RITABEN ARVINDBHAI PATEL vs THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3, SURAT
- Court
- Gujarat High Court
C/SCA/8482/2022 CAV JUDGMENT DATED: 23/10/2026
(GJHC240267032022)
Reserved On : 15/10/2026
Pronounced On : 23/10/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8482 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA Sd/-
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI Sd/-
=============================================
Approved for Reporting Yes No
✔
=============================================
RITABEN ARVINDBHAI PATEL
Versus
THE ASSISTANT COMMISSIONER OF INCOME TAX,
CENTRAL CIRCLE 3, SURAT
=============================================
Appearance:
MR TUSHAR HEMANI, SENIOR ADVOCATE WITH
MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1
MR RUTVIJ PATEL AND
MR KARAN G SANGHANI(7945) for the Respondent(s) No. 1
=============================================
CORAM: HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. By way of the present writ petition, the petitioner has
challenged the order dated 01.04.2022 passed under Section
148A(d) and the notice dated 01.04.2022 issued under Section
148 of the Income-tax Act, 1961 (for short, “the Act”), for the
Assessment Year 2018-19, on the ground that both are without
jurisdiction.
BRIEF FACTS :
2. The present petition has been filed by an individual who,
along with other co-owners, sold a parcel of land bearing Block
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No.633/B, situated at Village Vav, Taluka Kamrej, District Surat.
The petitioner held a 16.66% share in the land and, according
to her, received an amount of Rs.8,43,250/- towards her share
of the sale consideration.
3. The respondent issued a show-cause notice dated
19.03.2022 under clause (b) of Section 148A of the Act, calling
upon the petitioner to furnish details of the land transactions.
4. It is pertinent to note that the show-cause notice
emanated from a survey action undertaken under Section
133A of the Act at the premises of M/s.Saral Infra, a third party,
on 18-19.04.2019, during which several incriminating
documents, diaries, notebooks, etc., were impounded.
5. During the survey action, the statement of Mr.Sunilbhai
M. Patel was recorded under Section 131 of the Act, wherein he
was confronted with loose papers containing certain notings
relating to transactions concerning lands bearing Block
Nos.633/A, 633/B and 633/K, situated at Village Vav.
6. Accordingly, the respondent adopted the consideration
mentioned in the impounded material and computed the
alleged on-money received in relation to the land in question.
7. An amount of Rs.97,54,796/- was computed in the hands
of the buyers, whereas an amount of Rs.1,17,68,296/- was
computed in the hands of the sellers.
8. On the basis of the impounded material and the
statement of Mr.Sunilbhai M. Patel, the respondent formed an
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opinion that on-money amounting to Rs.1,17,68,296/- had
been received in respect of the sale of the land in question.
The respondent accordingly worked out the petitioner's share
in the alleged on-money at Rs.29,42,074/-, which was
proposed to be added to her total income.
9. The petitioner furnished a detailed reply to the show-
cause notice vide letter dated 28.03.2022, clarifying her
position with regard to the sale of the land in question.
10. By an order dated 01.04.2022 passed under Section
148A(d) of the Act, the respondent concluded that income
chargeable to tax had escaped assessment and, accordingly,
held that it was a fit case for issuing a notice under Section
148 of the Act.
11. Accordingly, a notice under Section 148 of the Act was
also issued on 01.04.2022, which is also under challenge in the
present writ petition.
SUBMISSIONS ON BEHALF OF THE PETITIONER :
12. At the outset, learned Senior Advocate Mr.Hemani
submitted that the impugned notice under Section 148 of the
Act had been issued without obtaining the sanction of the
competent authority and was, therefore, without jurisdiction.
13. It was submitted that the relevant assessment year
ended on 31.03.2019 and that the period of three years
prescribed under Section 151(i) of the Act expired on
31.03.2022, whereas, impugned order under Section 148A(d)
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and the notice under Section 148 of the Act were both issued
on 01.04.2022, after the expiry of the period of three years.
Therefore, in terms of Section 151(ii) of the Act, prior approval
was required to be obtained from the Principal Chief
Commissioner of Income Tax or the Principal Director General
or, where there was no such authority, the Chief Commissioner
of Income Tax or the Director General, as the case may be.
However, the approval in the present case was granted by the
Principal Commissioner of Income Tax (Central), Surat, who
was the specified authority under Section 151(i) of the Act.
Accordingly, it was contended that the sanction granted by an
authority not competent under the applicable provisions of the
Act rendered the impugned proceedings without jurisdiction.
14. It was submitted that the proviso to Section 151 of the
Act, inserted by the Finance Act, 2023, with effect from
01.04.2023, could not be applied retrospectively to the
sanction granted on 01.04.2022. It was further submitted that,
prior to the insertion of the said proviso, Section 151 of the Act
prescribed a clear distinction between the competent specified
authorities, depending upon whether the period elapsed from
the end of the relevant assessment year was three years or
less, or more than three years. The provisos to Section 149(1)
of the Act, providing for the exclusion or extension of the
period of limitation, operated for the purposes of computing
the limitation under Section 149 of the Act. The said provisions
could not be imported into Section 151 of the Act in the
absence of any express statutory provision to that effect. The
insertion of the proviso to Section 151 by the Finance Act, 2023
was, therefore, a substantive amendment affecting the
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jurisdiction of the authority competent to grant sanction and
could not be applied to proceedings initiated prior to
01.04.2023.
15. It was further submitted that the legislative history of
Section 151 and the provisions of the Finance Act, 2023 clearly
demonstrated that Parliament had consciously made the
amendment effective from 01.04.2023. The Memorandum
explaining the provisions of the Finance Bill, 2023, the Notes
on Clauses and Circular No.1/2024 dated 23.01.2024, issued by
the Central Board of Direct Taxes, specifically indicated the
effective date of the amendment. It was submitted that,
wherever the legislature intended to give retrospective effect
to an amendment, it expressly provided for the same. In the
absence of any such indication in respect of the proviso to
Section 151 of the Act, the same could not be construed as
operating retrospectively. Reliance was placed on the decisions
of the Supreme Court in the case of CIT vs. Vatika Township (P.)
Ltd., [(2014) 271 CTR 1 (SC)], and Sedco Forex International
Drill Inc. vs. CIT, [(2005) 12 SCC 717], in support of the
proposition that an amendment brought into force from a
specified date must ordinarily be construed prospectively,
particularly where its retrospective application would affect
accrued rights or alter the existing legal position.
16. It was submitted that Section 149 of the Act deals with
the limitation for issuance of a notice under Section 148 of the
Act, whereas Section 151 of the Act deals with the jurisdiction
of the specified authority competent to grant prior approval for
the issuance of such notice. In this regard, reliance was placed
on the decision of the Supreme Court in the case of Union of
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India vs. Rajeev Bansal, [(2024) 469 ITR 46 (SC)], particularly
paragraphs 74 and 76 thereof, to contend that the jurisdiction
of the specified authority is directly correlated with the time
elapsed from the end of the relevant assessment year. It was
submitted that the period of three years was required to be
computed with reference to the date on which the sanction
was granted and the notice was issued, and that the exclusions
provided under Section 149 could not be applied for
determining the competent authority under Section 151 as it
stood on 01.04.2022. It was further submitted that the
subsequent insertion of the proviso to Section 151 was itself
indicative of the fact that, prior to such amendment, there was
no statutory provision permitting the exclusions under Section
149 to be taken into account for determining the specified
authority under Section 151 of the Act.
17. In support of his submissions, learned Senior Advocate
Mr.Hemani placed reliance on the decisions of the Bombay
High Court in the case of Vodafone Idea Ltd. vs. DCIT, [(2024)
300 Taxman 364 (SC)], Agnello Oswin Dias vs. ACIT, [2024] 161
taxmann.com 16 (Bom.), Purnima Jitendra Navsariwala vs. ITO,
[Writ Petition No.7 of 2024, decided on 05.03.2024], Mystique
Media (P.) Ltd. vs. ITO, [2026] 185 taxmann.com 963 (Bom.),
and Skypak Travels (P.) Ltd. vs. ITO, [2025] 481 ITR 175
(Telangana), as well as the decision of the Telangana High
Court in Deloitte Consulting India (P.) Ltd. vs. Assessment Unit,
NFAC. It was submitted that the aforesaid decisions have
considered the effect of the proviso inserted in Section 151 by
the Finance Act, 2023, and it is held that the amendment is
prospective in nature and could not be applied to sanctions
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granted prior to 01.04.2023. It was further submitted that the
facts of the present case stood on a better footing, inasmuch
as the show-cause notice under Section 148A(b) of the Act was
issued on 19.03.2022, the petitioner submitted her reply on
28.03.2022, and the sanction was granted by the Principal
Commissioner of Income Tax on 01.04.2022, after the expiry of
the period of three years.
18. Learned senior advocate Mr.Hemani further placed
reliance on the decisions relied upon by the Revenue, including
Dhanraj Govindram Kella vs. ITO (2025) 480 ITR 612 (Guj),
Union of India vs. Ashish Agarwal, (2023) 1 SCC 617, CIT vs.
Gold Coin Health Food (P.) Ltd. (2008) 9 SCC 622, K.P. Varghese
vs. ITO (1981) 4 SCC 173, Manjula vs. D.A. Srinivas (2013) 5
AIR Kant R 486, Giriraj Commercial (P.) Ltd. Vs. Union of India,
[2024] 169 taxmann.com 168 (Cal.) and Abhinav Jain vs. ITO,
2026 LLBiz HC (DEL) 372. It was submitted that the decision in
the case of Rajeev Bansal (supra ) did not decide the
question of the retrospective applicability of the proviso to
Section 151 inserted with effect from 01.04.2023. It was
further submitted that the principle laid down in the case of
Gold Coin Health Food (P.) Ltd. (supra ) could not be
applied mechanically, as the nature and effect of the
amendment had to be examined to determine whether it was
clarificatory or substantive. In the present case, the
amendment altered the competent authority for granting
sanction and, therefore, affected jurisdiction. The subsequent
amendment could not validate a sanction that had been
granted by an authority lacking jurisdiction on the date of such
sanction.
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19. It was submitted that, as on 01.04.2022, more than three
years had elapsed from the end of the relevant assessment
year and that the competent specified authority was the
authority contemplated under Section 151(ii) of the Act. Since
the sanction was granted by the Principal Commissioner of
Income Tax (Central), Surat, the mandatory jurisdictional
requirement under Section 151 of the Act was not satisfied. It
was, therefore, urged that the proviso to Section 151 of the
Act, having been inserted with effect from 01.04.2023, could
not be applied retrospectively to validate the impugned
sanction and that the order dated 01.04.2022 passed under
Section 148A(d) and the notice dated 01.04.2022 issued under
Section 148 of the Act deserved to be quashed and set aside
as being without jurisdiction.
20. On merits, it is contended by learned Senior Advocate
Mr.Hemani that the impugned action of the respondent is liable
to be quashed and set aside, since there is no live link between
the petitioner and the incriminating material found during the
survey action under taken with the third party. He has pointed
out the loose paper chits referred in the impugned order, and
has contended that it does not bear any name, and the
petitioner is roped in the reassessment on the basis of one
Mr.Sunil Patel, to whom the petitioner has not sold the land,
and she is not at all connected with him.
SUBMISSIONS ON BEHALF OF THE REVENUE :
21. Learned Senior Standing Counsel Mr.Karan Sanghani
appearing along with learned Senior Standing Counsel Mr.Rutvij
Patel for the respondent-Revenue, opposed the submissions
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advanced by learned senior advocate Mr.Hemani on behalf of
the petitioner and submitted that Section 149 of the Act
prescribes the period of limitation for the issuance of a notice
under Section 148, whereas Section 151 specifies the authority
competent to grant approval for the issuance of such notice.
He has invited the attention of the Court to Section 149(2) of
the Act, which expressly provides that the provisions of sub-
section (1) of Section 149, relating to the issuance of notice,
shall be subject to the provisions of Section 151 of the Act. He
has submitted that Sections 149 and 151 of the Act cannot be
read in isolation, as both provisions are intrinsically connected
and must be interpreted harmoniously. According to him, the
period of limitation computed under Section 149 of the Act,
after giving effect to the statutory exclusions and extensions,
must also be considered for determining the specified
authority under Section 151 of the Act.
22. It was further submitted that, in the present case, the
ordinary period of three years for the Assessment Year 2018-19
would have expired on 31.03.2022. However, the Assessing
Officer issued a show-cause notice dated 19.03.2022 under
Section 148A(b) of the Act, granting time to the petitioner until
28.03.2022 to file a response, and the petitioner submitted her
reply on 28.03.2022.
23. Learned Senior Standing Counsel relied upon the third
proviso to Section 149(1) of the Act, as it stood at the relevant
time, which provides for the exclusion of the time allowed to
the assessee to respond to a show-cause notice issued under
Section 148A(b) of the Act while computing the period of
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limitation. He submitted that, upon excluding the period of
nine days, the limitation period for the issuance of a notice
under Section 148 of the Act stood extended up to 09.04.2022.
Consequently, the order under Section 148A(d) and the notice
under Section 148 of the Act, both dated 01.04.2022, were
issued within the period of three years, as computed in
accordance with the statutory provisions.
24. It was contended that, since the proceedings fell within
the three-year period after giving effect to the exclusion
prescribed under the third proviso to Section 149(1) of the Act,
the Principal Commissioner of Income-tax (Central), Surat, was
the competent specified authority under Section 151(i) of the
Act to grant the requisite approval. He contended that the
petitioner's argument that the competent authority must be
determined solely by reference to the calendar date on which
the notice under Section 148 of the Act was issued, without
considering the statutory exclusion of time, would lead to an
anomalous result. Such an interpretation, according to him,
would treat the notice as having been issued within the
prescribed limitation period under Section 149(1)(a) of the Act,
while simultaneously requiring approval from the higher
authority under Section 151(ii) of the Act. He submitted that
such an interpretation would render the statutory scheme
unworkable.
25. It was submitted that Section 149(2) of the Act serves as
a crucial legislative link by expressly providing that the
provisions of Section 149(1) of the Act, relating to the time
limit for the issuance of a notice, shall be subject to the
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provisions of Section 151 of the Act. According to the Revenue,
the purpose of Section 149(2) is to harmonise the computation
of the limitation period with the sanctioning mechanism,
thereby ensuring that Section 151 of the Act is not read in
isolation but is interpreted in conjunction with the limitation
period computed under Section 149(1) of the Act. It was
submitted that, had the legislature intended to de-link the
limitation prescribed under Section 149 from the sanctioning
mechanism under Section 151, it would not have inserted
Section 149(2), particularly when Sections 148 and 148A of the
Act already provide for the prior approval of the specified
authority under Section 151 of the Act. It was further
submitted that Sections 149 and 151 of the Act are intertwined
and refer to the same period, namely, whether three years or
more than three years have elapsed from the end of the
relevant assessment year, for the purposes of issuing a notice
and obtaining the requisite sanction.
26. It was contended that the Assessing Officer is required by
law to apply the exclusions or extensions provided under the
third and fourth provisos to Section 149(1) of the Act while
determining the limitation period for issuance of notice, so as
to ascertain whether the notice is issued within three years or
beyond three years from the end of the relevant assessment
year. Once the limitation period is determined, the Assessing
Officer is required to seek approval from the specified authority
under Section 151 of the Act corresponding to the limitation
period so determined. It was further submitted that, since the
sanction precedes the issuance of the notice, the two
provisions cannot be read in isolation instead must be
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interpreted harmoniously. According to the Revenue, these
provisions are interconnected machinery provisions that
operate in tandem.
27. Applying the aforesaid submissions to the facts of the
present case, it was submitted that, for the Assessment Year
2018-19, the ordinary three-year limitation period would have
expired on 31.03.2022. However, the Assessing Officer issued
the notice under Section 148A(b) of the Act on 19.03.2022 and
allowed the assessee time until 28.03.2022 to file a response.
The third proviso to Section 149(1) of the Act expressly
provides that, for the purposes of computing the period of
limitation, the time or extended time allowed to the assessee
to respond to a show-cause notice issued under Section
148A(b) of the Act shall be excluded
28. By statutorily excluding these nine days (the period from
19.03.2022 to 28.03.2022) from the computation of limitation,
the deadline for the Revenue to issue a notice under Section
148 of the Act within the period of three years prescribed
under Section 149(1)(a) of the Act stands extended to
09.04.2022. It was submitted that, since the exclusion of the
period under the third proviso to Section 149(1) of the Act
keeps the proceedings within the three-year period for the
purposes of computing limitation, Section 149(2) of the Act
requires the authority competent to grant approval under
Section 151 of the Act to be determined on the basis of the
same computation. If the petitioner's contention were
accepted, an anomalous situation would arise wherein the
notice issued under Section 148 of the Act would be construed
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as having been issued within the period of three years in terms
of Section 149(1)(a) of the Act, while approval from the higher
authority prescribed under Section 151(ii) of the Act, applicable
where more than three years have elapsed, would
nevertheless be required. Such an interpretation, as canvassed
by the petitioner, would render the statutory scheme
unworkable and would be contrary to the legislative intent.
According to the Revenue, this statutory link demonstrates that
approval from the Principal Chief Commissioner under Section
151(ii) of the Act was not required merely because the
calendar date on which the notice was issued fell after
31.03.2022, since the period computed after giving effect to
the statutory exclusion remained within three years. Therefore,
the order passed under Section 148A(d) of the Act and the
notice issued under Section 148 of the Act on 01.04.2022
were, according to the Revenue, within the prescribed
limitation period of three years, and the Assessing Officer had
rightly obtained approval from the Principal Commissioner of
Income-tax (Central), Surat, being the specified authority
under Section 151(i) of the Act.
29. It was further submitted that, under the general
principles governing the computation of limitation, as reflected
in Part-III of the Limitation Act, 1963 (Sections 12 to 15), the
determination of whether a prescribed period has “expired” or
“elapsed” does not invariably depend on an inflexible calendar
calculation. Where the legislature expressly provides for the
exclusion of certain periods - such as the time required to
obtain statutory sanction or consent under Section 15(2) of the
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Limitation Act, 1963, the period during which an injunction or
stay operates under Section 15(1) of the said Act, or the time
spent in bona fide prior proceedings under Section 14 of the
said Act - the period of limitation is computed after giving
effect to such exclusions.
30. It was submitted that a statutory exclusion suspends the
running of the limitation period for the period so excluded.
Consequently, an action brought within the prescribed period
after giving effect to such exclusion is, in the eyes of the law,
instituted within the period of limitation. The period counted
for limitation purposes, after applying the statutory exclusions,
therefore, does not exceed the prescribed limit.
31. It was further submitted that it is well settled that a
statute must be construed in a manner that makes its
provisions workable and enables them to achieve the purpose
of the legislation. Machinery provisions must be interpreted so
as to give effect to the object and purpose of the statute,
rather than to defeat them.
32. With regard to the decisions relied upon by learned
Senior Advocate Mr.Hemani, learned Senior Standing Counsel
submitted that the aforesaid decisions were distinguishable
and could not govern the issues arising in the present case. He
further submitted that those decisions had not considered the
specific interplay between Sections 149(2) and 151 of the Act,
which formed the basis of the Revenue's case.
33. Learned Senior Standing Counsel placed strong reliance on
the decision of the Supreme Court in the case of Rajeev
Bansal (supra ), and submitted that the said decision
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recognised the interrelationship between Sections 149 and 151
of the Act. According to him, the Supreme Court had held that
the entire period allowed to an assessee to respond to a show-
cause notice under Section 148A(b) of the Act was required to
be excluded while computing the period of limitation under
Section 149 of the Act. He, therefore, submitted that the
principle laid down in the case of Rajeev Bansal (supra )
supported the Revenue's interpretation that the statutory
exclusions prescribed under Section 149 of the Act must be
taken into account while determining the authority competent
to grant approval under Section 151 of the Act.
34. Relying on the decision in the case of Dhanraj
Govindram Kella (supra ), learned Senior Standing Counsel
submitted that the issue raised in the present writ petition was
squarely covered by the said decision. According to him, this
Court had rejected the contention that the date of issuance of
the notice under Section 148 of the Act was the sole relevant
date for determining the specified authority under Section 151
of the Act and had upheld the validity of approval granted by
the Principal Commissioner of Income-tax under Section 151(i)
of the Act after excluding the relevant periods under Section
149 of the Act. He further relied on Abhinav Jain vs. Income-tax
Officer, [2026] 488 ITR 255 (Delhi), wherein, according to the
Revenue, the time allowed to the assessee to respond to a
notice under Section 148A(b) of the Act was excluded in
determining whether the notice fell within the three-year
limitation period. Reliance was also placed on Giriraj
Commercial (P.) Ltd. vs. Union of India, [2024] 169
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taxmann.com 168 (Cal.), in support of the submission that the
Principal Commissioner of Income-tax was the competent
specified authority after giving effect to the statutory
exclusion.
35. Without prejudice to the aforesaid submissions, learned
Senior Standing Counsel submitted that the proviso inserted in
Section 151 of the Act by the Finance Act, 2023, with effect
from 01.04.2023, was clarificatory and declaratory in nature
and, therefore, its operation was not confined to proceedings
initiated after that date. He invited the attention of the Court to
the Memorandum explaining the provisions of the Finance Bill,
2023, which stated that the amendment was proposed “to give
further clarity with regards to the specified authority”. He
submitted that the amendment did not create any new charge,
liability or penal consequence but merely clarified the existing
statutory mechanism by expressly providing that the period
excluded or extended under the provisos to Section 149(1) was
to be taken into account while computing the three-year period
for determining the specified authority under Section 151 of
the Act.
36. In support of the aforesaid contention, learned Senior
Standing Counsel relied on the decision of the Supreme Court
in the case of Manjula vs. D.A. Srinivas, [2026] 186
taxmann.com 357 (SC) / [2026] 488 ITR 407 (SC), particularly
paragraph No.22 thereof, and submitted that an amendment
that is clarificatory, declaratory, curative or machinery-
oriented may operate retrospectively where its object is to
remove an omission, cure a defect or give effect to the original
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legislative intent. He also relied on the decision in the case of
CIT vs. Gold Coin Health Food (P.) Ltd., [2008] 304 ITR 308
(SC), to contend that the nature and effect of an amendment,
rather than merely the date from which it comes into force,
must be considered in determining its temporal operation.
Applying these principles, he submitted that the amendment to
Section 151 of the Act was intended to clarify the existing
legislative scheme and ensure that Sections 149 and 151 of
the Act operated coherently. Accordingly, he contended that
the amendment could be applied to the proceedings in the
present case.
37. In view of the aforesaid submissions, learned Senior
Standing Counsel submitted that the approval granted by the
Principal Commissioner of Income-tax (Central), Surat, under
Section 151(i) of the Act was valid and that the order dated
01.04.2022 passed under Section 148A(d) of the Act and the
notice dated 01.04.2022 issued under Section 148 of the Act
were within the prescribed period of limitation. He, therefore,
urged that the writ petition was devoid of merit and deserved
to be dismissed.
38. With regard to the merits, learned Senior Standing
Counsel Mr.Sanghani, has submitted that the re-assessment
may not be interfered with at this stage and the petitioner may
be relegated to face the assessment since the petitioner is a
non-filer of return. It is submitted that there is enough
incrementing material to suggest that income chargeable to
tax has escaped assessment.
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ANALYSIS AND OPINION :
39. We have heard the learned advocates appearing for the
respective parties at length.
40. The petitioner has assailed the notice dated 01.04.2022
issued under Section 148 of the Act and the order dated
01.04.2022 passed under Section 148A(d) of the Act for the
Assessment Year 2018-19. The alleged escapement of income
is Rs.29,42,074/-.
41. Before proceeding further, the facts necessary for
adjudication are set out below :
Date Particulars
1. 19.03.2022 The AO issued notice u/s 148A(b) of the Act
granting time till 28.03.2022 to the petitioner for
filing response
2. 28.03.2022 The Petitioner filed reply/objections
3. 01.04.2022 Section 148A(d) order came to be passed after
obtaining approval dated 01.04.2022 of
Pr.CIT(Central) being specified authority u/s 151(i)
4. 01.04.2022 Impugned notice issued u/s 148 of the Act after
obtaining prior approval dated 01.04.2022 of
Pr.CIT(Central) being specified authority u/s 151(i)
It is the case of the petitioner, that the sanction granted by the
Pr.CIT on 01.04.2022 is without jurisdiction and illegal, and
instead it should be by Pr.Chief CIT, under section 151(ii),
whereas the revenue is defending its sanction granted by
Pr.CIT under Section 151(i).
INTERPLAY OF SECTION 149 AND 151 OF THE ACT:
42. The case of the respective parties’ hinges on the
interplay between Sections 149 and 151 of the Act, more
particularly in the context of the proviso inserted in Section
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151 by the Finance Act, 2023, with effect from 01.04.2023. In
order to resolve the issue raised in the present writ petition, it
is necessary to closely examine the operation and application
of the relevant statutory provisions.
43. Section 151 of the Act, as substituted by the Finance Act,
2021, and as it stood on 01.04.2022, reads as follows:
“151. Specified authority for the purposes of section 148 and
section 148A 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;
(ii) Principal Chief Commissioner or Principal Director General
or where there is no Principal Chief Commissioner or Principal
Director General, Chief Commissioner or Director General, if
more than three years have elapsed from the end of the
relevant assessment year.”
44. Section 149(1) of the Act, as it stood on 01.04.2022, read
as follows:
“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—
(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 section 148 shall be issued at
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any time in a case for the relevant assessment year beginning
on or before 1st day of April, 2021, if 6[a notice under section
148 or section 153A or section 153C 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 or section 153A or section 153C, 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 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.]”
45. Since the alleged escapement of income in the present
case is less than Rs.50 lakh, the controversy primarily concerns
Section 149(1)(a) of the Act, which prescribes a period of three
years for the issuance of a notice under Section 148 of the Act.
The third proviso to Section 149(1), as applicable at the
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relevant time, provided for the exclusion of the time allowed to
the assessee to respond to the show-cause notice issued under
Section 148A(b) of the Act, while the fourth proviso provided
for an extension of the residual period to seven days. Both
provisos operate expressly “for the purposes of computing the
period of limitation as per this section” and in context of
Clause(b) of Section 149(1).
46. The Finance Act, 2023, with effect from 01.04.2023, (i)
inserted two new provisos in Section 149(1) (now the third and
fourth provisos) and renumbered the earlier third and fourth
provisos as the fifth and sixth provisos; and (ii) inserted the
following proviso to Section 151:
“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) of
section 149.”
47. Section 151 of the Act, as substituted by the Finance Act,
2021, with effect from 01.04.2021, reads as follows:
[Sanction for issue of notice.
151. Specified authority for the purposes of section 148 and
section 148A 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;
(ii) Principal Chief Commissioner or Principal Director General
or where there is no Principal Chief Commissioner or Principal
Director General, Chief Commissioner or Director General, if
more than three years have elapsed from the end of the
relevant assessment year.]
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48. Thereafter, the Finance Act, 2023, inserted the following
proviso in Section 151 of the Act, with effect from 01.04.2023:
“79b [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) of
section 149 .]
79b. Inserted by the Finance Act, 2023, w.e.f. 1.04.2023”
49. Thus, the provision for taking into account the extended
period while determining the specified authority for granting
sanction under Section 151(i) of the Act was introduced with
effect from 01.04.2023.
50. As recorded hereinabove, Section 149 of the Act deals
with the limitation period for issuing a notice under Section
148 of the Act, with a clear and specific distinction based on
the period of limitation and the monetary threshold
demarcating clauses (a) and (b) thereof. Under the Finance Act,
2021, the third and fourth provisos provided for the exclusion
or adjustment of time in computing the period of limitation
under Section 149(1)(b) of the Act. The fourth proviso refers to
the “preceding proviso”, namely, the third proviso. Thus, both
the third and fourth provisos address the situation
contemplated under Section 149(1)(b) of the Act, which
prescribes a monetary threshold of ₹50 lakh. Neither proviso
applies to clause (a) of Section 149(1) of the Act. By the
Finance Act, 2023, two further provisos were inserted;
however, the position regarding the adjustment of the
limitation period under Section 149(1)(b) of the Act remained
unaltered.
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51. Section 149(2) of the Act further provides that sub-
section (1) “shall be subject to the provisions of Section 151”.
The statute, therefore, expressly makes Section 149(1) subject
to Section 151 of the Act. In legal parlance, the expression
“subject to” means subordinate to, limited by, or contingent
upon the fulfilment of a specified condition, rule or provision.
Thus, the limitation periods prescribed under clauses (a) and
(b) of Section 149(1) of the Act have a direct nexus with the
determination of the specified authority competent to grant
sanction under Section 151 of the Act. The Supreme Court, in
the case of Rajeev Bansal (supra ), while considering the
issue of the sanctioning authority under Section 151 of the Act,
held as follows :
“75. After April 1, 2021, the new regime has specified
different authorities for granting sanctions under section 151.
The new regime is beneficial to the assessee because it
specifies a higher level of authority for the grant of sanctions
in comparison to the old regime. Therefore, in terms of Union
of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1
SCC 617.] , after April 1, 2021, the prior approval must be
obtained from the appropriate authorities specified under
section 151 of the new regime. The effect of section 151 of
the new regime is thus:
(i) If income escaping assessment is less than rupees fifty
lakhs : (a) a reassessment notice could be issued within three
years after obtaining the prior approval of the Principal
Commissioner, or Principal Director or Commissioner or
Director; and (b) no notice could be issued after the expiry of
three years; and
(ii) If income escaping assessment is more than rupees fifty
lakhs : (a) a reassessment notice could be issued within three
years after obtaining the prior approval of the Principal
Commissioner, or Principal Director or Commissioner or
Director; and (b) after three years after obtaining the prior
approval of the Principal Chief Commissioner or Principal
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Director General or Chief Commissioner or Director General.”
76. Grant of sanction by the appropriate authority is a
precondition for the Assessing Officer to assume jurisdiction
under section 148 to issue a reassessment notice. Section 151
of the new regime does not prescribe a time limit within which
a specified authority has to grant sanction. Rather, it links up
the time limits with the jurisdiction of the authority to grant
sanction. Section 151(ii) of the new regime prescribes a higher
level of authority if more than three years have elapsed from
the end of the relevant assessment year. Thus, non-
compliance by the Assessing Officer with the strict time limits
prescribed under section 151 affects their jurisdiction to issue
a notice under section 148.”
52. Thus, the Supreme Court has held that obtaining valid
sanction from the competent authority under Section 151 of
the Act is a strict jurisdictional requirement. A notice issued
under Section 148 of the Act without the requisite sanction,
particularly where the applicable limitation period necessitates
approval from a higher authority, is invalid.
53. We may reiterate that the last date of completion of
assessment was 31.03.2022, i.e. three years after the end of
Α.Υ.2018-19. The PCIT, who has granted sanction, beyond the
statutory limit of three years, i.e. on 01.04.2022, will have no
jurisdiction. The Revenue cannot validate its action by arguing
that a timely Section 148A(b) notice cures an untimely Section
151(i) sanction. This contention contradicts the statutory
framework of Section 149(1)(a) read with Section 151 (prior to
01.04.2023). Because Section 151 clearly demarcates which
authority must grant sanction based on the timeline, the strict
limitation periods under Section 149(1)(a) and (b) cannot be
blurred or compromised. If the justification of the revenue is
accepted then there was no need for the legislature to
introduce the proviso under Section 151, w.e.f. 01.04.2023
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bringing the adjustment of period within the ambit of Section
151(1) since such adjustment already existed under Section
149. The legislature was conscious of clear delineation of the
specified authority under Section 151 having direct nexus with
Clauses (a) and (b) of Section 149(1), and the provisos
appended therein.
PROVISO TO SECTION 151 INSERTED BY THE FINANCE
ACT, 2023: WHETHER IT OPERATES RETROSPECTIVELY :
54. The Revenue has contended that the proviso to Section
151 of the Act is retrospective in nature and, therefore,
validates the sanction granted by the Principal Commissioner
of Income-tax (PCIT) on 01.04.2022. To ascertain the effective
date of the amendment, we may refer to the Memorandum
explaining the provisions of the Finance Bill, 2023. The
Memorandum expressly states that “these amendments will
take effect from the 1st day of April, 2023”. To further clarify
the effective date of the amendments introduced by the
Finance Act, 2023, the CBDT issued Circular No. 1/2024 dated
23.01.2024. With regard to Section 151 of the Act and the
authority competent to grant sanction, the Circular clarifies
that the amendments take effect from 01.04.2023.
55. At this stage, it would be apposite to refer to the decision
of the Bombay High Court in the case of Skypack Travels (P.)
Ltd. (supra ), wherein it was held that the aforesaid proviso
operates prospectively. The relevant observations are as
follows:
“20. We also find merit in the Petitioner's submission that the
proviso inserted to Section 151 cannot be treated as
retrospective. The Legislature has inserted the proviso
specifically with effect from 01 April 2023. Where the
Legislature intended retrospectivity, it could have said so
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expressly. In the absence of such indication, and particularly
where the provision relates to jurisdiction, it cannot be
construed so as to retrospectively validate an action which
was without jurisdiction when taken.
21. There is another aspect which fortifies the Petitioner's
stand. The proviso to Section 151 refers to four provisos to
Section 149(1). The same reads thus:
"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) of
section 149."
22. Two of those provisos i.e., third and fourth proviso to
Section 149(1) were inserted with effect from 01 April 2023.
The original third and fourth provisos were made fifth and
sixth provisos. There is no case made out or even argued that
even third and fourth proviso to Section 149(1) are
retrospective in nature. Once, the third and fourth proviso to
Section 149(1) are undisputedly prospective and effective
from 01.04.2023, then the proviso to Section 151 which was
inserted at the same time, and which makes a reference to
such provisos cannot be held to be retrospective. In that view
of the matter also, the proviso to Section 151 cannot be read
retrospectively so as to govern notices and orders issued in
April 2022.”
56. We are in complete agreement with the reasoning
adopted by the Bombay High Court in holding that the proviso
to Section 151 of the Act operates prospectively. While
examining the language of the proviso to Section 151, which
refers to the third, fourth, fifth and sixth provisos to Section
149(1), the Bombay High Court categorically observed as
follows: “Once the third and fourth provisos to Section 149(1)
are undisputedly prospective and effective from 01.04.2023,
the proviso to Section 151, which was inserted at the same
time and refers to those provisos, cannot be held to operate
retrospectively.
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57. We may further observe that the proviso to Section 151
provides for the exclusion of the period specified in the third,
fourth or fifth proviso, or the extension of the period under the
sixth proviso to Section 149(1) of the Act. Thus, by inserting
the proviso to Section 151, the legislature altered the manner
in which the three-year period is computed for determining the
specified authority under Section 151(i) of the Act. In our
opinion, such an alteration in the computation of the limitation
period, which substantially affects the vested rights of an
assessee and alters the jurisdiction, must operate
prospectively unless the legislature has expressly or by
necessary implication provided for retrospective operation.
Had the legislature intended the amendment to operate
retrospectively, it could have expressly provided for such
retrospective effect. In this regard, we may appropriately rely
on the decision of the Constitution Bench of the Supreme Court
in the case of CIT vs. Vatika Township Private Limited
(supra ). While examining the proviso appended to Section 113
of the Act, the Supreme Court held as follows -
“34. It would also be pertinent to mention that assessment
creates a vested right and an assessee cannot be subjected to
reassessment unless a provision to that effect inserted by
amendment is either expressly or by necessary implication
retrospective. (See CED v. M.A. Merchant [1989 Supp (1) SCC
499 : 1989 SCC (Tax) 404].)
35. We would also like to reproduce hereunder the following
observations made by this Court in Govind Das v. ITO [(1976)
1 SCC 906 : 1976 SCC (Tax) 133] , while holding Section
171(6) of the Income Tax Act to be prospective and
inapplicable for any assessment year prior to 1-4-1962, the
date on which the Income Tax Act came into force : (SCC p.
914, para 11)
“11. Now it is a well-settled rule of interpretation
hallowed by time and sanctified by judicial decisions
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that, unless the terms of a statute expressly so provide
or necessarily require it, retrospective operation should
not be given to a statute so as to take away or impair an
existing right or create a new obligation or impose a
new liability otherwise than as regards matters of
procedure. The general rule as stated by Halsbury in Vol.
36 of the Laws of England (3rd Edn.) and reiterated in
several decisions of this Court as well as English courts
is that ‘all statutes other than those which are merely
declaratory or which relate only to matters of procedure
or of evidence are prima facie prospective and
retrospective operation should not be given to a statute
so as to affect, alter or destroy an existing right or
create a new liability or obligation unless that effect
cannot be avoided without doing violence to the
language of the enactment. If the enactment is
expressed in language which is fairly capable of either
interpretation, it ought to be construed as prospective
only.’”
(emphasis supplied)
36. In CIT v. Scindia Steam Navigation Co. Ltd. [AIR 1961 SC
1633 : (1962) 1 SCR 788] , this Court held that as the liability
to pay tax is computed according to the law in force at the
beginning of the assessment year i.e. the first day of April,
any change in law affecting tax liability after that date though
made during the currency of the assessment year, unless
specifically made retrospective, does not apply to the
assessment for that year.
XXXX
42. There are some other circumstances which reflect the
legislative intent. The problem which was highlighted in the
Conference of Chief Commissioners on the rate of surcharge
applicable, is noted above. In view of the aforesaid difficulties
pointed out by the Chief Commissioners in their Conference, it
becomes clear that as per the provisions then enforced, levy
of surcharge in the block assessment on the undisclosed
income was a difficult proposition. It is for this reason
retrospective amendment to Section 113 was suggested.
Notwithstanding the same, the legislature chose not to do so,
as is clear from the discussion hereinafter:
42.1. “Notes on Clauses” appended to the Finance Bill, 2002
while proposing insertion of proviso categorically states that
“this amendment will take effect from 1-6-2002”. These
become epigraphic [Ed. : As per the Oxford Dictionary,
“epigraphic” here means : intending to suggest the theme or
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purpose of the amendment.] words, when seen in
contradistinction to other amendments specifically stating
those to be clarificatory or retrospective depicting clear
intention of the legislature. It can be seen from the same
Notes that a few other amendments in the Income Tax Act
were made by the same Finance Act specifically making those
amendments retrospective. For example, Clause 40 seeks to
amend Section 92-F. Clause (iii-a) of Section 92-F is amended
“so as to clarify that the activities mentioned in the said
clause include the carrying out of any work in pursuance of a
contract” (emphasis supplied). This amendment takes effect
retrospectively from 1-4-2002. Various other amendments also
take place retrospectively. The Notes on Clauses show that
the legislature is fully aware of three concepts:
(i) prospective amendment with effect from a fixed date;
(ii) retrospective amendment with effect from a fixed anterior
date; and
(iii) clarificatory amendments which are retrospective in
nature.
42.2. Thus, it was a conscious decision of the legislature, even
when the legislature knew the implication thereof and took
note of the reasons which led to the insertion of the proviso
that the amendment is to operate prospectively. The learned
counsel appearing for the assessees sagaciously contrasted
the aforesaid stipulation while effecting amendment in Section
113 of the Act, with various other provisions not only in the
same Finance Act but Finance Acts pertaining to other years
where the legislature specifically provided such amendment
to be either retrospective or clarificatory. Insofar as
amendment to Section 113 is concerned, there is no such
language used and on the contrary, specific stipulation is
added making the provision effective from 1-6-2002.”
58. Thus, the Constitution Bench of the Supreme Court has
reaffirmed that an assessee's vested rights cannot be
adversely affected by an amendment unless the legislature has
expressly or by necessary implication provided for its
retrospective operation. It has held that retrospective
operation should not be attributed to a statutory provision so
as to take away or impair an existing right, create a new
obligation or impose a new liability, except in matters of
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procedure. It has also held that tax liability is computed in
accordance with the law in force at the beginning of the
assessment year i.e. on the first day of April, and that any
subsequent change in the law affecting such liability, unless
specifically made retrospective, does not apply to that
assessment year.
59. The Supreme Court has also considered the legislative
intent reflected in the Notes on Clauses and the relevant
clarificatory circular issued by the CBDT while determining
whether the proviso in question operates prospectively. In the
present case, the petitioner claims the benefit of the statutory
safeguards governing reassessment, and the impugned
proceedings adversely affect her rights. The proviso to Section
151 of the Act introduces a specific rule for taking into account
the periods excluded or extended under Section 149(1) while
determining the competent authority under Section 151(i). If
applied retrospectively, it would validate sanctions that were
otherwise invalid under the law applicable on the date they
were granted, thereby altering the authority competent to
grant sanction and diluting a statutory safeguard. Such a
substantive change in jurisdiction cannot be applied
retrospectively in the absence of a clear legislative intention to
that effect. Accordingly, we hold that the proviso appended to
Section 151 of the Act by the Finance Act, 2023, operates with
effect from 01.04.2023 and does not apply retrospectively.
DISCUSSION ON THE CASE LAW :
60. A catena of decisions has been relied upon by the
respective parties. We have already dealt with the decision of
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the Supreme Court in the case of Rajeev Bansal (supra ),
which has been relied upon by both sides. We shall now
consider a few other decisions.
61. The Revenue has primarily relied upon the decision of the
Coordinate Bench of this Court in the case of Dhanraj
Govindram Kella (supra ). We have no quarrel with the
principle laid down in the said decision; however, the factual
and legal context in which it was rendered is distinguishable
from the issue arising in the present writ petition.
62. It is noticed that the Coordinate Bench was examining
reassessment proceedings for the Assessment Years 2013–14
to 2017–18, involving the three-year limitation period and the
extension of time under the Taxation and Other Laws
(Relaxation and Amendment of Certain Provisions) Act, 2020
(TOLA). The Coordinate Bench referred to the decision of the
Supreme Court in the case of Ashish Agarwal (supra ),
wherein the notices issued under the erstwhile Section 148
regime were directed to be treated as show-cause notices
under Section 148A(b) of the new regime. The Supreme Court
granted the assessees 30 days from the date of its decision i.e.
04.05.2022, to file their replies, following which the Revenue
was required to pass orders under Section 148A(d) and issue
notices under Section 148 of the Act. At the same time, the
notices were directed to be governed by the limitation
prescribed under Section 149(1), as amended with effect from
01.04.2021.
63. The Coordinate Bench further referred to the decision of
the Supreme Court in the case of Rajeev Bansal (supra ). In
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relation to the Assessment Year 2017-18, for which the
ordinary assessment limitation period expired on 31.03.2021,
the Supreme Court considered the effect of TOLA and held that
the period from 30.06.2021 to 04.05.2022, together with the
further period of 15 days consumed by the assessee in filing
the reply, was required to be excluded to determine the
surviving period available under TOLA. After considering these
precedents, the Coordinate Bench held that the approval
granted by the specified authority under Section 151(i) for
issuance of the orders under Section 148A(d) and notices
under Section 148, issued between 01.04.2021 and
30.06.2021 for the Assessment Years 2013-14 to 2017-18, was
valid.
64. In the present case, however, the notice under Section
148A(b) of the Act for the Assessment Year 2018-19 was issued
on 19.03.2022. After the petitioner filed her reply, the order
under Section 148A(d) and the notice under Section 148 were
issued on 01.04.2022, pursuant to approval granted by the
Principal Commissioner of Income-tax (Central), Surat, under
Section 151(i) of the Act. The last date for completion of
assessment with effect from 31.03.2022 i.e., 3 years from the
end of assessment year 2018-19.The issue before us concerns
the retrospective application of the proviso to Section 151,
inserted by the Finance Act, 2023, with effect from 01.04.2023,
to validate that sanction. That question was not the issue
examined by the Coordinate Bench in the case of Dhanraj
Govindram Kella (supra ). Consequently, reliance on the said
decision does not assist the Revenue in the present case.
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65. The decision in the case of Abhinav Jain (supra ), relied
upon by the Revenue, is also distinguishable on its facts and
the issue involved. The Delhi High Court rendered its decision
in the context of an undisputed fact that two corrigenda had
been issued, extending the time allowed to the assessee to
respond to the notice. Having regard to those extensions, and
in the absence of a challenge to the corrigenda by the
petitioner therein, the Court applied the third proviso to
Section 149(1) of the Act, held that the notice was within the
prescribed period of limitation and treated the Principal
Commissioner of Income-tax as the competent authority.
66. Learned Single Judge of the Calcutta High Court, in the
case of Giriraj Commercial (P.) Ltd. (supra ), did not
examine the effect of the insertion of the proviso to Section
151 of the Act with effect from 01.04.2023. The Court applied
the amended provisions referred to before it as the “recent
amendment”, without the question of the proviso's
retrospective operation being raised, argued or decided. A
decision rendered without considering or deciding a particular
question of law does not constitute a binding precedent on that
question; the principle of sub silentio is therefore relevant in
the present context.
67. In support of the contention that the proviso to Section
151 operates retrospectively, the Revenue has relied upon the
recent decision of the Supreme Court in the case of Manjula vs.
D.A. Srinivas, [2026] 186 taxmann.com 357 (SC). The
observations in paragraph No.22.3 of the said decision are
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relied upon to submit that the Supreme Court reiterated that
“the protection against retrospectivity generally extends only
to vested or accrued rights”.
68. The said decision concerned amendments to the Benami
Transactions (Prohibition) Act, 1988, introduced in 2016 to
address the mischief associated with benami transactions.
After examining the object and effect of the amendments, the
Supreme Court upheld their retrospective application,
observing, in substance, that no person could claim a vested
right to enter into a benami transaction intended to defeat the
law. The principle applied in that context does not, by itself,
establish that the proviso to Section 151 of the Income-tax Act
was intended to operate retrospectively. The retrospective
operation of an amendment must be determined having regard
to its language, object, effect and the legislative intent
applicable to the particular enactment. Accordingly, the
decision in the case of Manjula (supra ) does not, by itself,
support the Revenue's contention in the present case.
69. In the case of CIT vs. Gold Coin Health Food (P.) Ltd.,
[2008] 304 ITR 308 (SC), the Supreme Court considered an
amendment that was held to be clarificatory in nature and did
not create a new liability. The Notes on Clauses themselves
described the amendment as clarificatory. As discussed
hereinabove, however, the Notes on Clauses to Clause 71 of
the Finance Bill, 2023, concerning the proviso to Section 151 of
the Act, specifically state that “these amendments will take
effect from 1st April, 2023”.
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70. In the case of Gold Coin Health Food (P.) Ltd. (supra ),
the Supreme Court was required to examine whether the
amendment was clarificatory or substantive in nature. The
significance of the Notes on Clauses in determining the nature
and effect of an amendment was further elucidated by the
Constitution Bench of the Supreme Court in the case of Vatika
Township (supra ). Applying the principles laid down in the
latter decision, and having regard to the express effective date
specified for the amendment, we hold that the proviso to
Section 151 of the Act, inserted by the Finance Act, 2023,
operates prospectively with effect from 01.04.2023.
OPINION ON MERITS:
71. Upon close scrutiny of the impugned order, the notice
and the reply filed by the petitioner, we find that the action of
the Revenue warrants interference.
72. The petitioner has been subjected to reassessment on
the basis of material found during the survey conducted at
M/s.Saral Infra on 18-19.04.2019. During the survey
proceedings, Mr.Sunilbhai Patel was confronted with details
contained in the impounded material, and his statement was
recorded on oath under Section 131 of the Act. He was shown
loose papers relating to the sale of lands bearing various
survey numbers, including the land owned by the petitioner.
73. The petitioner had sold the land by a sale deed dated
17.10.2017 to two purchasers viz. Nathabhai Gordhanbhai
Gajera, HUF, and Vilasben Nathabhai Gajera. In his statement,
Mr.Sunilbhai Patel stated that the lands purchased had
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subsequently been sold and that a profit of Rs.2,34,99,954 had
been earned. On the basis of this statement, the Assessing
Officer attributed a share of the alleged on-money
consideration to the petitioner and concluded that income
amounting to Rs.29,42,074 had escaped assessment.
74. The petitioner categorically contended that she had
never sold the land to Mr.Sunil Patel and that her name did not
appear in any of the loose papers impounded during the
survey. Nevertheless, the Assessing Officer rejected her
defence, relying upon the statement of Mr.Sunil Patel and the
petitioner's failure to report the alleged transaction in a return
of income.
75. Upon perusal of the documents and loose papers
reproduced in the impugned notice and order, we find that the
impounded material does not establish any direct or
identifiable connection with the petitioner. The loose papers do
not disclose any names. Apart from the survey numbers and
the rates of the lands, they contain no other particulars or
information capable of establishing the petitioner's
involvement in the alleged transaction.
76. It is also undisputed that the petitioner did not sell the
land to Mr.Sunil Patel. Nor has any material been brought on
record to establish that Mr.Sunil Patel acted as a broker for the
petitioner. The petitioner sold the land on 17.10.2017, whereas
the material was impounded nearly two years later, on 18–
19.04.2019, during the survey at M/s.Saral Infra. No live link
has been established between the petitioner and either
M/s.Saral Infra or Mr.Sunil Patel.
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77. In these circumstances, the reassessment proceedings
are founded on material that does not, even prima facie ,
establish the petitioner's connection with the alleged receipt of
on-money consideration. The petitioner cannot be subjected to
the rigours of reassessment on such material. Accordingly, the
Revenue's action fails on merits as well.
CONCLUSION AND ORDER :
78. We reiterate that the grant of sanction by the competent
specified authority under Section 151 of the Act is a
prerequisite for the Assessing Officer to assume jurisdiction to
issue a reassessment notice under Section 148 of the Act. Non-
compliance with the statutory requirements governing the
competent authority and the applicable limitation period
affects the jurisdiction of the Assessing Officer to issue such
notice.
79. In the present case, the Principal Commissioner of
Income-tax (Central), Surat, granted sanction on 01.04.2022
under Section 151(i) of the Act. The validity of that sanction
cannot be sustained by retrospectively applying the proviso to
Section 151, which was introduced with effect from 01.04.2023
and altered the manner of computing the three-year period for
determining the specified authority under Section 151(i). As
the said proviso operates prospectively, it cannot validate the
sanction granted in the present case under the law applicable
on the relevant date. Accordingly, the sanction dated
01.04.2022, and the consequential order under Section
148A(d) and notice under Section 148 of the Act, demands
interference by this Court as the same is without jurisdiction.
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80. Accordingly, the writ petition succeeds and is allowed .
The impugned order and notice, both dated 01.04.2022, are
hereby quashed and set aside. Rule is made absolute.
Sd/-
(A. S. SUPEHIA, J)
Sd/-
(VAIBHAVI D. NANAVATI,J)
MAHESH/SB/01
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