2023 (3) TMI 1548 - HC - Income Tax

Validity of reopening of assessment - Period of limitation to issue notice issued u/s 148A(b) - Time limit for notice - scope of new regime as per section 148A - prescribed permissible timeline of six years - notices having been issued after passage of six years from the end of the relevant assessment year - HELD THAT - This Court is in agreement with the decision in Keenara Industries Pvt. Ltd. 2023 (3) TMI 104 - GUJARAT HIGH COURT of this Court as well with Allahabad High Court decision in Rajeev Bansal 2023 (2) TMI 1081 - ALLAHABAD HIGH COURT Therefore the point is no more res integra that all original notices under section 148 of the Act referable to the old regime and issued between 01.04.2021 to 30.06.2021 would stand beyond the prescribed permissible timeline of six years from the end of Assessment Year 2013-14 and Assessment Year 2014-15. Therefore all such notices when they would relate to Assessment Year 2013-14 or Assessment Year 2014-15 would be time barred as per the provisions of the Act as applicable in the old regime prior to 01.04.2021. Furthermore these notices cannot be issued as per the amended provision of the Act. Revenue was entirely at his receiving end unable to dispute the position of law holding the field as above. The impugned notice in this petition under section 148 of the Act relatable to Assessment year 2013-14 is beyond the permissible time limit therefore liable to be treated illegal and without jurisdiction. Since the petition deserves to be allowed on the aforesaid crisp legal ground alone learned advocates for the parties submitted to agree that facts and other legal issues may not be gone into by the Court. Accordingly they are neither delineated nor are gone into. As a result Notice issued by Respondent-Assessing Officer under Section 148 seeking to reopen the assessment in respect of Assessment Year 2013-14 Order passed by the Respondent under Section 148A(d) of the Act and all consequential actions as may have been taken are hereby quashed and set aside.

Issues Involved:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment for the Assessment Year 2013-14.
2. Applicability of the time limit for issuing such notices under the old and new regimes of the Income Tax Act.
3. Impact of the Supreme Court decision in Ashish Agarwal on the validity of notices issued between 01.04.2021 and 30.06.2021.
4. Relevance of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 on the extension of time limits for issuing reassessment notices.

Issue-wise Detailed Analysis:

1. Legality of the Notice under Section 148:

The petitioner challenged the notice dated 31.07.2022 issued by the respondent-assessing officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2013-14. The petitioner contended that the notice and the consequential order under Section 148A(d) were barred by limitation as they were issued more than six years after the end of the relevant assessment year, thus rendering them without jurisdiction.

2. Applicability of Time Limits:

The court examined the provisions of Section 149 of the Income Tax Act as they existed prior to the Finance Act, 2021 (old regime) and after the amendments introduced by the Finance Act, 2021 (new regime). Under the old regime, notices under Section 148 could be issued within four to six years from the end of the relevant assessment year if the income chargeable to tax that escaped assessment amounted to one lakh rupees or more. The new regime, effective from 01.04.2021, reduced this period to three years, extendable to ten years under specific conditions. The court noted that the First Proviso to Section 149, as introduced by the Finance Act, 2021, stipulated that no notice could be issued for assessment years beginning on or before 01.04.2021 if it was already time-barred under the old regime.

3. Impact of the Supreme Court Decision in Ashish Agarwal:

The Supreme Court in Union of India vs. Ashish Agarwal held that notices issued between 01.04.2021 and 30.06.2021 under the old regime should be treated as show-cause notices under the new Section 148A of the Act. However, the court emphasized that all defenses available under Section 149 and the Finance Act, 2021, remained open to the assessee. The Gujarat High Court, in Keenara Industries Pvt. Ltd., clarified that notices time-barred under the old regime could not be revived under the new regime, even with the Supreme Court's directions in Ashish Agarwal.

4. Relevance of the Taxation and Other Laws Act, 2020:

The court addressed the impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, which extended the time limits for issuing reassessment notices due to the COVID-19 pandemic. However, it was held that this secondary legislation could not override the principal legislation, and the extended time limits could not apply to notices that were already time-barred under the old regime. The court reiterated that the Finance Act, 2021 did not save the old regime's provisions, and thus, notices that had become time-barred could not be issued post-01.04.2021.

Conclusion:

Based on the above analysis, the court concluded that the notice dated 31.07.2022 issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2013-14, was beyond the permissible time limit and therefore illegal and without jurisdiction. Consequently, the notice, the order under Section 148A(d), and all consequential actions were quashed and set aside. The petition was allowed, and the rule was made absolute. All other questions on facts and law were kept open for future consideration.

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