2023 (3) TMI 1355 - 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 - 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. All the impugned notices in the respective petitions under section 148 of the Act relatable to Assessment year 2013-14 or the assessment year 2014-15, as the case may be, are beyond the permissible time limit, therefore, liable to be treated illegal and without jurisdiction. Since the petitions deserve 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 in respect of the above petitions. All other questions on facts involved in the reasons weighed with Assessing Officer seeking to reopen the assessment are kept open in all cases.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Application of limitation period for reopening assessments under the old and new regimes of the Income Tax Act, 1961.
3. Validity of the notice issued beyond the prescribed time limit as per the old regime.
4. Impact of the Finance Act, 2021, and relevant Supreme Court judgments on the reopening of assessments.

Summary:

Issue 1: Legality of Notice Issued under Section 148 of the Income Tax Act, 1961
The petitioner challenged the notice dated 19.07.2022 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 19.07.2022 passed under Section 148A(d) of the Act.

Issue 2: Application of Limitation Period for Reopening Assessments
The petitioner argued that the notice issued under Section 148 and the consequential order under Section 148A(d) were barred by limitation, as they were issued after six years from the end of the relevant assessment year. The court referred to the decision in Keenara Industries Pvt. Ltd. vs. The Income Tax Officer, which held that the notice for reopening assessments could only be issued if the limitation period under the old regime had not expired before the Finance Act, 2021, came into force.

Issue 3: Validity of Notice Issued Beyond the Prescribed Time Limit
The court noted that under the old regime, Section 149 allowed notice under Section 148 to be issued within four/six years from the end of the relevant assessment year. The Finance Act, 2021, introduced new provisions, including Section 148A and a recast Section 149, effective from 01.04.2021. However, the first proviso to Section 149 of the new regime stipulated that no notice under Section 148 could be issued if it was already time-barred under the old regime before 01.04.2021.

Issue 4: Impact of Finance Act, 2021, and Supreme Court Judgments
The court referred to the Supreme Court's decision in Union of India vs. Ashish Agarwal, which directed that notices issued under the old regime between 01.04.2021 and 30.06.2021 should be treated as show-cause notices under Section 148A(b) of the new regime. However, the court emphasized that the limitation period under the old regime would still apply, and notices that were time-barred under the old regime could not be revived under the new regime.

Conclusion:
The court concluded that the notice dated 19.07.2022 for reopening the assessment for the assessment year 2014-15 was beyond the permissible time limit and, therefore, illegal and without jurisdiction. Consequently, the notice, the order under Section 148A(d), and all consequential actions were quashed and set aside. The petition was allowed, and the rule was made absolute.