2024 (11) TMI 763 - AT - Income Tax

Validity of notice u/s. 148 /148A as barred by limitation - main contention of the revenue is that the notices issued u/s. 148 have been deemed to be extended by Section 3 of TOLA, therefore, all the notices sent are within time limit and same is in consonance of the judgment of Union of India vs. Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT - HELD THAT - Firstly, after 01/04/2021, the Income Tax Act has to be read alongwith substituted provisions of TOLA will continue to apply after 01/04/2021 if any action or proceedings provided under the substituted provision of the Income Tax falls for completion between 21/03/2020 to 31/03/2021 and Section 3(1), overrides Section 149 - Similarly, TOLA will extend the time limit for grant of sanction by the authorities specified u/s.151 and if the time limit of three years falls between 21/03/2021 and 31/03/2021 then the specified authority u/s. 151(i) has extended time limit till 30/06/2021. The direction of Shri Ashish Agarwal will extent to all re-assessment notice issued in old regime i.e. from 01/04/2021 to 30/06/2021 and finally Court held that ld. AO was required to issue re-assessment notice u/s. 148 under the new regime within the time limit surviving u/s. 148 of the Income Tax Act r.w. TOLA. Thus, in all such instances for the relevant assessment years under question the time limit was extended only up to 30/06/2021 for issuance of notice u/s. 148. Now here in this case as noted above for A.Y.2013-14 after 148A (b), notice u/s. 148 was issued on 29/07/2022; for A.Y. 2014-15 it was issued on 31/07/2022; and for A.Y.2015-16 it was issued 28/07/2022. Thus, in all these years as noted above the original time limit for six years for A.Y.2013-14 was upto 31/03/2020; for 2014-15 it was 31/03/2021; and for A.Y. 2015-16 it was 31/03/2022. Even under the TOLA, the time limit for issuance of notice u/s 148 had expired on 30/06/2021 both for A.Y. 2013-14 A.Y. 2014-15. For the A.Y.2015-16, the Revenue itself has contended before the Hon ble Supreme Court as noted above, all the notices issued on or after 01/04/2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA. Here notice u/s. 148 for the A.Y. 2015-16 has been issued on 28/07/2022 which is admittedly barred by limitation under the new provision of Section 149(1) and it is not covered under TOLA. Accordingly, all the notices are quashed being barred by limitation on the reasons given above and we are not going on the reasons given by the ld. CIT (A) for quashing the notice. Appeals of the Revenue are dismissed.

Summary

Issues Involved:

1. Validity of notices issued under Section 148 of the Income Tax Act for Assessment Years 2013-14, 2014-15, and 2015-16.
2. Application of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) in extending the time limits for issuing reassessment notices.
3. Compliance with the procedural requirements under the new regime introduced by the Finance Act, 2021, including the necessity for obtaining prior approval from specified authorities under Section 151.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148:

The primary issue in these appeals was the validity of notices issued under Section 148 for the Assessment Years (AY) 2013-14, 2014-15, and 2015-16. The Revenue challenged the quashing of these notices by the Commissioner of Income Tax (Appeals) [CIT(A)], who held that the notices were barred by limitation. The CIT(A) relied on judgments from the Bombay High Court, including Siemens Financial Services Pvt. Ltd. and Godrej Industries, which found that the notices were issued beyond the permissible time limits.

2. Application of TOLA:

The Revenue argued that the notices were within the time limit due to the extension provided by Section 3 of TOLA. TOLA was enacted to provide relief and relaxation during the COVID-19 pandemic, allowing for the extension of time limits for various actions under the Income Tax Act. The Revenue contended that the notices issued under the old regime between April 1, 2021, and June 30, 2021, were deemed to be show-cause notices under Section 148A(b) of the new regime, as per the Supreme Court's decision in Union of India vs. Ashish Agarwal. This decision allowed for the extension of time limits for issuing reassessment notices until June 30, 2021.

3. Compliance with Procedural Requirements:

The Supreme Court's judgment in Union of India vs. Rajeev Bansal further clarified the procedural requirements under the new regime. It emphasized the need for obtaining prior approval from specified authorities under Section 151 before issuing reassessment notices. The new regime, effective from April 1, 2021, introduced a higher level of authority for granting sanctions, which was considered beneficial to the assessee. The Court held that non-compliance with these procedural requirements affects the jurisdiction to issue a notice under Section 148.

Conclusion:

In light of the Supreme Court's rulings, the Tribunal found that the notices for AY 2013-14, 2014-15, and 2015-16 were issued beyond the extended time limits provided by TOLA. Specifically, the time limit for issuing notices for AY 2013-14 and 2014-15 expired on June 30, 2021, and the notices were issued in July 2022. For AY 2015-16, the Revenue conceded that all notices issued on or after April 1, 2021, must be dropped as they were not completed within the period prescribed under TOLA. Consequently, the Tribunal quashed all the notices as being barred by limitation, dismissing the Revenue's appeals. The decision was based on the principles established by the Supreme Court, ensuring compliance with the new procedural requirements and time limits.