Travel back theory as propounded by the CBDT Instruction is against the spirit of the ratio laid down by the Hon’ble Apex Court in Ashish Agarwal case – ITAT
In a recent judgment, ITAT Jaipur has held that travel back theory as propounded by the CBDT Instruction is against the spirit of the ratio laid down by the Hon’ble Apex Court in Ashish Agarwal case using its extraordinary powers and it does not mean that the limitation can be extended as per the whims and fancies of CBDT.
ABCAUS Case Law Citation:
4616 (2025) (06) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) upholding the order of AO passed u/s. 147 r.w.s 144C of the Income Tax Act, 1961 (the Act).
The appellant assessee was non-resident in the year under consideration and in the earlier years also, filed his return of income u/s 139(4) of the Act. Information in this case was received from AIR/TAS/26AS that the assessee purchased an immovable property along with three other co-owners; assessee’s share in this investment was 1/4th Share.
Based on this information a notice u/s 148 of the Act was issued in 2022. The Assessing Officer (AO) passed a draft assessment order u/s 144C (1) of the Act and proposed an addition towards assessee’s share in property purchased.
Against this draft assessment order the assessee approached the Dispute Resolution Panel. The DRP confirmed the draft order passed u/s. 144C (1) and issued the direction for final assessment order u/s 144C (5) of the Act. The AO passed the impugned assessment order u/s. 147 r.w.s. 144C (13) of the Act.
In the instant case, notice u/s 148 of the Act was issued to the assessee for AY 2013-24 on 25.07.2022. The assessee challenged the notice issued u/s 148 of the Act on the ground of validity.
While issuing this notice the AO relied upon the judgment of the Hon’ble Apex Court in the case of Ashish Agarwal and CBDT Instruction No. 01/2022 dated 11.05.2022.
The Tribunal observed that the last day for issuance of notice in the case of the assessee was 31.03.2020, but the same was extended by virtue of TOLA 2020. Accordingly, the reliance placed by the AO on Ashish Agarwal’s case and Board’s instruction was misplaced. In this case limitation expired on 31.03.2021 and reference to Ashish Agarwal’s case and Board’s instruction was basically a misinterpretation of the legal and factual position.
The Tribunal observed that the judicial pronouncement of Hon’ble Apex Court and Board’s instruction deals with the issue only in case limitation was beyond 31.03.2021 but inadvertently instead following the new law the department has followed the old law; in that case the judgment of Ashish Agarwal came to rescue the department as the Apex Court has used its extraordinary powers as provided in Article 142 of the Constitution. As a matter of fact, TOLA, 2020 also not meant for this type of situation what we are dealing in this matter.
The Tribunal further observed that CBDT in its said Instruction has interpreted that Hon’ble Supreme Court has upheld the views of High Courts that the benefit of new law shall be made available even in respect of proceedings relating to past assessment years. Decision of Hon’ble Supreme Court read with the time extension provided by TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that point. Based on this interpretation, CBDT has mandated that the extended reassessment notices can be issued.
The Tribunal held that the travel back theory as propounded by the CBDT is against the spirit of the ratio laid down by the Hon’ble Apex Court and the Board’s Circular/Instruction can’t run contrary to the decision of the Hon’ble Apex Court. Board’s circular is otherwise also beyond parent Act, it is only by virtue of the Hon’ble Apex Court Ruling in Ashish Agarwal they got a new lease of life in time barred matter as a matter of extraordinary powers used by the Hon’ble Apex Court in public interest and to save the genuine mistake of the department. But that does not mean that the same can be extended as per the whims and fancies of the Board.
Accordingly, the Tribunal held that the notice issued by the Revenue was clearly time barred, consequently the whole assessment proceeding was bad in law.
In the result, the appeal of the assessee was allowed and orders of the authorities below were set-aside.
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