2024 (3) TMI 109 - HC - Income Tax

Period of limitation to issue notice for reopening of assessment - whether notice is issued beyond the period of limitation provided for in Section 149? - applicability of Section 3 of TOLA - exclusion of Covid period - HELD THAT - The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued u/s 148 of the Act, which in the present case is 31st July 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under Section 148 of the Act for AY 2014-15 could be issued on or after 1st April 2021 based on the first proviso to Section 149 of the Act. Therefore, the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under Section 148 of the Act could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices. The fifth proviso can only apply where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached. The sixth proviso to Section 149 of the Act has no impact as it only provides a situation where after exclusion of the time period referred to in the fifth proviso, the time available with the Assessing Officer for passing an order under Section 148A(d) of the Act is less than 7 days, then the remaining time frame shall be extended to 7 days and limitation also stands extended by 7 days. The notice u/s 148 of the Act issued on 31st July 2022, therefore, is barred by limitation. As per the fifth proviso to Section 149 of the Act only the period from 24th May 2022 to 8th June 2022 can be excluded since the notice under Section 148A(b) of the Act has been issued for the first time on 24th May 2022 providing time to petitioner till 8th June 2022 to furnish a reply. The Revenue is seeking to exclude a period from 21st May 2021 to 4th May 2022 relying on Ashish Agarwal ( 2022 (5) TMI 240 - SUPREME COURT which, as explained earlier, cannot apply. Hence, the impugned notice dated 31st July 2022 is bad in law. Decided in favour of assessee.

Issues Involved:
1. Period of Limitation for Issuance of Notice
2. Validity of Reassessment Proceedings
3. Application of Supreme Court Judgment in Ashish Agarwal Case
4. Applicability of TOLA and Notifications
5. Validity of Approval under Section 151

Summary:

1. Period of Limitation for Issuance of Notice:
The petitioner challenged the notice dated 24th May 2022 under Section 148A(b) of the Income Tax Act, 1961, arguing it was issued beyond the period of limitation as per Section 149 of the Act. The Court noted that for AY 2014-15, the time limit to issue a notice expired on 31st March 2021. Despite the amended provisions allowing a 10-year period under certain conditions, the first proviso to Section 149(1) restricts this by stating that no notice can be issued if it was already time-barred under the unamended provisions. The Court concluded that the notice issued on 31st July 2022 was barred by limitation.

2. Validity of Reassessment Proceedings:
The petitioner contended that the reassessment proceedings were invalid as they were initiated based on a "change of opinion" and without new information as required under Explanation 1 to Section 148. The Court did not delve into these arguments in detail, as the preliminary issue of limitation was decisive.

3. Application of Supreme Court Judgment in Ashish Agarwal Case:
The petitioner argued that the directions in the Ashish Agarwal case were not applicable as no writ petition was filed challenging the earlier notice dated 21st May 2021. The Court agreed, stating that the Supreme Court's directions did not extend the limitation period for issuing notices under Section 148.

4. Applicability of TOLA and Notifications:
The petitioner argued that the provisions of TOLA and subsequent notifications extending the limitation period were ultra vires and could not apply post 1st April 2021 when the new reassessment provisions were introduced. The Court supported this view, stating that the notifications did not extend the time limit for AY 2014-15 beyond 31st March 2021. The Court also rejected the Revenue's argument that the notices should "relate back" to an earlier date.

5. Validity of Approval under Section 151:
The petitioner claimed that the approval granted under Section 151 was without application of mind. The Court did not address this issue in detail, as the notice was already deemed time-barred.

Findings:
The Court concluded that the notice issued on 31st July 2022 was barred by limitation. The Court held that the validity of a notice must be judged based on the law existing on the date of issuance, which, in this case, was after the expiry of the limitation period. Therefore, the impugned notice and the reassessment proceedings were quashed.

Conclusion:
The petition was disposed of, with the Court ruling in favor of the petitioner on the issue of limitation, rendering other grounds of challenge moot. No order as to costs was made.

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