Patna High Court
Ankit Agarwal vs The Principal Chief Commissioner Of … on 18 April, 2025
Author: Rajeev Ranjan Prasad
Bench: Rajeev Ranjan Prasad, Ashok Kumar Pandey
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.5202 of 2024
======================================================
Ankit Agarwal son of Shri Ganesh Agarwal, presently residing at Flat No.
413, Athena Apartment, Jai Singh Highway, P.S. Bani Park, District Jaipur
(Rajasthan).
... ... Petitioner
Versus
1. The Principal Chief Commissioner of Income Tax Bihar and Jharkhand,1st
Floor, C.R. Building, Beerchand Patel Marg, Patna.
2. The Chief Commissioner of Income Tax, Bihar and Jharkhand, 1st Floor,
C.R. Building, Beerchand Patel Marg, Patna.
3. The Commissioner of Income Tax, Muzaffarpur, Atithi Bhavan, Sahu Road,
Muzaffarpur.
4. The Additional/Joint Commissioner of Income Tax, Range-II, Muzaffarpur
Chandralok Bhavan, Chandralok Chowk, Naya Tola, Muzaffarpur.
5. The Income Tax Officer, Ward 2(5) Sitamarhi, Chandrakala Bhavan,
Bhawdevpur, Sitamarhi.
6. The Assessing Authority, National Faceless Assessment Centre, Income Tax
Department, New Delhi.
... ... Respondents
======================================================
Appearance :
For the Petitioner/s : Mr. Vishal Kumar, Advocate
Mr. Akshat Agarwal, Advocate
Mr. Lokesh Kumar, Advocate
Mr. Vikash Khanna, Advocate
For the Respondent/s : Mrs. Archana Sinha @ Archana Shahi, Sr. SC
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE ASHOK KUMAR PANDEY
ORAL JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)
Date : 18-04-2025
Heard learned counsel for the petitioner and learned
Senior Standing Counsel for the Department of Income Tax (the
respondents).
2. This writ application has been filed seeking the
following reliefs:-
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"(i) For quashing the Show Cause Notice dated
29.02.2024
bearing DIN: ITBA/ AST/F/144(FCM)/2023-
24/1061726288(1) issued by the Respondent Department
for being issued without jurisdiction as the very initiation
of the impugned re-assessment proceeding was initiated on
admitted false premise by issuing false notice under
Section 148A(b) of the Income Tax Act, 1961;
(ii) For quashing the order dated 06.04.2022 bearing DIN
and ITBA/AFT/F/148A/2022-24/Notice No. 1042559776
(1) passed under Section 148A(d) of the Income Tax Act,
1961 as the same has been passed on false premise that the
petitioner is a non-filer of return and has escaped
assessment of income for the Assessment Year 2015-16
whereas in the impugned Show Cause Notice it has been
admitted that the petitioner had filed its Income Tax
Return for the Assessment Year 2015-16;
(iii) For setting aside the entire re-assessment proceeding
and inquiry conducted under Section 142 of the Income
Tax Act, 1971 with respect to Assessment Year 2015-16 as
the same had been initiated on the basis of the impugned
order dated 06.04.2022 passed under Section 148A(d) of
the Income Tax Act, 1961 which is per se illegal, arbitrary
and bad in law;
(iv) For a declaration that if the impugned order dated
06.04.2022 passed under Section 148A(d) of the Income
Tax Act, 1961 would not have been passed for being time
barred in terms of Section 149 of the Income Tax Act,
1961 if the Respondent Department would had issued
notice alleging wrong claim of exempted income under the
head of long term capital gain of an amount of Rs.
25,90,000/- as the limitation for issuing notice is such
matters are 3 years;
(v) For a declaration that the Respondent Department
issued a notice under Section 148A(b) of the Income Tax
Act, 1961 on false premise alleging the Petitioner to be a
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non-filer of Return and further alleging escaped
assessment for the Assessment Year 2015-16 and non-
payment of tax on income of Rs. 1,04,90,899/- with sole
intention to take benefit of the longer period of limitation
prescribed for issuance of notice under Section 149 of the
Income Tax Act, 1961 as, if the Notice under Section
148A(b) would have been issued for the alleged claim of
bogus Long Term Capital Gain to the tune of Rs.
25,90,000/- after scrutinizing the Income Tax Return filed
by the Petitioner for the Assessment Year 2015-16, the
same would had been hopelessly time barred as the
limitation for issuing Notice under Section 149 of the
Income Tax Act, 1961 with respect to amount below
Rs.50,00,000/- is 3 years; and/or for any other order/orders
as your honour may deem fit in the facts and the
circumstances.”
Brief facts of the case
3. Petitioner is a citizen of India who filed his Income
Tax Return before the respondent Income Tax Officer, Ward 2(4),
Sitamarhi vide ΡΑΝ: ΑΙΤΡΑ 5484A for the assessment year 2015-
16. He is running a proprietary concern in the name and style of
M/s Subhlaxmi Dal Mill situated at Hajarimal Road, Bairgania,
Sitamarhi and M/s Agrawal Traders situated at Rajdhani Krishi
Upaj Mandi, Sikkar Road, Kukarkheda, Jaipur, Kukarkheda.
4. It is the case of the petitioner that he filed his Income
Tax Return for the Assessment Year 2015-16 (Financial Year 2014-
15) on 30.03.2016 wherein on the basis of the computation of its
return, the petitioner had disclosed the total income to the tune of
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Rs.7,99,950/- upon which he paid tax to the tune of Rs. 96,345/-.
He had claimed exempted tax to the tune of Rs. 25,04,808/- under
‘Other Head’ as Long-Term Capital Gain received from sale of
shares.
5. The Profit & Loss Account, Balance Sheet and Books
of Accounts of the petitioner’s proprietaryship firm was audited by
a Chartered Accountant who issued Audit Report under Section
44AB of the Income Tax Act, 1961 (hereinafter referred to as the
‘Act of 1961’). A copy of the Income Tax Return Acknowledgment
and the audit report are enclosed with the writ application as
Annexure ‘P/1’ and ‘P/2’ respectively.
6. The grievance of the petitioner is that after
completion of six years, the petitioner was served with impugned
order purportedly passed under Section 148A(d) of the Act of 1961
on 06.04.2022 with respect to Assessment Year 2015-16. A copy of
the order dated 06.04.2022 is Annexure ‘P/3’ to the writ
application.
Submissions on behalf of the Appellant
7. Learned counsel for the petitioner submits that
reading of the impugned order would show that the Notice under
Section 148A (b) of the Act of 1961 dated 23.03.2022 was issued
upon the petitioner due to non-filing of return. According to the
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said notice, on the basis of the information received from Insight
Portal under the Module “Non-filing of Return” the petitioner was
served with a notice which wrongly alleged that he had not filed
his Income Tax Return for the Assessment Year 2015-16.
8. Learned counsel for the petitioner submits that as per
the notice (Annexure ‘P/3’) it is alleged in the impugned order that
in the relevant Assessment Year, the petitioner had deposited in
cash aggregating to Rs.60,92,995/- in the State Bank of India and
has further made transaction of Rs. 43,97,919/-. On the basis of
these information, the Assessing Officer was of the view that
petitioner being a non-filer of return had total income of Rs.
1,04,90,899/- from different sources but he had failed to offer tax,
thus, it is a case of escaped assessment. On these facts, the
impugned order dated 06.04.2022 passed under Section 148A(d)
of the Act of 1961 and notice under Section 148 of the Act of 1961
were directed to be issued against the petitioner.
9. Learned counsel for the petitioner submits that on
receipt of the letter dated 30.01.2023 from the Assessing Officer
(Annexure ‘P’4’), he immediately filed a reply and brought it to
the notice of the Assessing Officer that the petitioner is a regular
assessee of Income Tax, his books of accounts are audited annually
and requested the Respondent-Department to drop the impugned
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proceeding initiated for assessment/reassessment of the return of
the petitioner. It is submitted that despite the specific reply of the
petitioner, the Respondent-Department issued Notice for
assessment under Section 142(1) of the Act of 1961 dated
07.06.2023 whereby the petitioner was directed to submit certain
documents detailed therein with respect to Assessment Year 2015-
16. The petitioner complied with the said notice and submitted the
requisite documents vide letter dated 19.06.2023 and 07.07.2023.
10. Learned counsel for the petitioner submits that the
petitioner submitted compliance of the two notices issued under
Section 142(1), still the Respondent-Department issued a third
notice under Section 142(1) dated 30.10.2023. The petitioner
complied with the notice and submitted all the relevant documents
which were best available with him.
11. It is submitted that it is apparent from the materials
on the record that on false premise and on the basis of wrong
information, just in order to take benefit of longer period of
limitation, as prescribed under Section 149 of the Act of 1961, the
impugned order dated 06.04.2022 under Section 148A(d) of the
Act of 1961 was passed.
12. It is submitted that the petitioner has been issued
impugned Show Cause Notice dated 29.02.2024 under signature of
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the Assessment Unit, Income Tax Department whereby long term
gain to the tune of Rs. 25,90,000/- on account of sale of shares has
been alleged to be bogus and the petitioner has been showcaused
as to why the said variation be not implicated on the petitioner.
The Department has doubted the sale proceeds of sale of 7000
shares of Tarang Project by the petitioner which was purchased by
the petitioner on 13.06.2009 from M/s. Tushar (India) Pvt. Ltd.
vide Contract No. 13 dated 13.06.2009 which was subsequently
sold by the petitioner through Hindustan Tradecom Pvt. Ltd. The
sale proceeds of said shares were received in the bank account of
the petitioner and also duly accounted in its books of accounts. It
is submitted that the long term capital gain claimed as exempted
by the petitioner has been arbitrarily denied by the Respondent-
Department.
13. During pendency of the writ application, the
Respondent-Assessing Authority, Assessment Unit, Income Tax
passed assessment order under Section 144, 144(b) read with
Section 147 of the Act of 1961 on 18.03.2024 and raised a notice
of demand under Section 156 of the Act on 18.03.2024. The
petitioner has challenged the assessment order and notice of
demand both dated 18.03.2024 by which the department has asked
the petitioner to pay a sum of Rs. 19,45,394/-. For this purpose,
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I.A. No. 1 of 2024 annexing the assessment order and notice of
demand as Annexure ‘P/11’ has been filed and the writ application
has been amended by the said I.A. This Court allowed the
amendment application vide order dated 10.02.2025 and the
department was given an opportunity to file a consolidated counter
affidavit answering all aspects of the matter.
14. Learned counsel for the petitioner has relied upon
the judgment of the Hon’ble Supreme Court in the case of Union
of India vs. Rajeev Bansal reported in [2024] 469 ITR 46 (SC) to
submit that in the said case the Hon’ble Supreme Court has taken
note of the reassessment notices issued between 1st April, 2021 and
30th June, 2021 under the old regime on the ground that (i) sections
147 to 151 stood substituted by Finance Act, 2021 from 1 st April,
2021; (ii) In the absence of any saving clause, the Revenue could
initiate reassessment proceedings after 1st April, 2021 only in
accordance with the provisions of the new regime since they were
remedial, beneficial, and meant to protect the rights and interests
of the assessees and (iii) the Central Government could not
exercise its delegated authority to reactivate the pre-existing law.
The Hon’ble Supreme Court has held that the benefit of the new
provisions shall be made available even in respect of the
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proceedings relating to past assessment years, provided section
148 notice has been issued on or after 01.04.2021.
15. Learned counsel for the petitioners submits that in
this case the Assessing Officer proceeded to issue the order based
on “mere information” without there being any evidence of
possession of books of accounts or other documents which would
have revealed that income chargeable to tax which amounts to Rs.
50 lakhs or more has escaped assessment. Learned counsel has
relied upon paragraph ‘7.8’ and ‘8.1’ of the CBDT Instruction No.
01 of 2022 dated 11th May, 2022.
16. It is further submitted that the inflated amounts have
been shown in the impugned order to initiate reassessment without
any cogent evidence, to escape the threshold of Rs. 50 lakhs which
is a prerequisite to initiate reassessment and the ultimate post
enquiry figure of income escaping assessment is only Rs. 29 lakhs
which admittedly could not have triggered the notice after six
years of the end of the assessment year. The very premise of the
notice that assessee is a non-filer of return is flawed.
17. Learned counsel submits that lack of jurisdiction
goes to the root of the matter and in this case a jurisdictional error
has been committed by the assessing authority which will vitiate
the whole reassessment proceedings. Learned counsel has relied
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upon the judgment of the Bombay High Court in the case of
Inventors Industrial Corporation Ltd. v. CIT reported in 1991
SCC OnLine Bom 655 : (1992) 194 ITR 548 : (1991) 96 CTR
206.
18. Learned counsel further submits that the speech of
the Finance Minister while introducing the amendment in the
Income Tax Laws may be found in the judgment of the Hon’ble
Delhi High Court in the case of Ganesh Dass Khanna vs. Income
Tax Officer and Anr. reported in [2024] 460 ITR 546 (Delhi)
wherein it is clearly stated that only in serious tax evasion cases
where there is evidence of concealment of income of more than
Rs. 50 lakhs, can the re-assessment be opened beyond the
prescribed limitation period of three years. The approval for the
same has to be taken from the highest level of the Department.
19. Learned counsel has further relied upon a judgment
of learned Division Bench of this Court in Salik Khan vs.
Assessment Unit, Income Tax Department and Anr. (CWJC No.
7568 of 2024) in which it has been held that while issuing a notice
under Section 148A, the Revenue has to supply the information
and material relied upon within 30 days. It is submitted that in the
present case while issuing notice under Section 148A(b), the
assessing authority did not make available any material in support
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of the information furnished in the annexure to the notice under
Section 148A. Learned counsel has relied upon paragraph ‘101’ of
the judgment in the case of Rajeev Bansal (supra) to submit that it
specifically talks of supply of the relevant material to the assessee
which forms basis of the deemed notice. Learned counsel has
taken this Court through the acknowledgment (Annexure ‘P/1’)
and the copy of the audit report to submit that the petitioner had
filed his return well in time and had claimed exempted income of
Rs. 25,04,808/-. It is also pointed out that while in the notice under
Section 148A, the assessing authority mentions that there were a
cash deposit of Rs. 20 lakhs in his bank account, during the
proceeding there is no discussion of any cash deposit. This,
according to the learned counsel for the petitioner would show that
while issuing notice under Section 148A, the assessing authority
had inflated the amount.
Stand of the Respondents
20. The writ application has been opposed by learned
Senior Standing Counsel for the Department. A counter affidavit
has been filed on behalf of the Department in which it is stated that
the assessee was served with a notice under Section 148A(b) of the
Act of 1961 dated 23.03.2022 calling upon him to show cause as
to why a notice under Section 148 of the Act be not issued to him.
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The assessee did not submit any reply to the show cause notice
dated 23.03.2022, therefore, it was assumed that the assessee has
his total income of Rs. 1,04,90,914/- from different sources which
had escaped assessment for the Assessment Year 2015-16 and
accordingly order under Section 148A(d) was passed on
06.04.2022 after approval of the competent authority.
21. The counter affidavit enlists the details of the
opportunity given to the assessee from which it appears that one
show cause notice was issued on 23.03.2022 under section 148A(b).
It is stated that after receipt of the notice under Section 148 of the
Act, the assessee did not file his return of income. Later on, the case
was transferred to Faceless Unit for assessment proceedings. It is
admitted that during assessment, the Faceless Assessing Officer
(FAO) found that the assessee had filed its ITR on 30.03.2016
declaring total income of Rs. 7,99,960/-. The FAO observed that the
assessee had purchased 7000 Equity Shares of Tarang Project from
one M/s Tushar (India) Pvt. Ltd. on 13.06.2009 which was further
sold on 24.03.2015 through some other broker. When the assessee
was asked about this, he submitted his inability to provide the details
of broker. The reason given by the assessee is that as the data was too
old to recover and also did not maintain any Demat or Trading
Account with the said broker. He was not having any share transfer
slip for transfer of shares in his name. He had not received any
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dividend from Tarang Project Scrip from the date of purchase i.e.
13.06.2009 and upto 23.03.2015. The broker companies were issued
Notice under section 133(6) of the Act for information about
purchase and transfer of shares, but both of them failed to provide the
requisite information. In these circumstances, treating it as an
unexplained cash credit under Section 68 read with Section 115 BBE
of the Act of 1961. The assessee replied on 04.03.2024 and stated
that documents in question are quite old and further sought extension
for four weeks time. It is stated that as the case was going to be
barred by limitation on 31.03.2024, an adjournment letter was issued
by the FAO to the assessee on 05.03.2024 requesting the assessee to
submit his response to the show cause notice by 08.03.2024. On
08.03.2024, assessee submitted his response in which for the first
time, he challenged the proceeding under Section 148A and Order
under Section 148A(d) on the ground of false and wrong
information.
22. In these circumstances, the assessment proceeding has
been concluded.
Submissions on behalf of the Respondent
23. Learned Senior Standing Counsel for the
Department has produced the records and while going through the
notice under Section 148A when a query was made by this Court
with regard to the contents of the annexure to the notice under
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clause (b) of Section 148A, learned Senior Standing Counsel for
the Department submits that the first paragraph of the annexure to
the said notice seems to be incorrect and maybe a result of a cut
and paste practice while preparing the annexure to the notice.
Learned Senior Standing Counsel, however, submits that so far as
the main content of the annexure is concerned, it is correct and
based on an information available on the Insight Portal of the
Department which was showing a cash deposit aggregating to Rs.
20 lakhs in the State Bank of India and a transaction of Rs.
26,31,400/- and Rs. 43,97,919/- and further it was showing that the
assessee had sold equity shares in a recognised stock exchange of
Rs. 5,56,584/-.
24. Learned Senior Counsel submits that the notice
under Section 148A(b) has been issued with prior approval of the
PC CIT, Bihar and Jharkhand. In this regard, the attention of this
Court has been drawn towards paragraph ‘4’ of the notice
(Annexure ‘A’ to the rejoinder).
25. Learned Senior Standing Counsel further submits
that before issuance of Section 148 notice, the Department has
followed the procedures prescribed by law and the reassessment
proceeding had been opened only after giving an appropriate
opportunity of hearing to the petitioner. Learned Senior Standing
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Counsel submits that under the old law, the Department had six
years available for issuance of notice under Section 148 of the Act.
The period of six years would have lapsed on 31.03.2022 but if the
time given to respond is excluded in counting the period of
limitation, the notice under Section 148 dated 06.04.2022 would
be found within time.
26. It is submitted that in the present case, despite
receipt of notice under Section 148 of the Act, the petitioner failed
to file his return. Learned Senior Standing Counsel has relied upon
the judgment of the Hon’ble Supreme Court in the case of GKN
Driveshafts (India) Ltd. vs. Income Tax Officer and Ors.
reported in (2003) 1 SCC 72.
27. Learned Senior Standing Counsel further submits
that at the stage of issuing notice under Section 148A, all that is
required is to provide the information on the basis of which the
notice has been issued. In case of Chaturbhuj Gattani vs.
Income-Tax Officer and Anr. reported in (2024) 468 ITR 295 :
2024 SCC OnLine Raj 3142 : (2024) 336 CTR 369 (Raj), the
Hon’ble Rajasthan High Court has held that the concept of
reasonable opportunity appears to be inherent in the inquiry
contemplated under section 148A. However, it has to be seen
whether this concept can be stretched to the extent of supplying of
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Officer that certain income has escaped assessment. It is her
submission that the Hon’ble Rajasthan High Court has held in case
of Chaturbhuj Gattani (supra) that on reading of section 148A it
may be found that it does not expressly provide for supply of any
material/evidence in support of the show-cause notice under
section 148A(b). Learned Senior Standing Counsel has further
relied upon a judgment of learned coordinate Bench of this Court
in the case of Chandra Shekhar vs. Principal Commissioner of
Income Tax and Anr. (CWJC No. 8351 of 2024) to submit that in
the said case, the Assessing Officer had issued notice under
Section 148A clause (b) on 28.03.2024 in respect of the
Assessment Year 2020-2021. The petitioner was contending that
for the purpose of limitation number of days is required to be
counted from the date of notice dated 22.04.2024. The Hon’ble
Court found that the notice dated 22.04.2024 was issued pursuant
to the petitioner’s reply to the notice dated 28.03.2024 i.e. reply
dated 31.03.2024. The Hon’ble Division Bench found that the 5th
and 6th proviso to Section 149 make it crystal clear that delay is
required to be taken note of with reference to notice. Since in the
said case notice means first notice issued on 28.03.2024 and it was
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Assessing Officer had jurisdiction.
28. Learned Senior Standing Counsel submits that the
impugned orders are in accordance with law, hence no interference
is required by this Court.
Consideration
29. We have heard learned counsel for the parties. In this
case, the first and foremost question which would arise for
consideration is altogether in terms of Section 149 of the Act of
1961 as amended vide Finance Act 2021 with effect from
01.04.2021, a notice under Section 148 or Section 148A could
have been issued by the assessing authority in respect of the
Assessment Year 2015-16.
30. Section 149 as amended by Finance Act, 2016 reads
as under:
Time limit for notice.
55
“149. 56[(1) No notice under section 148 shall be issued57
for the relevant assessment year,–
55. For relevant case laws, see Taxmann’s Master Guide to Income-tax
Act.
56. Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-
4-1989
57. For the meaning of the term “issued”, see Taxmann’s Direct Taxes
Manual, Vol.3.
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[(a) if four years have elapsed from the end of the
relevant assessment year, unless the case falls under clause
(b)59 [or clause (c)];
(b) if four years, but not more than six years, have elapsed
from the end of the relevant assessment year unless the
income chargeable to tax which has 60escaped assessment
amounts to or is likely to amount to one lakh rupees or
more60 for that year;
61
[(c) if four years, but not more than sixteen years, have
elapsed from the end of the relevant assessment year unless
the income in relation to any asset (including financial
interest in any entity) located outside India, chargeable to
tax, has escaped assessment.]
Explanation.–In determining income chargeable to tax
which has escaped assessment for the purposes of this sub-
section, the provisions of Explanation 2 of section 147
shall apply as they apply for the purposes of that section.
(2) The provisions of sub-section (1) as to the issue of
notice shall be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to
be served is a person treated as the agent of a non-resident
under section 163 and the assessment, reassessment or
recomputation to be made in pursuance of the notice is to
be made on him as the agent of such non-resident, the
notice shall not be issued after the expiry of a period of
62
[six] years from the end of the relevant assessment year.”
58. Clauses (a) and (b) substituted by the Finance Act, 2001, wef. 1-6-2001. Prior to their substitution, clauses
(a) and (b), as amended by the Direct Tax Laws (Second Amendment) Act, 1989, we.f. 1-4-1989, read as under:
“(a) in a case where an assessment under sub-section (3) of section 143 or section 147 has been made for such
assessment year,-
(i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause
(ii) or sub-clause (iii);
(ii) if four years, but not more than seven years, have elapsed from the end of the relevant assessment year unless
the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty
thousand or more for that year;
(iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless
the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees one lakh
or more for that year;
(b) in any other case,-
(i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause
(ii) or sub-clause (iii);
(ii) if four years, but not more than seven years, have elapsed from the end of the relevant assessment year,
unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees
twenty-five thousand or more for that year;
(iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless
the income chargeable to tax which has escaped assessment amounts to or is likely to amount to rupees fifty
thousand or more for that year.”
59. Inserted by the Finance Act, 2012, w.e.f. 1-7-2012.
60. For the meaning of the expressions “escaped assessment” and “likely to amount to one lakh rupees or more”,
see Taxmann’s Direct Taxes Manual, Vol. 3.
61. Inserted by the Finance Act, 2012, w.e.f. 1-7-2012
62. Substituted for “two” by the Finance Act, 2012, w.e.f. 1-7-2012.
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31. The Finance Act, 2021 inserted Section 148A with
a heading “Conducting inquiry, providing opportunity before
issue of notice under section 148. Section 148A as inserted by
Finance Act, 2021 with effect from 01.04.2021 reads as under:-
“148A. The Assessing Officer shall, before issuing any
notice under section 148,–
(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 section 148 should not be issued on the basis
of information which suggests that income chargeable to
tax has escaped assessment in his case for the relevant
assessment year and results of enquiry conducted, if any, as
per clause (a);
(c) consider the reply of assessee furnished, if any, in
response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record
including reply of the assessee, whether or not it 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 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:
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
20/31Provided that the provisions of this section shall not apply
in a case where,–
(a) a search is initiated under section 132 or books of
account, other documents or any assets are requisitioned
under section 132A in the case of the assessee on or after
the 1st day of April, 2021; or
(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 section 132 or
requisitioned under section 132A, in the case of any other
person on or after the 1st day of April, 2021, belongs to the
assessee; or
(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 section 132 or requisitioned under section 132A, in
case of any other person on or after the 1st day of April,
2021, pertains or pertain to, or any information contained
therein, relate to, the assessee.
Explanation.–For the purposes of this section, specified
authority means the specified authority referred to in
section 151.]”
32. Further, vide Finance Act, 2021 with effect from
01.04.2021, the time limit for notice under section 148 of the Act
was changed. Section 149 as substituted with effect from
01.04.2021 reads as under:-
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
21/31“28-36[Time limit for notice.
149. (1) No notice under section 148 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 asset, which
has escaped assessment amounts to or is likely to amount to
fifty lakh rupees or more for that year:
Provided that no notice under section 148 shall be issued at
any time in a case for the relevant assessment year
beginning on or before 1st day of April, 2021, if such
notice 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 this section, as they stood
immediately before the commencement of the Finance Act,
2021:
28-36. Substituted by the Finance Act, 2021, w.e.f. 1-4-2021. Prior to its substitution, section 149, as amended by the
Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-
1989, Finance Act, 2001, w.e.f. 1-6-2001 and Finance Act, 2012, w.e.f. 1-7-2012, read as under:
*149. Time limit for notice.-(1) No notice under section 148 shall be issued** for the relevant assessment year,-
(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or
clause (c);
(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the
income chargeable to tax which has †escaped assessment amounts to or is likely to amount to one lakh rupees or more†
for that year;
(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the
income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has
escaped assessment.
Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-
section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident
under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be
made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years
from the end of the relevant assessment year.
Explanation. For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended
by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1 st day of April,
2012.”
*For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
**For the meaning of the term “issued”, see Taxmann’s Direct Taxes Manual, Vol. 3.
†For the meaning of the expressions “escaped assessment” and “likely to amount to one lakh rupees or more”, see
Taxmann’s Direct Taxes Manual, Vol. 3.
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
22/31
Provided further that the provisions of this sub-section
shall not apply in a case, where a notice under section
153A, or section 153C read with section 153A, is required
to be issued in relation to a search initiated under section
132 or books of account, other documents or any assets
requisitioned under section 132A, on or before the 31st day
of March, 2021:
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) of section 148A or the period
during which the proceeding under section 148A 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) of section
148A is less than 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.
(2) The provisions of sub-section (1) as to the issue of
notice shall be subject to the provisions of section 151.]”
33. In the present case, the assessing authority has issued
notice under Section 148A clause (b) of the Act on 23.03.2022
calling upon the petitioner to show cause as to why in view of the
details contained in Annexure ‘A’, a notice under Section 148 of
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
23/31
the Act should not be issued. It is important to reproduce annexure
to the notice dated 23.03.2022 hereunder for a ready reference:-
“An information in the case of Sri Ankit Kumar
Agarwal, PAN-AITPA5485A, (hereby thereafter
called as “assessee”), has been received under the
module of “Non Filing of Return (NMS)” from the
INSIGHT portal. As per the data available on the e-
filing portal, the assessee has not filed the ITR for
AY under consideration.
As per the information available on record, the
assessee, in the FY 2014-15, relevant to the AY
2015-16, has deposited in cash aggregating to Rs.
2000000/- in the State Bank of India. Further, the
assessee has also made transactions of Rs.
2631400/- and Rs. 4397919/-. The Assessee has sale
of equity share in a recognized stock exchange of
Rs. 556584/-.
Thus, on perusal of the information received, it is
observed that, despite being a non filer of return, the
assessee has income worth of Rs. 9269898/- from
different sources, failed to offer tax for the same, is
chargeable to tax, has escaped assessment for the
AY 2015-16.”
34. It is evident from annexure to the notice dated
23.03.2022 that the Assessing Officer had an information under the
module of non-filing of return from the Insight Portal which was a
palpably incorrect information in his hand. He has stated that as
per data available on the e-filing portal, the assessee had not filed
the ITR for the assessment year under consideration. Again, this
information is totally incorrect. Learned Senior Standing Counsel
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
24/31
for the Department has submitted that this seems to be a mistake
and it may have been committed in course of cut and paste. This
Court is afraid that such submissions cannot be taken as an
appropriate explanation from the respondents. The name of the
petitioner has been mentioned in the first paragraph of the
annexure and then the authority issuing the notice has apparently
mentioned about a data available on the e-filing portal which is not
a correct data. The fact remains that the petitioner has filed its ITR
on 30.03.2016 and his audit report was also uploaded.
35. This Court further finds that in the second paragraph
of the annexure, it is stated that the assessee had deposited in cash
aggregating to Rs. 20 lakhs in the State Bank of India and had also
made transactions of Rs.26,31,400/- and Rs.43,97,919/- but all
these transactions have not at all been discussed later on and what
has ultimately transpired is that the Assessing Officer has
disallowed long term capital gain of Rs. 25,90,000/- which was
claimed by the petitioner in his Income Tax Return.
36. The contention of learned counsel for the petitioner
that in the annexure to the notice issued under section 148A (b) of
the Act, the amount of escaped assessment was inflated to bring it
over and above Rs. 50 lakhs only to avoid the period of limitation,
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
25/31
has much force and there is no reason as to why this submission of
the petitioner be not accepted.
37. This Court finds that under clause (b) of sub-section
(1) of Section 149, the period of limitation under the old law i.e.
prior to 01.04.2021 was 4 years unless the case falls under clause
(b) or (c) if the Assessing Officer would have been in possession
of books of account or other documents or evidence which
revealed that income chargeable to tax represented in form of (i)
an asset (ii) expenditure in respect of a transaction or in relation to
any event or occasion; or (iii) an entry or entries in the books of
account which has escaped assessment is likely to the extent of
Rs. 50 lakhs or more. At the relevant time, when the notice under
section 148A (b) was issued, the maximum period within which
notice under Section 148 could have been issued was only 10
years if the escaped assessment amount was likely to Rs. 50 lakhs
or more than that. However, according to learned Senior Standing
Counsel for the Department in this case under the old law under
clause (b) of sub-section(1) of Section 149 the notice could have
been issued within four years but not more than six years have
elapsed from the end of the relevant assessment year. Learned Sr.
Counsel would submit that in this case the six years period
would have expired on 31.03.2022. The notice was given on
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
26/31
23.03.2022 . Time till 29.03.2022 was granted to submit response
to the show cause notice. Thus, the period from 23.03.2022 to
29.03.2022 would be liable to be excluded from the counting of
limitation. In such circumstance, the notice dated 06.04.2022
would be taken to have been issued within 6 years.
38. It is further evident that while issuing notice under
section 148A(b), the notice issuing authority not only relied upon
wrong information but he also failed to submit any material in
support of the same to the petitioner. In this regard, the judgment
of the learned coordinate Bench of this court in case of Salik
Khan (supra) (paragraph ‘5’) and paragraph ‘101’ of the judgment
in case of Rajeev Bansal (supra) have been relied upon. We
reproduced paragraph ‘5’ of Salik Khan (supra) and paragraph
‘101’ of the judgment in case of Rajeev Bansal (supra) hereunder
for a ready reference:-
“5. As far as the notice under Section 148 and
Section 148A is concerned, the issue is covered by
the judgments of this Court referred to above. It was
categorically found that Section 149 provides for a
time-limit for notice to be issued under Section 148
which under clause (a) of Sub-section (1) is three
years. A limitation of 10 years is provided only for
escaped assessment where the tax escaped is more
than Rs. 50 Lakhs. In the present case admittedly
the total assessment is only of Rs. 31 lakhs and the
demand now raised is slightly more than Rs. 19
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
27/31lakhs. Insofar as Section 148A it was brought into
the Act by Finance Act, 2021 with effect from
01.04.2021 when Section 148 also stood substituted.
Section 148A deals with the enquiry and
opportunity provided before issuance of notice
under Section 148 but under the very same Finance
Act, 2021. The limitation period provided under
Section 149 was also amended and it was brought
down to three years where the escaped assessment
is of less than Rs. 50 lakhs.
101. Under section 148A(b), the Assessing Officer
has to comply with two requirements : (i) issuance
of a show-cause notice; and (ii) supply of all the
relevant information which forms the basis of the
show-cause notice. The supply of the relevant
material and information allows the assessee to
respond to the show-cause notice. The deemed
notices were effectively incomplete because the
other requirement of supplying the relevant material
or information to the assessees was not fulfilled.
The second requirement could only have been
fulfilled by the Revenue by an actual supply of the
relevant material or information that formed the
basis of the deemed notice.”
39. It has been further noticed in the case of Rajeev
Bansal (supra) that in case of Union of India vs. Ashish Agarwal
reported in (2023) 1 SCC 617, the Hon’ble Court had directed the
Assessing Officer to provide relevant information and materials
relied upon by the Revenue to the assessee within 30 days of the
date of the judgment. It has been held that a show cause notice is
effectively issued in terms of Section 148A(b) only if it is supplied
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
28/31
along with the relevant information and materials by the Assessing
Officer. Due to the legal fiction, the Assessing Officers were
deemed to have been inhibited from acting in pursuance of the
section 148 A(b) notice till the relevant materials were supplied to
the assessee.
40. The above view in case of Rajeev Bansal (supra) and
Ashish Agrawal finds support from paragraph ’53’ of the judgment
in Ganesh Das Khanna (supra) which contains the speech of the
Finance Minister with regard to reduction in time for income tax
proceedings. Paragraph ’53’, ‘53.1’, ‘53.2’ and ‘53.3’ of the
judgment in case of Ganesh Das Khanna (supra) are as under:-
“53. Apart from what we have stated above on the language
and scheme of the relevant provisions introduced with the
enactment of the Finance Act, 2021, one has to bear in
mind, in our opinion, the raison d’etre for forging the new
regime. A clue about the same is provided in the Finance
Minister’s Budget Speech delivered on 1-2-2021 [(2021)
430 ITR (St) 33] and the relevant parts of the Memorandum
Explaining the Provisions of the Finance Bill, 2021 [(2021)
430 ITR (St) 214] [hereafter referred to as “memorandum”)
which morphed into Finance Act, 2021. For convenience,
the relevant parts are extracted below:
“Speech of the Finance Minister
… Reduction in time for income tax proceedings
153. The Speaker, presently, an assessment can be reopened
up to 6 years and in serious tax fraud cases for up to 10 years.
As a result, taxpayers have to remain under uncertainty for a
long time.
154. I therefore propose to reduce this time limit for reopening
of assessment to 3 years from the present 6 years. In serious
tax evasion cases too, only where there is evidence of
concealment of income of Rs 50 lakh or more in a year, can
the assessment be reopened up to 10 years. Even this
reopening can be done only after the approval of the Principal
Chief Commissioner, the highest level of the Income Tax
Department….
Memorandum
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
29/31… Income escaping assessment and search assessments–
Under the Act, the provisions related to income escaping
assessment provide that if the assessing officer has reason to
believe that any income chargeable to tax has escaped
assessment for any assessment year, he may assess or reassess
or recompute the total income for such year under Section 147
of the Act by issuing a notice under Section 148 of the Act.
However, such reopening is subject to the time limits
prescribed in Section 149 of the Act….
The Bill proposes a completely new procedure for assessment
of such cases. It is expected that the new system would result
in less litigation and would provide ease of doing business to
taxpayers as there is a reduction in the time limit by which a
notice for assessment or reassessment or recomputation can
be issued. The salient features of the new procedure are as
under:
(iii) Section 147 proposes to allow the assessing officer to
assess or reassess or recompute any income escaping
assessment for any assessment year (called relevant
assessment year)….
(vii) New Section 148-A of the Act proposes that before
issuance of notice the assessing officer shall conduct
enquiries, if required, and provide an opportunity of being
heard to the assessee. After considering his reply, the assessing
office shall decide, by passing an order, whether it is a fit case
for issue of notice under Section 148 and serve a copy of such
order along with such notice on the assessee. The assessing
officer shall before conducting any such enquiries or
providing opportunity to the assessee or passing such order
obtain the approval of specified authority. However, this
procedure of enquiry, providing opportunity and passing order,
before issuing notice under Section 148 of the Act, shall not be
applicable in search or requisition cases.
(viii) The time limitation for issuance of notice under Section
148 of the Act is proposed to be provided in Section 149 of the
Act and is as below:
• In normal cases, no notice shall be issued if three years have
elapsed from the end of the relevant assessment year. Notice
beyond the period of three years from the end of the relevant
assessment year can be taken only in a few specific cases.
• In specific cases where the assessing officer has in his
possession evidence which reveal that the income escaping
assessment, represented in the form of asset, amounts to or is
likely to amount to fifty lakh rupees or more, notice can be
issued beyond the period of three years but not beyond the
period of ten years from the end of the relevant assessment
year.
• Another restriction has been provided that the notice under
Section 148 of the Act cannot be issued at any time in a case
for the relevant assessment year beginning on or before 1-4-
2021, if such notice could not have been issued at that time on
account of being beyond the time limit prescribed under the
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
30/31provisions of clause (b), as they stood immediately before the
proposed amendment.
• Since the assessment or reassessment or recomputation in
search or requisition cases (where such search or requisition is
initiated or made on or before 31-3-2021) are to be carried out
as per the provisions of Sections 153-A, 153-B, 153-C and
153-D of the Act, the aforesaid time limitation shall not apply
to such cases.
• It is also proposed that for the purposes of computing the
period of limitation for issue of Section 148 notice, the time or
extended time allowed to the assessee in providing
opportunity of being heard or period during which such
proceedings before issuance of notice under Section 148 are
stayed by an order or injunction of any court, shall be
excluded. If after excluding such period, time available to the
assessing officer for passing order, about fitness of a case for
issue of Section 148 notice, is less than seven days, the
remaining time shall be extended to seven days….”
(emphasis is ours)
53.1. As would be evident from the extracts set forth above,
both from the Finance Minister’s speech and the
memorandum, the time limit for reopening under the new
regime was reduced from six (6) years to three (3) years and
only in respect of “serious tax evasion cases”, that too, where
evidence of concealment of income of Rs 50 lakhs or more in
a given period was found, the period for reopening the
assessment was extended to ten (10) years. In order to ensure
that utmost care was taken before invoking the extended
period of limitation, the proposal was that approval should be
obtained from the Principal Chief Commissioner of Income
Tax, at the highest hierarchical level of the Department.
Likewise, the memorandum emphasised that the new regime
was forged with the hope that it would result in less litigation
and would provide ease of doing business to taxpayers, as
there was a reduction in the time limit by which notice for
assessment, reassessment and recomputation could be issued.
53.2. Thus, as per the memorandum, in “normal cases”, no
notice was intended to be issued if three (3) years had elapsed
from the end of the relevant assessment year. Notice, beyond
the prescribed three (3) years from the end of the relevant
assessment year, could be issued only in a few specific cases;
one such example which is given in the Bill is where the
assessing officer was in possession of evidence that escaped
income amounted to Rs 50 lakhs or more.
53.3 In sum, the sense that one gets upon a holistic reading
of the backdrop in which the new regime for reopening
assessments was enacted is that where escapement of
income was below Rs 50 lakhs, the normal period of
limitation i.e. three (3) years was to apply. In comparison,
the extended period of ten (10) years would apply in serious
tax evasion cases where there was evidence of concealment
of income of Rs 50 lakhs or more in the given period.”
Patna High Court CWJC No.5202 of 2024 dt.18-04-2025
31/31
41. On facts appearing from the records, there is no iota of
doubt to this Court that no effective show-cause notice under section
148A (b) of the Act of 1961 was served upon the petitioner. The fact
that the petitioner did not respond to the show-cause notice dated
23.03.2022 would not make the show-cause notice good and
compliant with the requirement of law. After coming into force of the
Finance Act 2021 the respondents could have issued a notice under
Section 148 of the Act of 1961, if the condition prescribed under
Section 149(1) (b) would have been satisfied.
42. In view of the discussions hereinabove, we are of the
considered opinion that the proceeding initiated against the petitioner
was based on incorrect information furnished in the notice under
section 148(A) (b) which was not supported by any material, therefore,
the very initiation of the proceeding by issuing section 148 notice on
06.04.2022 would stand vitiated.
43. In result, the impugned orders and the demand raised
against the petitioner stand quashed.
44. This writ application is allowed.
(Rajeev Ranjan Prasad, J)
(Ashok Kumar Pandey, J)
Rishi/-
AFR/NAFR AFR CAV DATE Uploading Date 24.04.2025 Transmission Date 24.04.2025