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2023 (10) TMI 1140 - HC - Income TaxValidity of Reopening of assessment - order passed u/s 148A(d) - Period of limitation - Time limit for notice - scope of new regime as per section 148A - prescribed permissible timeline of six years - notices having been issued after passage of six years from the end of the relevant assessment year - HELD THAT - As per the aforesaid amended section 149, notice under section 148 of the Act could be issued within three years from the end of the relevant assessment year. What is contemplated is that the assessing officer could reopen the case of the assessee beyond three years, but within 10 years from the end of the relevant assessment year. This could be done by the assessing officer within 10 years provided he is in possession of the books of accounts or documents or evidence revealing that income escaped assessment represented in form of asset was likely to exceed Rs. 50 lakhs. Further condition needed to be satisfied is the approval of the competent authority of the Income Tax under section 151 of the Act, which enable the assessing officer to assume the jurisdiction. What is to be noticed with relevance is that the First Proviso to section 149 of the Act as introduced in Finance Act, 2021, inter alia stipulated that no notice under section 148 shall be issued at any time in a case for the relevant Assessment Year beginning on or before 1st day of April 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provision as it stood immediately before the commencement of the Finance Act, 2021. In respect of the notice u/s 148 of the Act relating to the assessment year beginning on or before 01.04.2021, the operational conditions in the provision as they stood before 01.04.2021 were maintained. It thus included the factor of prescription of time limit-the limitation. The Supreme Court in Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT striking balance between the notices issued by the Department under the old regime and the provisions brought into force under the new regime held that all notices issued under Section 148 of the Act between 01.04.2021 to 30.06.2021 shall be deemed to have been issued under section 148A of the Act to be treated as show-cause notices under section 148A(b) of the Act. The Supreme Court observed that new provisions substituted by the Finance Act, 2021 were remedial and benevolent in nature, came to be inserted with an object to protect the right and interests of the assessee as well to sub-serve the public interest. Thus, one of the direction and clarification in Ashish Agarwal (supra), is that all the defences that were available to the Assessee under section 149 under the Finance Act, 2021 and in law whatever rights are available to the assessing officer under the Finance Act, 2021 are kept open to be continued to be available. The notice which could not have been issued in the old regime period due to becoming time barred as per then operating provision, would also not be permissible to be issued post-01.04.2021. As already noticed, Section 149 as it stood immediately before commencement of Finance Act, 2021, that is before 01.04.2021 in the old regime inter alia provided for time limit for notice. It stated inter alia that no notice under section 148 shall be issued for the relevant assessment year, as per clause (b), if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to one lakh rupees or more for that year. Limitation of six years from the end of relevant assessment year operated as timeline in the old regime for issuance of notice u/s 148 beyond which period, it was not competent for the assessing officer to issue notice for reassessment. This embargo is made to continue in the new regime also. Now the reopening notices which related to the period prior to 01.04.2021, but issued between 01.04.2021 to 30.06.2021 came to be challenged before the Division Bench of this Court in Keenara Industries Pvt. Ltd 2023 (3) TMI 104 - GUJARAT HIGH 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 that Notifications extending the due dates under the old provisions could not breath any more after the repeal of the old provisions. Therefore, 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. All the impugned notices in the respective petitions u/s 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.
Issues Involved:
1. Challenge to the notices issued for reopening of assessment under Section 148 and orders under Section 148A(d) of the Income Tax Act, 1961. 2. Bar of limitation for the notices issued beyond the prescribed time limit. Summary: Issue 1: Challenge to Notices and Orders Under Section 148 and Section 148A(d) Both Special Civil Applications challenged the notices issued for reopening assessments for the years 2013-14 and 2014-15 under Section 148 and the orders passed under Section 148A(d) of the Income Tax Act, 1961. The petitions were heard together and treated for disposal by a common judgment. Issue 2: Bar of Limitation for Notices Issued Beyond Prescribed Time Limit The petitioners argued that the notices and consequential orders were barred by limitation, as they were issued after the passage of six years from the end of the relevant assessment year. This argument was supported by the Division Bench decision in Keenara Industries Pvt Ltd. vs. The Income Tax Officer, which established that notices under Section 148 could only be issued within six years from the end of the relevant assessment year, as per the old regime before the Finance Act, 2021. The Court revisited the development of the law and the applicable provisions under both the old regime and the new regime introduced by the Finance Act, 2021. It was noted that under the old regime, the time limit for issuing notices under Section 148 was four/six years, depending on the amount of income that escaped assessment. The Finance Act, 2021, amended Section 149 to reduce the time limit to three years, with a provision to extend it to ten years if the escaped income exceeded Rs. 50 lakhs. However, the First Proviso to Section 149, as introduced by the Finance Act, 2021, stipulated that no notice under Section 148 could be issued for assessment years before 01.04.2021 if it was already time-barred under the old regime. This was upheld by the Supreme Court in Union of India vs. Ashish Agarwal, which clarified that all defenses available under Section 149 and the Finance Act, 2021, would continue to be available. The Court in Keenara Industries Pvt. Ltd. held that notices issued after the expiry of six years from the end of the relevant assessment year were barred and without jurisdiction. This was further supported by the Allahabad High Court in Rajeev Bansal vs. Union of India, which held that the relaxation/extension under the Taxation and Other Laws Act, 2020, could not be applied to extend the time limit for issuing such notices. Conclusion In light of the above legal principles, the Court concluded that the impugned notices for the assessment years 2013-14 and 2014-15 were beyond the permissible time limit and thus illegal and without jurisdiction. Consequently, the notices and orders under Section 148 and Section 148A(d) were set aside, and the petitions were allowed. Order (i) Notice dated 01.07.2022 under Section 148 and Order dated 01.07.2022 under Section 148A(d) of the Income Tax Act for Assessment Year 2013-14 are set aside. (ii) Notice dated 31.07.2022 under Section 148 and Order dated 30.07.2022 under Section 148A(d) of the Income Tax Act for Assessment Year 2014-15 are set aside. Both petitions are allowed, and Rule is made absolute in each petition.
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