2024 (3) TMI 1375 - HC - Income Tax

Validity of re-assessment proceedings as time barred - HELD THAT - Having considered the submissions of learned counsel for the parties and particularly taking into consideration that the reassessment is initiated vide impugned notice issued on 26.03.2023 in relation to Assessment Year 2012-13 and also the provisions contained in Section 149(1)(b) of the Act, as amended vide Finance Act, 2021, pre-existing provisions of Section 149 and Section 153C as also the orders passed by the different High Courts, the petitioner has made out a strong prima-facie case. It is ordered that though reassessment proceedings may go on, final order shall not be passed without the leave of the Court. The respondents are granted four weeks time to file reply. List this case after four weeks for final disposal.

Summary

Issues:
1. Jurisdiction of re-assessment proceedings under Section 148 of the Income Tax Act, 1961.
2. Time limitation for issuance of notice under Section 148.
3. Prima facie case for time-barred assessment.
4. Material evidence for re-opening assessment.
5. Provision of Section 149(1)(b) of the Act.
6. Granting of stay on final assessment order.

Jurisdiction of Re-assessment Proceedings:
The petitioner argued that the re-assessment proceedings initiated through the notice under Section 148 of the Income Tax Act are time-barred and lack jurisdiction. It was contended that as the notice was issued beyond the time limit specified in Section 149(1)(b) of the Act, the proceedings should be deemed without jurisdiction. The petitioner referred to various High Court judgments to support the argument that the assessment for the relevant year is time-barred.

Time Limitation for Notice under Section 148:
The respondent, on the other hand, contended that the notice under Section 148 is within the limitation period as per a conjoint reading of Sections 148, 149(1)(b), and Section 153C of the Act. It was argued that if the proceedings had been initiated before the commencement of the Finance Act, 2021, they would have been within the limitation period as per the pre-existing provisions of Section 149. The respondent also highlighted the material evidence found during a search, indicating a prima facie case for re-opening the assessment.

Prima Facie Case for Time-barred Assessment:
The petitioner relied on High Court judgments to establish a strong prima facie case that the assessment is time-barred. The Court considered the submissions of both parties, the date of issuance of the notice, and the amended provisions of Section 149(1)(b) of the Act. Based on these factors and the orders of different High Courts, the Court found that the petitioner had made out a strong prima facie case for a time-barred assessment.

Material Evidence for Re-opening Assessment:
The respondent argued that there is sufficient material evidence, discovered during a search, to support the re-opening of the assessment. The evidence revealed questionable transactions between the petitioner and another individual, providing a basis for re-assessment.

Provision of Section 149(1)(b) of the Act:
The Court considered the provisions of Section 149(1)(b) of the Act, as amended by the Finance Act, 2021, along with the pre-existing provisions of Section 149 and Section 153C. The Court noted the importance of these provisions in determining the time limitation for issuing the notice under Section 148.

Granting of Stay on Final Assessment Order:
In light of the arguments presented by both parties and the prima facie case established by the petitioner, the Court ordered that while the re-assessment proceedings may continue, a final order should not be passed without the leave of the Court. The respondents were granted four weeks to file a reply, and the case was listed for final disposal after the specified period.