2024 (10) TMI 1623 - HC - Income Tax

Reopening of assessment - Period of limitation to issue notice issued u/s 148A(b) - scope of notices issued u/s 148 of the new regime between July and September 2022 - Application of TOLA to the Income Tax Act after 1 April 2021 - concerned AO can be asked to decide the said issue in terms of the observations of the Supreme Court in RAJEEV BANSAL 2024 (10) TMI 264 - SUPREME COURT (LB) and drop the proceedings where they fall beyond limitation, or are below the value of Rs. 50.00 lakhs - HELD THAT - While examining the cases, the example as mentioned by the Apex Court in its judgment in Rajeev Bansal s case 2024 (10) TMI 264 - SUPREME COURT (LB) and observations made in paragraph Nos. 110 and 111, shall also be taken into consideration. Cases, which fall less than the value of Rs. 50, 00, 000/- would have to be dropped keeping in view the stand taken by the revenue before the Apex Court, as observed in paragraph No. 53. The aforesaid exercise shall be conducted by the concerned competent Officer of the Department expeditiously, preferably, within a period of two months without any further delay. The decision shall be conveyed to the assessee in terms of the faceless regime by the concerned Officer keeping in view the provision of Section 144-B of the Act. If any of the petitioner/assessee is still aggrieved of the order passed, remedy in terms of the provision of the Act can be availed by him.

2025 (1) TMI 247 - SCH

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around the validity of notices issued under Section 148 of the Income Tax Act, 1961, in light of the amendments introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the Finance Act, 2021. The primary issues include:

Whether the new regime under Section 149(1) is applicable to past assessment years.
The impact of the legal fiction created by the Supreme Court in the case of Ashish Agarwal on the limitation period for issuing reassessment notices.
The applicability of the new faceless regime and the procedural requirements under the amended provisions.
The treatment of cases where the income chargeable to tax that escaped assessment is less than Rupees fifty lakhs.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of Section 149(1) to Past Assessment Years

Relevant legal framework and precedents: The judgment references the Supreme Court's decision in Union of India vs. Rajeev Bansal, which clarified that Section 149(1) applies to past assessment years, reducing the time limit for issuing notices from four to three years.
Court's interpretation and reasoning: The court interpreted that the new regime is not prospective and applies retrospectively to past assessment years, aligning with the Supreme Court's interpretation.
Key evidence and findings: The court relied on the Supreme Court's observations and legal reasoning to determine the applicability of the new regime.
Application of law to facts: The court applied this interpretation to the cases at hand, determining which notices were valid under the new regime.
Treatment of competing arguments: The court considered arguments from both petitioners and respondents, ultimately aligning with the Supreme Court's reasoning.
Conclusions: The court concluded that the new regime applies to past assessment years, affecting the validity of notices issued under the old regime.

Issue 2: Impact of Legal Fiction on Limitation Period

Relevant legal framework and precedents: The concept of legal fiction as discussed in Ashish Agarwal was pivotal in determining the limitation period for reassessment notices.
Court's interpretation and reasoning: The court interpreted that the legal fiction stopped the clock of limitation from the date of issuance of Section 148 notices under the old regime.
Key evidence and findings: The court referred to the Supreme Court's detailed explanation of how the limitation period should be computed.
Application of law to facts: The court applied this understanding to assess whether the notices in question were issued within the permissible time frame.
Treatment of competing arguments: The court examined the arguments regarding the computation of limitation, ultimately relying on the Supreme Court's guidance.
Conclusions: The court concluded that the limitation period must be computed by excluding specific periods as outlined by the Supreme Court.

Issue 3: Procedural Requirements under the New Faceless Regime

Relevant legal framework and precedents: The Finance Act, 2021, introduced procedural changes under the faceless regime, impacting how reassessment notices are handled.
Court's interpretation and reasoning: The court emphasized the need for compliance with procedural requirements, including issuing notices within the surviving time limit.
Key evidence and findings: The court examined the procedural steps outlined by the Supreme Court for issuing reassessment notices.
Application of law to facts: The court applied these procedural requirements to determine the validity of the notices in question.
Treatment of competing arguments: The court considered arguments regarding procedural compliance, emphasizing adherence to the Supreme Court's directions.
Conclusions: The court concluded that procedural compliance under the faceless regime is essential for the validity of reassessment notices.

Issue 4: Treatment of Cases Involving Income Below Rupees Fifty Lakhs

Relevant legal framework and precedents: The proviso to Section 149(1)(b) limits the issuance of reassessment notices for past assessment years if the escaped income is below Rupees fifty lakhs.
Court's interpretation and reasoning: The court interpreted that notices must be dropped if the escaped income is below this threshold, as per the Supreme Court's guidance.
Key evidence and findings: The court relied on the Supreme Court's interpretation to assess the validity of notices in cases involving lower amounts of escaped income.
Application of law to facts: The court applied this threshold to the cases at hand, determining which notices should be dropped.
Treatment of competing arguments: The court considered arguments regarding the threshold, ultimately adhering to the Supreme Court's reasoning.
Conclusions: The court concluded that notices must be dropped if the escaped income is below Rupees fifty lakhs.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The court cited the Supreme Court's observations, including the summary of the law regarding the new regime's applicability and the computation of limitation periods.
Core principles established: The judgment reinforced the applicability of the new regime to past assessment years, the impact of legal fiction on limitation periods, the necessity of procedural compliance, and the threshold for escaped income.
Final determinations on each issue: The court directed the revenue to examine each case individually, applying the Supreme Court's guidance to determine the validity of notices based on limitation periods and income thresholds.

The court's decision underscores the importance of adhering to the Supreme Court's interpretations and procedural requirements under the amended Income Tax Act, ensuring that reassessment notices are issued within the correct legal framework and time limits.

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