BABA GLOBAL LTD v. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 29 & ORS

1. The petitioner [Assessee] has filed the present petition, inter alia, impugning the following notices/orders:

(i) Notice dated 31.03.2023 issued under Section 148A(b) of the

(ii) Corrigendum letter dated 28.04.2023;

(iii) Order dated 27.04.2023 under Section 148(d) of the Act sent by e-mail dated 28.04.2023 at 12:31 AM; and

(iv) Notice dated 27.04.2023 sent by e-mail dated 28.04.2023 at

2. It is the petitioner’s case that the notice dated 27.04.2023 issued under Section 148 of the Act [impugned notice] for Assessment Year [AY] 2019-20 is invalid as it was issued beyond the period of limitation. The last date for issuance of the notice was 31.03.2023. After accounting for the exclusion/extensions in terms of provisos to Section 149 of the Act, the period to issue such a notice expired on 27.04.2023 and the impugned notice was sent on 28.04.2023.

3. It is also the petitioner’s case that the impugned notice is invalid as the Assessing Officer [AO] had decided that it was not a fit case for issuance of such a notice and had, on 27.04.2023, passed an order under Section 148A(d) of the Act dropping the said proceedings. However, the AO had further reviewed the said order – as it appears at the instance of the ‘specified authority’ – and had thereafter, issued another order dated 27.04.2023 under Section 148A(b) of the Act, which was received on 28.04.2023 at 12:31 AM, holding that it was a fit case for issuance of notice under Section 148 of the Act. However, the AO does not have any power to review an order under Section 148A(d) of the Act.

4. Briefly stated the relevant facts necessary to address the issue involved in the present case are as under: 4.[1] The petitioner filed its return of income for AY 2019-20 on 08.11.2019. Thereafter, on 10.06.2020, it filed a revised return declaring a total income of ₹1,63,07,320/-. 4.[2] On 31.03.2023, the AO issued a show cause notice under Section 148A(b) of the Act calling upon the petitioner to show cause why a notice under Section 148 of the Act not be issued. The said notice indicated that the AO had information to the effect that the petitioner had remitted amounts through its saving bank accounts and the same were not commensurate with the income tax returns filed for the relevant assessment year. The petitioner was called upon to furnish a reply to the notice on 28.04.2023. 4.[3] The petitioner responded to the said notice on 12.04.2023, inter alia, explaining the account on which the remittances were made. The Assessee also pointed out that some of the remittances did not pertain to the previous year relevant to AY 2019-20. 4.[4] On 27.04.2023, the AO passed an order examining the information available on record as well as the petitioner’s response to the notice under Section 148A(c) of the Act and accepted the same. The relevant extract of the said order is reproduced below: “Comments of the AO 5.[1] Reply furnished by the assessee has been considered u/s 148A(c) of the Act and found to be tenable as per the facts and findings of the case discussed in foregoing paras. 5.[2] The assessee contended that the transactions under consideration were its business payments/receipts and were duly accounted for in its books of accounts relating to the AY 2019-20. From the perusal of the invoices raised by the assessee, bank statements and ledgers of concerned parties, the claim of the assessee has been found correct. 5.[3] The contentions of the assessee are examined and found tenable. In view of the above factual and legal position, the initiation of proceeding u/s 147 is not warranted in this case. 5.[4] In view of the above facts as discussed, and on the basis of material available on record and submission of the assessee, it is suggested that the issuance of notice u/s 148 of the Act is not required. Hence, the proceedings u/s 148A are being dropped. This order is being passed after obtaining prior approval F.No. Pr.CIT(C)-3/148A(d)/2023-24/218 dated 27.04.2023 of the Principal Commissioner of Income Tax (Central)-3, New Delhi as per section 151 (i) of the Act.” 4.[5] Thereafter, the petitioner received an e-mail, which was sent at 12:08 AM on 28.04.2023. The said e-mail included the following attachments: 12:05 AM on 28.04.2023, which reads as: “Please find attached notice” • A scanned notice under Section 148 of the Act, which was signed manually. The said notice did not bear either the DIN or the notice number. 4.[6] Thereafter, at 12:22 AM on 28.04.2023, the AO sent an e-mail enclosing therewith a corrigendum dated 28.04.2023, which was digitally signed at 12:20 AM on 28.04.2023. The contents of the said corrigendum are reproduced below: “Corrigendum The letter issued vide DIN ITBA/COM/F/17/2023- 24/105209366(1) dated 27.04.2023 may kindly be treated as null and void.” 4.[7] The aforesaid e-mail was followed by an e-mail sent at 12:31 AM on 28.04.2023 enclosing therewith an order under Section 148A(d) of the Act [impugned order]. In terms of the impugned order, the AO held that it was a fit case for issuance of a notice under Section 148 of the Act. Paragraph 5 of the said order, which was completely contrary to the earlier order passed under Section 148A(d) of the Act, is reproduced below:

Act.”

5. It is clear from the facts as narrated above the AO had sought to review its earlier order passed under Section 148A(d) of the Act. Whereas in terms of the order dated 27.04.2023, the AO had accepted the explanation provided by the Assessee; it had rejected the same by the impugned order. It is contended on behalf of the Revenue that the impugned order had merely corrected the earlier order issued on 27.04.2023. However, we find no merit in the said contention as the plain reading of the order dated 27.04.2023 indicates that the AO had accepted the Assessee’s contention for the reasons as are articulated in the said order. However, the reasoning in the impugned order is completely different and the AO has now sought to provide reasons to support a contrary conclusion. Clearly, this is not a case of an inadvertent typographical or a clerical error. The reasons for which the AO had concluded that it was not a fit case for issuance of notice under Section 148 of the Act is well articulated in the first order.

6. The explanation provided by the Revenue in its counter affidavit is to the effect that the AO had passed an order dropping the proceedings. However, it had subsequently realised that its order was contrary to the merits and contrary to the approval of the Principal Commissioner of Income Tax [PCIT] granted for re-opening of the assessment and issuance of the notice under Section 148 of the Act. The relevant extract of the counter affidavit filed on behalf of the Revenue is set out below:

passed on 27.04.2023 dropping the proceedings. However, subsequently it was realised that the order of dropping the proceedings u/s 148A(d) of the Act was erroneously passed contrary to the merits of the case and contrary to the approval of the PCIT for reopening of assessment and issuance of notice u/s 148 of the Act in this case issued vide letter dated 27.04.2023. The approval of PCIT is attached herewith as Annexure 1.

8. Thereafter, rectifying the mistake, immediately a fresh order dated 27.04.2023 with DIN and letter No. in ITBA/ COM/F/17/2023-24/1052409458(1) was passed rebutting the objections of the assessee and holding that the case of assessee was a fit case for issuance of notice u/s 148 of the Act on the ground that profit on account of currency fluctuation of Rs. 20,55,995/- has escaped assessment for AY 2019-20. Consequently, notice u/s 148 of the Act dated 27.04.2023 was issued to the assessee. A corrigendum dated 28.04.2023 was also issued for treating the (erroneous) order dated 27.04.2023 passed u/s. 148A(d) as null and void. The above corrigendum was served to the assessee vide email dated 28.04.2023.”