2023 (3) TMI 1199 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of order u/s 148A - scope of new enactment of Section 148A - Period of limitation to issue notice issued u/s 148A(b) - notices issued u/s 148 referable to the old regime - HELD THAT - 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. The impugned notice in this petition u/s 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.All other questions on facts and of law involved in the reasons weighed with Assessing Officer seeking to reopen the assessment are kept open. As a result, notice dated 30.6.2021 issued by the respondent- Assessing Officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment in respect of Assessment Year 2014-15, Order dated 21.7.2022 passed by the Respondent under Section 148A(d) of the Act, and all consequential actions, as may have been taken, are hereby quashed and set aside.

Summary

Issues Involved:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the order passed under Section 148A(d) of the Income Tax Act, 1961.
3. Application of limitation period for issuing reassessment notices.

Summary:

Issue 1: Legality of the notice issued under Section 148 of the Income Tax Act, 1961

The petitioner challenged the notice dated 30.6.2021 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 argued that the notice was barred by limitation as it was issued after the passage of six years from the end of the relevant assessment year, referencing the decision in Keenara Industries Pvt Ltd. vs. The Income Tax Officer.

Issue 2: Validity of the order passed under Section 148A(d) of the Income Tax Act, 1961

The petitioner also challenged the order dated 21.7.2022 passed under Section 148A(d) of the Income Tax Act, 1961. The impugned order mentioned factual details and reasons for reopening the assessment. However, it was argued that the notice under Section 148A(b) was treated as a show-cause notice in light of the Supreme Court's decision in Union of India vs. Ashish Agarwal, which allowed such notices to be considered under the new regime.

Issue 3: Application of limitation period for issuing reassessment notices

The Court revisited the development of law regarding the limitation period for issuing reassessment notices under Section 148 of the Act. It was noted that prior to the Finance Act, 2021, the time limit for issuing such notices was four/six years from the end of the relevant assessment year. The Finance Act, 2021, effective from 01.04.2021, introduced Section 148A and recast Section 149, changing the time limit to three years, extendable to ten years under certain conditions. The First Proviso to Section 149 of the new regime stipulated that no notice could be issued if it was already time-barred under the old regime.

The Supreme Court in Ashish Agarwal held that notices issued between 01.04.2021 and 30.06.2021 under the old regime should be treated as show-cause notices under Section 148A(b) of the new regime. However, the Court emphasized that all defenses available under Section 149 of the Finance Act, 2021, would continue to be available.

In Keenara Industries Pvt. Ltd., it was held that notices which were time-barred under the old regime could not be revived under the new regime. The Court in the present case agreed with this position, stating that the notice for the assessment year 2014-15 issued on 30.6.2021 was beyond the permissible time limit and thus illegal and without jurisdiction.

Conclusion

In view of the above, the notice dated 30.6.2021 issued under Section 148 and the order dated 21.7.2022 passed under Section 148A(d) of the Income Tax Act, 1961, along with all consequential actions, were quashed and set aside. The petition was allowed, and the rule was made absolute.