2023 (3) TMI 1198 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of order u/s 148A - scope of new enactment of Section 148A - Notice beyond the permissible time limit - Period of limitation to issue notice issued u/s 148A(b) - time limit extended by Notifications of the Central Board of Direct Taxes - notices issued u/s 148 referable to the old regime - HELD THAT - As already noted, the department took shelter of the time limit extended by Notifications of the Central Board of Direct Taxes to treat the above class of notices to be within time. In Keenara Industries Pvt. Ltd. 2023 (3) TMI 104 - GUJARAT HIGH COURT this Court proceeded to hold that enacting the provisions in Taxation and Other Laws (Relaxation Amendment of Certain Provisions) Act, 2020, was not the permissible device whereby the time limit could be legitimately extended for the purpose of issuing Notices under Section 148, which were otherwise barred in terms of Section 149, as it exists in the old regime. The Taxation and Other Laws Act, 2020 was rightly viewed to be a secondary legislation. It was therefore held that secondary legislation would not override the principal legislation-the Finance Act, 2021. Also negatived by the Division Bench in Keenara Industries Pvt. Ltd. (supra) as per observations in paragraph 36 of the judgment, the concept of freezing the time limit. It was held that it was not permissible in law for the Revenue to travel back in time. Nor does the Taxation and Other Laws Act endorse to such concept. It was held as per paragraphs 38 and 39 of the Keenara Industries Pvt. Ltd. (supra) that Notifications extending the due dates under the old provisions could not breath any more after the repeal of the old provisions. The point is no more res integra that all original notices under section 148 of the Act referable to the old regime and issued between 01.04.2021 to 30.06.2021 would stand beyond the prescribed permissible timeline of six years from the end of Assessment Year 2013-14 and Assessment Year 2014-15. Therefore, all such notices when they would relate to Assessment Year 2013-14 or Assessment Year 2014-15 would be time barred as per the provisions of the Act as applicable in the old regime prior to 01.04.2021. Furthermore, these notices cannot be issued as per the amended provision of the Act. Revenue was entirely at his receiving end, unable to dispute the position of law holding the field as above. In view of the above, the impugned notice in this petition under section 148 of the Act relatable to Assessment year 2014-15 is beyond the permissible time limit, therefore, liable to be treated illegal and without jurisdiction. Since the petition deserves to be allowed on the aforesaid crisp legal ground alone, learned advocates for the parties submitted to agree that facts and other legal issues may not be gone into by the Court. Accordingly, they are neither delineated, nor are gone into.

Summary

Issues Involved:

1. Legality of the notice issued under Section 148 of the Income Tax Act for reopening the assessment for the assessment year 2014-15.
2. Applicability of the limitation period for issuing such notice under both the old and new regimes of the Income Tax Act.
3. Impact of the Supreme Court's decision in Union of India vs. Ashish Agarwal on the present case.

Summary:

Issue 1: Legality of the Notice under Section 148

In the present petition filed under Article 226 of the Constitution, the petitioner challenged the notice dated 27.07.2022 issued by the respondent-assessing officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2014-15. The petitioner also challenged the order dated 26.07.2022 passed under Section 148A(d) of the Act. The petitioner contended that the notice and the consequential order were barred by limitation, having been issued after the passage of six years from the end of the relevant assessment year.

Issue 2: Limitation Period for Issuing Notice

The court revisited the legal provisions under both the old regime (prior to the Finance Act, 2021) and the new regime (post-Finance Act, 2021). Under the old regime, Section 149 allowed the issuance of a notice under Section 148 within four/six years from the end of the relevant assessment year. The Finance Act, 2021, which came into effect on 01.04.2021, introduced Section 148A and recast Section 149, reducing the time limit to three years, extendable to ten years under certain conditions. The court noted that the First Proviso to Section 149 of the new regime stipulated that no notice could be issued if it was time-barred under the old regime as of 01.04.2021.

Issue 3: Impact of Supreme Court Decision in Ashish Agarwal

The Supreme Court in Union of India vs. Ashish Agarwal held that all notices issued under Section 148 between 01.04.2021 and 30.06.2021 would be deemed to have been issued under Section 148A and treated as show-cause notices under Section 148A(b). However, the Supreme Court also clarified that all defenses available under Section 149 and other rights and contentions would continue to be available to the assessees. The court in the present case relied on this decision and the Division Bench's decision in Keenara Industries Pvt. Ltd. to conclude that the notice issued for the assessment year 2014-15 was time-barred and therefore without jurisdiction.

Conclusion:

The court held that the impugned notice dated 27.07.2022 and the order dated 26.07.2022 were beyond the permissible time limit and thus illegal and without jurisdiction. Consequently, the notice and all consequential actions were quashed and set aside. The petition was allowed, and the rule was made absolute.