2023 (3) TMI 1549 - 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 u/s 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.

Summary

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 2014-15.
2. Applicability of the time limit for issuing notices under the old and new regimes of the Income Tax Act, particularly in light of the Finance Act, 2021.
3. Impact of the Supreme Court's decision in Ashish Agarwal and the Division Bench decision in Keenara Industries Pvt. Ltd. on the validity of the notice.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 26.07.2022 issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2014-15, arguing it was barred by limitation. The petitioner contended that the notice was issued beyond the permissible time limit of six years from the end of the relevant assessment year, as prescribed under the old regime of the Income Tax Act. The court agreed with this contention, referencing the decision in Keenara Industries Pvt. Ltd., which held that notices issued beyond the six-year limitation period were without jurisdiction and time-barred.

2. Applicability of Time Limit for Issuing Notices:
The court examined the transition from the old regime to the new regime introduced by the Finance Act, 2021, which came into effect from 01.04.2021. Under the old regime, Section 149 allowed for notices to be issued within four to six years from the end of the relevant assessment year, provided the escaped income exceeded one lakh rupees. The new regime reduced this period to three years, extendable to ten years only if the escaped income exceeded fifty lakh rupees and was represented in the form of an asset. The court emphasized that the first proviso to Section 149 of the new regime maintained the limitation period from the old regime, thereby barring notices that were already time-barred before the commencement of the Finance Act, 2021.

3. Impact of Supreme Court's Decision in Ashish Agarwal and Division Bench Decision in Keenara Industries Pvt. Ltd.:
The court considered the Supreme Court's decision in Ashish Agarwal, which allowed notices issued between 01.04.2021 and 30.06.2021 to be treated as show-cause notices under Section 148A(b) of the Act. However, the Supreme Court also clarified that all defenses available under Section 149 and the Finance Act, 2021, remained intact. The Division Bench in Keenara Industries Pvt. Ltd. further clarified that notices which became time-barred under the old regime could not be revived under the new regime. The court in the present case agreed with these interpretations, holding that the notice for the assessment year 2014-15 was issued beyond the permissible timeline and was thus illegal and without jurisdiction.

Conclusion:
The court concluded that the notice dated 26.07.2022 and the consequential order under Section 148A(d) were time-barred and without jurisdiction. Therefore, the notice and all consequential actions were quashed and set aside. The petition was allowed, and the rule was made absolute, with all other questions of fact and law kept open for future consideration.