2024 (2) TMI 400 - HC - Income Tax

Reopening of assessment u/s 147 - period of limitation - whether Notice u/s 148 issued beyond limitation period prescribed U/s 149 and thus is time barred and void? - HELD THAT - The Income Tax Act has provided a strict time-line to complete the assessment or reassessment proceedings under Section 147 of the Income Tax Act, 1961, once initiated under Section 148 of the Income Tax Act, 1961. If the said proceedings are not completed within the stipulated time-line, it will be barred by limitation. Thus the very initiation of reassessment proceeding is wholly without jurisdiction. Any notice under Section 148 of the I.T Act, 1961 is normally three years from the end of the relevant assessment year (in this case A.Y 2016-17) and extendable beyond 3 years till 10 years, provided the income which has escaped assessment is Rs. 50,00,000/- or more which is absent in the impugned Notices as indicated herein above. The three-year time period of A.Y 2016-17 had ended on 31.03.2020. Accordingly, the Impugned Notice, dated 21.07.2022, is beyond 3 years time period. Further, the said notice is for alleged escaped income of Rs. 39,21,450/- which is less than Rs. 50,00,000/- and thus, the said notice cannot take the benefit of extended period of limitation which is beyond three years till ten years. Thus, the Impugned Notice dated 21.07.2022, issued under Section 148, is barred by the limitation period prescribed under Section 149 of the Act. Accordingly, the Impugned Notice issued u/s 148, is barred by the limitation period prescribed under Section 149 and is illegal, unsustainable and void ab initio and is liable to be set-aside and consequently, all subsequent actions/notice/orders are also liable to be quashed. It is a well-established principle of law that if the foundation of any proceeding is illegal and unsustainable in law, then all consequential proceedings or order are also bad in law. Since the impugned notice u/s 148 of I.T Act, 1961, is illegal and unsustainable in law, accordingly, the Impugned Re-assessment order passed under Section 147 and the Notice of Demand issued under Section 156 are also bad in law and unsustainable and the same, is hereby, quashed and set aside. Decided in favour of assessee.

Issues Involved:
1. Whether the impugned notice dated 21.07.2022 under Section 148 of the Income Tax Act, 1961, is time-barred and void.
2. Whether the impugned notice and order dated 21.07.2022 were issued without the approval of the prescribed authority under Section 151 of the Income Tax Act, 1961.
3. Whether the impugned order dated 21.07.2022 was passed without considering the petitioner's replies.
4. Whether the impugned order and notice were issued without providing detailed information and material/documents to the petitioner.

Summary:

Issue 1: Time-Barred Notice
The petitioner contended that the notice dated 21.07.2022 under Section 148 of the Income Tax Act, 1961, was issued beyond the limitation period prescribed under Section 149 of the Act. The court observed that the notice was for alleged escaped income of Rs. 39,21,450/-, which is less than Rs. 50,00,000/-. According to Section 149, the limitation period for issuing such notice is three years from the end of the relevant assessment year, extendable to ten years only if the escaped income is Rs. 50,00,000/- or more. Since the three-year period ended on 31.03.2020, the notice dated 21.07.2022 was beyond this period and thus barred by limitation.

Issue 2: Approval of Prescribed Authority
The petitioner argued that the impugned notice and order were issued without the approval of the prescribed authority under Section 151 of the Act. The court did not specifically address this issue, as it found the reassessment proceedings to be fundamentally flawed due to the time-barred nature of the notice.

Issue 3: Consideration of Petitioner's Replies
The petitioner claimed that the impugned order dated 21.07.2022 was passed without considering their detailed replies dated 04.06.2022 and 28.06.2022. The court did not delve into this issue, given its decision on the primary issue of the notice being time-barred.

Issue 4: Provision of Detailed Information
The petitioner asserted that the impugned order and notice were issued without providing detailed information and material/documents. The court did not find it necessary to adjudicate this issue, as the reassessment proceedings were already deemed invalid due to the time-barred notice.

Conclusion:
The court concluded that the reassessment proceedings were wholly without jurisdiction due to the time-barred nature of the notice dated 21.07.2022. Consequently, the impugned notice, reassessment order dated 31.05.2023, and the Notice of Demand dated 31.05.2023 were all quashed and set aside. The court emphasized that if the foundation of any proceeding is illegal, all consequential proceedings or orders are also unsustainable in law. The writ petition was allowed, and pending interlocutory applications were closed.

← Previous Next →