2024 (3) TMI 433 - HC - Income Tax

Validity of reopening of assessment - period of limitation to issue notice - validity of a notice issued under Section 148/148A - scope of Taxation and other laws (Relaxation and Amendment of certain provisions) Act, 2020 (TOLA) application - provisions of the new reassessment law introduced by the Finance Act, 2021 - HELD THAT - As decided in THE NEW INDIA ASSURANCE COMPANY LIMITED 2024 (1) TMI 803 - BOMBAY HIGH COURT as per the unamended Section 149(1)(b) of the Act, the outer time limit to issue a notice under Section 148 was 6 years from the end of the relevant assessment year and thus, for AY 2013-14, the time limit expired on 31st March 2020. Under the amended provision, a notice under Section 148 can be issued within a period of 3 years or 10 years, the latter available only after fulfilling certain stipulated additional conditions, including the limitation provided for by the first proviso to Section 149(1) of the Act. The first proviso to Section 149(1) stipulates that no notice under Section 148 can be issued at any time in a case for any assessment year, if a notice under Section 148 could not have been issued at that time on account of being beyond the time limit specified under the unamended Section 149(1)(b), i.e., as it stood prior to the Finance Act, 2021. Applicability of Section 149 to be seen qua the notice under Section 148 and not with respect to the notice issued under Section 148A(b) or the order passed under Section 148A(d) of the Act. In the present case, as for AY 2013-14, the 6 years period expired on 31st March 2021, extended under Section 3(1) of TOLA. Therefore, the impugned notice dated 28th July 2022, which is under challenge in the petition, is barred by limitation. Reassessment notices issued for AY 2013-14 are patently barred by limitation as the six years limitation period under the Act (as extended by Section 3 of TOLA) expired by 31st March 2021. However, even on the Revenue s demurrer and assuming that such reopening notices could travel back in time and that the provisions of TOLA protected such reopening notices (we do not agree), even then, in so far as the notices issued for AY 2013-14 is concerned, would in any case be barred by limitation. We record that this order is restricted only to the point of limitation since the impugned notices had been issued for the Assessment Year 2013-2014, after the amendment to the Finance Act on 01.04.2021, and that too under the provisions existing prior to the amendment to the Finance Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the impugned notices issued for the Assessment Year 2013-2014.
2. Application of the amended provisions of the Finance Act, 2021.
3. Limitation period for issuing reopening notices under Section 148 of the Income Tax Act.

Summary:

Issue 1: Validity of the Impugned Notices
The court examined the validity of the impugned notices issued for the Assessment Year 2013-2014. The notices were issued after the amendment to the Finance Act, 2021, but based on the provisions existing before the amendment. The Respondent/Department contended that certain earnings/transactions escaped assessment, warranting the reopening of the assessment.

Issue 2: Application of the Amended Provisions
The court referred to its earlier judgment in "The New India Assurance Company Limited Vs. The Assistant Commissioner of Income Tax and Others," where it was concluded that the reassessment proceedings initiated based on notices issued after the amendment were barred by limitation. It was held that a notice under Section 148 of the Act cannot be issued to reopen an assessment if the right to reopen was already barred under the pre-amended Act.

Issue 3: Limitation Period
The court emphasized that for AY 2013-14, the time limit to issue a notice under Section 148 expired on 1st April 2021. The court cited multiple precedents, including "CIT V/s. Onkarmal Meghraj (HUF)" and "J.P. Jani, Income-tax Officer v. Induprasad Devshanker Bhatt," to support its conclusion that the reopening notice issued in July 2022 was beyond the statutory time limit. The court dismissed the Department's arguments regarding the applicability of the Limitation Act, 1963, and the exclusion of the Covid period under TOLA, stating that these contentions were flawed and contrary to well-established principles of law.

Conclusion:
The court allowed the Writ Petitions and quashed the impugned notices. The order was restricted only to the point of limitation, as the notices were issued for the Assessment Year 2013-2014 after the amendment to the Finance Act on 01.04.2021, under the provisions existing prior to the amendment.