2023 (12) TMI 103 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - applicability of period of limitation of 10 years - as alleged notice beyond the limitation prescribed u/s 149 issued - Relevant date for conducting search or survey - whether with the amendment brought in by Finance Act 2021, the respective notices issued to the respective petitioners under Section 148 of the Act for the Assessment Year 2013-14 is/are beyond jurisdiction? - HELD THAT - It is true that in the newer provision of reassessment, in cases where search is initiated after 01.04.2021, it is required to be made as per provisions contained in section, 148, 149 and 151. The discussions made herein above clearly states that no error has been committed by the AO in issuing Notice u/s 148 of the Act for the AY 2013-14. It goes without saying that Section 148A is not applicable in this case as information emanated from searched party and materials/documents pertained to/relates to the both Assessee i.e., where the search is conducted and against the 3rd person whose documents have been seized which goes to show that the information and the documents forms an asset and beyond 50 Lakh. Further the records suggest that investigating team has also alleged about the entries in the Books of Account. Thus, the first and the main contention of the learned counsel for the respective Assessee that the Notice u/s 148 is time barred, has no legs to stand in the eye of law in view of the discussions made in the preceding paragraphs. Accordingly, the judgments cited by the learned counsel is not applicable in the instant case, inasmuch as, the Notice issued by the Revenue is not time barred as discussed herein above. Contention of petitioner hat no search was made in the case of Assessee and only survey was conducted as such 10 years will not be applicable in its case - Even this submission is misconceived because of the fact that 153C (2) of the Act is very clear in explaining the manner of assessment. The provision of this sub-section in unequivocal term stipulates that the Assessing Officer shall issue Notice and assess or reassess total income of such other person of such assessment year in the same manner as provided in section 153A of the Act. Thus, so far as the argument of difference between survey and search as developed by the learned counsel for the petitioner is concerned; the same is misconceived and without any basis. Thus A.O was justified in reopening the assessment for A.Y.13-14 in case of both the Assessees for 10 years as they have rightly taken previous sanction of the competent authority. There is no illegality, whatsoever, with regard to initiation of reassessment proceeding by issuing notice under Section 148 of the Income Tax Act. Decided against assessee.

Summary

Issues Involved:
1. Legality and jurisdiction of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Applicability of the time limit prescribed under Section 149 of the Income Tax Act.
3. Distinction between search and survey operations under the Income Tax Act.

Summary:

1. Legality and Jurisdiction of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioners challenged the jurisdiction for issuance of notice under Section 148 of the Act, arguing that the notices were issued on a factually incorrect premise and beyond the prescribed limitation period. The court examined the legislative intent behind the Finance Act, 2021, which aimed to reduce the time limit for ordinary cases to three years and introduced a threshold amount for invoking an extended time limit of ten years. The court found that the notices were issued based on information obtained from search and seizure operations, which suggested that income chargeable to tax had escaped assessment.

2. Applicability of the Time Limit Prescribed Under Section 149 of the Income Tax Act:
The court noted that under the old provisions, the Assessing Officer could assess six assessment years in the case of a search. The Finance Act, 2021, expanded this to ten years under certain conditions. The court concluded that the notices issued under Section 148 for the assessment year 2013-14 were within the jurisdiction as they fell within the ten-year period from the end of the relevant assessment year. The court emphasized that the first proviso to Section 149 stipulates that notices can be issued if they could have been issued under the old provisions of Sections 153A and 153C.

3. Distinction Between Search and Survey Operations Under the Income Tax Act:
The petitioner argued that since only a survey was conducted in the case of Devika Constructions, the ten-year period should not apply. The court rejected this argument, stating that Section 153C(2) of the Act clearly explains that the Assessing Officer shall issue notice and assess or reassess the total income of such other person in the same manner as provided in Section 153A. The court found no distinction between search and survey in this context and upheld the notices issued.

Conclusion:
The court held that the Assessing Officer was justified in reopening the assessment for the assessment year 2013-14 for both petitioners, as they had taken the previous sanction of the competent authority. There was no illegality in the initiation of reassessment proceedings by issuing notices under Section 148 of the Income Tax Act. Consequently, both writ applications were dismissed without interfering with the respective show-cause notices.