Facts of the Case

The petitioner, Baba Global Ltd., filed a writ petition challenging the notice dated 31.03.2023 issued under Section 148A(b) of the Income-tax Act, 1961, a corrigendum dated 28.04.2023, the order dated 27.04.2023 passed under Section 148A(d), and the consequential notice dated 27.04.2023 issued under Section 148 for Assessment Year 2019-20.

The petitioner had filed its return of income for AY 2019-20 on 08.11.2019 and a revised return on 10.06.2020. Based on information regarding inward and outward remittances through bank accounts allegedly not commensurate with the declared income, a show cause notice under Section 148A(b) was issued on 31.03.2023. The petitioner furnished a detailed reply explaining that the transactions were duly accounted business receipts and payments and that certain remittances did not pertain to the relevant year.

On 27.04.2023, the Assessing Officer passed an order under Section 148A(d) accepting the petitioner’s explanation and expressly holding that initiation of proceedings under Section 147 was not warranted, thereby dropping the proceedings with prior approval of the Principal Commissioner of Income Tax. However, in the early hours of 28.04.2023, multiple emails were issued, including a notice under Section 148, a corrigendum declaring the earlier order null and void, and a second order under Section 148A(d) taking a completely contrary view and holding that it was a fit case for issuance of notice under Section 148.

Issues Involved

Whether the Assessing Officer has the power to review or revise an order passed under Section 148A(d) of the Act, whether issuance of a fresh order under Section 148A(d) after dropping proceedings is permissible in law, and whether the notice issued under Section 148 was barred by limitation under Section 149 after applying the fifth and sixth provisos.

Petitioner’s Arguments

The petitioner contended that once an order under Section 148A(d) was passed dropping the proceedings, the Assessing Officer became functus officio and had no authority to review or reverse that decision. It was argued that the subsequent order was not a clerical correction but a complete change of opinion, which is impermissible in absence of any statutory power of review. The petitioner further contended that the notice under Section 148 was issued beyond limitation, as the maximum permissible period expired on 27.04.2023 after applying the exclusions and extensions under the fifth and sixth provisos to Section 149.

Respondent’s Arguments

The Revenue argued that the initial order dated 27.04.2023 dropping the proceedings was erroneous and contrary to the approval granted by the Principal Commissioner of Income Tax for reopening. It was contended that the subsequent order merely corrected the earlier mistake and that the reassessment proceedings were validly initiated. The Revenue sought to justify the issuance of the corrigendum and the second order under Section 148A(d).

Court Order / Findings

The Delhi High Court held that Section 148A(d) vests the Assessing Officer with the authority to decide whether it is a fit case to issue a notice under Section 148, and once such a decision is taken, the Assessing Officer has no power to review or revise the same. The Court found that the first order dated 27.04.2023 clearly accepted the petitioner’s explanation and dropped the proceedings, and the subsequent order took a diametrically opposite view based on fresh reasoning. This, the Court held, was not a clerical or typographical correction but an impermissible review, which is not sanctioned by law.

On limitation, the Court held that the case was governed by Section 149(1)(a) and not Section 149(1)(b). The last date for issuance of notice under Section 148 was 31.03.2023. After excluding the time granted to respond to the notice under Section 148A(b) and applying the sixth proviso extending the period to seven days, the outer limit expired on 27.04.2023. Since the impugned notice was issued on 28.04.2023, it was clearly beyond limitation. The Court held that this issue stood squarely covered by its earlier decision in Raminder Singh vs. Assistant Commissioner of Income Tax.

Important Clarification

The Court clarified that approval of the specified authority cannot confer upon the Assessing Officer a power of review that is not statutorily vested in him. Once an order under Section 148A(d) is passed, the Assessing Officer becomes functus officio. It was also clarified that limitation under Section 149 is mandatory and cannot be circumvented by procedural improvisations.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the impugned order passed under Section 148A(d), the corrigendum dated 28.04.2023, and the notice issued under Section 148 for Assessment Year 2019-20. The reassessment proceedings were held to be invalid in law. The pending application was disposed of accordingly.

 

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