence, after 1-4-1989 , Assessing

Officer has power to reopen, provided there is "tangible material" to

come to the conclusion that there is escapement of income from

assessment. Reasons must have a live link with the formation of the

belief. Our view gets support from the changes made to section 147 of

the Act, as quoted hereinabove. Under the Direct Tax Laws

(Amendment) Act, 1987 , Parliament not only deleted the words

"reason to believe" but also inserted the word "opinion" in section 147

of the Act. However, on receipt of representations from the

Companies against omission of the words "reason to believe",

Parliament re-introduced the said expression and deleted the word

"opinion" on the ground that it would vest arbitrary powers in the

Assessing Officer………….”

39The Delhi High Court in Seema Gupta v. ITO

18

held that the order

under section 148A(d) and notice under section 148 of the Act should be set

aside when the reassessment was initiated on a change of opinion where the

18. (2022) 288 Taxman 519 (Del)

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same was discussed and verified by the Assessing Officer at the time of

original assessment proceedings.

40While concluding, Mr. Suresh Kumar submitted that the effect of

setting aside notice on the ground of not having obtained proper sanction

would result in stalling the entire reassessment proceedings. Rajasthan High

Court in Sudesh Taneja Vs. ITO

19

held that (a) taxing statute must be

interpreted strictly. Equity has no place in taxation. Nor while interpreting

taxing statute intendment would have any place.

(b)There is nothing unjust in the tax payer escaping if the letter of the

law fails to catch him on account of the legislature’s failure to express itself

clearly.

(c)It is axiomatic that taxation statute has to be interpreted strictly

because the State cannot at their whims and fancies burden the citizens

without authority of law.

(d)In the matter of interpretation of charging section of a taxation

statute, strict Rule of interpretation is mandatory and if there are two views

possible in the matter of interpretation of a charging section, the one

favourable to the assessee need to be applied. Paragraph 31(i) of Sudesh

Taneja (supra) reads as under:

“31. We may now attempt to answer these questions ourselves with

the aid of statutory provisions and law laid down in various decisions

cited before us we may summarise certain principles applicable in the

field of taxation and which principles would be invoked in the course

of the judgment:-

(i) A taxing statute must be interpreted strictly. Equity has no place in

19. 442 ITR 289

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taxation nor while interpreting taxing statute intendment would have

any place. In case of State of W.B. Vs. Kesoram Industries Ltd. And

Ors., (2004) 10 SCC 201, referring to Article 265 of the Constitution

which provides that no tax shall be levied or collected except by

authority of law, it was observed that in interpreting a taxing statute,

equitable considerations are entirely out of place. Taxing statutes

cannot be interpreted by any presumption or assumption. A taxing

statute has to be interpreted in light of what is clearly expressed; it

cannot imply anything which is not expressed; it cannot import

provisions in the statute so as to supply any deficiency. Before taxing

any person it must be shown that he falls within the ambit of charging

section by clear words used in the section and if the words are

ambiguous and open to two interpretations, the benefit of

interpretation is given to the subject. There is nothing unjust in the

tax payer escaping if the letter of the law fails to catch him on account

of the legislature's failure to express itself clearly.

A Constitution Bench in the case of Commissioner of Customs

(Import), Mumbai Vs. Dilip Kumar And Company And Ors., (2018) 9

SCC 1, had reiterated these principles. It was a case where on a

reference to the Larger Bench the Supreme Court was considering a

question whether an ambiguity in a tax exemption provision or

notification, the same must be interpreted so as to favour the

assessee. Making a clear distinction between a charging provision of a

taxing statute and exemption notification which waives a tax or a levy

normally imposed, the Supreme Court observed as under:-

"14. We may, here itself notice that the distinction in interpreting a

taxing provision (charging provision) and in the matter of

interpretation of exemption (98 of 113) [CW-969/2022] notification

is too obvious to require any elaboration. Nonetheless, in a nutshell,

we may mention that, as observed in Surendra Cotton Oil Mills Case,

in the matter of interpretation of charging Section of a taxation

statute, strict Rule of interpretation is mandatory and if there are two

views possible in the matter of interpretation of a charging section,

the one favourable to the Assessee need to be applied. There is,

however, confusion in the matter of interpretation of exemption

notification published under taxation statutes and in this area also,

the decisions are galore.

24. In construing penal statutes and taxation statutes, the Court has

to apply strict Rule of interpretation. The penal statute which tends to

deprive a person of right to life and liberty has to be given strict

interpretation or else many innocent might become victims of

discretionary decision making. Insofar as taxation statutes are

concerned, Article 265 of the Constitution prohibits the State from

extracting tax from the citizens without authority of law. It is

axiomatic that taxation statute has to be interpreted strictly because

the State cannot at their whims and fancies burden the citizens

without authority of law. In other words, when the competent

Legislature mandates taxing certain persons/certain objects in certain

circumstances, it cannot be expanded/interpreted to include those,

which were not intended by the legislature."

41In the circumstances, we make the Rule absolute and allow the

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petition for the following reasons:

(a) that approval for issuance of notice under Section 148A(d) of the Act

has not been properly obtained and hence the order passed thereunder

and consequent notice issued under Section 148 of the Act have to be

quashed and set aside. The sanction ought to have been granted under

Section 151(ii) and not under Section 151(i) of the Act.

(b) The notice to reopen has also been issued on the basis of change of

opinion which is not permissible.

42Since we have disposed the petition on these grounds, we have not

considered the other grounds which can be considered in some other matter

at the appropriate stage.

43No order as to costs.

(Dr. N. K. GOKHALE, J.) (K.R. SHRIRAM, J.)

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