2024 (9) TMI 152 - HC - Income Tax

Validity of reassessment notice issued beyond period of limitation - Reopening of assessment under old regime - scope of new regime - scope of TOLA - HELD THAT - As considering the observations as made by the Division Bench in Hexaware 2024 (5) TMI 302 - BOMBAY HIGH COURT we find that the impugned notice itself was illegal and without jurisdiction. There was no foundation on jurisdiction for an assessment order to be passed on the basis of a notice under section 148 which itself was time barred. Thus there is no basis on which we can hold the impugned assessment order to be legal and valid as not only the impugned notice under Section 148 of the Act but also the order passed under Section 148A (d) of the Act were barred by limitation as per the first proviso to Section 149 as held in Hexaware. For such reason, we are of the clear opinion that no useful purpose would serve relegating the petitioner to avail an alternate remedy of an appeal, as filing of such appeal itself would be an empty formality. In the aforesaid circumstances, the inherent illegality of the impugned notice under Section 148 of the Act being time-barred, which percolates into the assessment order passed thereunder is an incurable defect, regardless of the forum before which the same is agitated. In these circumstances, it cannot be said that it was not appropriate for the Petitioner to invoke the jurisdiction of this Court under Article 226 when the assessing officer has acted without jurisdiction. The notice dated 25 July, 2022 u/s 148 of the Act could not have been issued for the assessment year 2013-14. It is on such notice, the assessment order dated 26 May, 2023 has been passed. This is clearly a case where the Assessing Officer has proceeded without jurisdiction and possibly applying the amended provisions of Section 149 as incorporated by the Finance Act to the case in hand when he issued notice dated 25 July, 2022 overlooking the fact that in the present case as the law would stand, the limitation had already expired and within the extended period of limitation as noted by us herein. Thus, once the notice itself was inherently without jurisdiction, the order passed on such notice although was passed without granting hearing to the petitioner, would obviously be rendered illegal. An order which is ab initio void cannot be saved in any circumstances or labeled to be not illegal and void, merely because the petitioner belatedly approached this Court and more so when such order was sought to be effected/implemented in a recent notice issued to the petitioner u/s 271. Any acquiescence to an illegal order can never bring about a situation where the illegality attributed to such an order would stand extinguished and the order can be termed to be legal. The law cannot be read in such manner. Thus, in the present case, an order which is illegal and void ab initio is sought to be given effect to, which cannot be permitted to be done. Assessee appeal allowed.

Issues Involved:
1. Legality of the notice under Section 148 of the Income Tax Act, 1961.
2. Limitation period for issuing notice under Section 148.
3. Application of the first proviso to Section 149 of the Income Tax Act.
4. Jurisdiction of the assessing officer.
5. Relegation to alternate remedy of statutory appeal.

Detailed Analysis:

1. Legality of the notice under Section 148 of the Income Tax Act, 1961:

The petitioner challenged the legality of the notice issued under Section 148 of the Income Tax Act dated 25th July 2022, along with subsequent orders and notices. The petitioner argued that these notices and orders were beyond the prescribed period of limitation as per the first proviso to Section 149 of the Act, making them invalid and without jurisdiction.

2. Limitation period for issuing notice under Section 148:

The relevant assessment year in this case is 2015-16. The petitioner was initially issued a notice under Section 148 on 11th June 2021. This notice was deemed to be under Section 148A(b) following the Supreme Court's decision in Union of India v. Ashish Agarwal. The petitioner argued that the limitation period of six years for issuing a notice under Section 148 expired on 31st March 2022, as per the provisions of Section 149 before its amendment by the Finance Act, 2021.

3. Application of the first proviso to Section 149 of the Income Tax Act:

The petitioner contended that the issue was covered by the decision in Hexaware Technologies Ltd. v. Assistant Commissioner of Income-tax. The court in Hexaware held that for assessment years up to 2021-2022, the period of limitation as prescribed in the erstwhile provisions of Section 149 would apply. The notice under Section 148 issued on 27th August 2022 was beyond the six-year limitation period and hence barred by the first proviso to Section 149. The court emphasized that the proviso's purpose was to ensure that amendments were prospective, not retrospective.

4. Jurisdiction of the assessing officer:

The court found that the impugned notice under Section 148, dated 25th July 2022, was issued beyond the prescribed limitation period, rendering it illegal and without jurisdiction. Consequently, any assessment order based on such a notice was also without jurisdiction. The court referenced its decision in Bhoomi Viral Shah v. Income-tax Officer, where it was held that an order ab initio void cannot be saved by any subsequent proceedings.

5. Relegation to alternate remedy of statutory appeal:

The respondents argued that the petitioner should be relegated to an alternate remedy of a statutory appeal. However, the court held that since the impugned notice itself was time-barred and hence illegal, relegating the petitioner to an alternate remedy would serve no useful purpose. The court emphasized that an illegal and void order cannot be validated through subsequent procedural steps.

Conclusion:

The court allowed the petition, quashing the notice under Section 148 dated 25th July 2022, the order under Section 148A(d) dated 25th July 2022, the show-cause notice under Section 148A(b) dated 31st May 2022, the order passed under Section 147 read with Section 144 dated 31st March 2024, the notice of demand under Section 156 dated 31st March 2024, and the show-cause notice under Section 274 read with Section 271(1)(c) dated 31st March 2024. The rule was made absolute in these terms.

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