2024 (12) TMI 649 - HC - Income Tax

Assessment u/s 147 - Applicability of the time limitation u/s 149(1) of the Act for issuing notice u/s 148 - HELD THAT - The impugned notice has been issued beyond the period as stipulated u/s 149 (1) of the Act. However, it is the Revenue s case that the impugned notices were within the prescribed time period by virtue of the non-obstante clause u/s 150 of the Act. The said contention is premised on the assumption that the decision of this Court, dismissing the Revenue s appeal against an order passed by the learned ITAT 2023 (4) TMI 693 - ITAT DELHI , is to be construed as containing findings and directions for commencing proceedings u/s 147 of the Act. The Revenue relies on the decision of Abhisar Buildwell Private Limited. 2023 (4) TMI 1056 - SUPREME COURT in support of this assumption. It is material to note that in Abhisar Buildwell Private Limited 2023 (4) TMI 1056 - SUPREME COURT the Hon ble Supreme Court had upheld the decisions of this Court in Commissioner of Income Tax v. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and the decision of Saumya Construction P. Ltd. 2016 (7) TMI 911 - GUJARAT HIGH COURT whereby it was held that the proceedings under Section 153A of the Act could be initiated only if incriminating material had been found during the search proceedings. However, the Hon ble Supreme Court had also noted that in cases where the said proceedings could not be initiated, the Revenue was not remediless and could take recourse to Sections 147 and 148 of the Act. It is apparent from the above that the said observations cannot be read as permitting reopening of assessments, even in cases where necessary conditions for invoking Sections 147 and 148 of the Act are not satisfied. The said decision also does not permit reopening of assessments beyond the period as stipulated under Section 149(1) of the Act. We are unable to accept that the decision of this court in ITA No. 807/2023 2024 (1) TMI 161 - DELHI HIGH COURT dismissing the Revenue s appeal can be read as findings and directions within the meaning of Section 150, to permit the Revenue to issue notices u/s 148 of the Act, beyond the period as stipulated u/s 149(1) of the Act. The contention that the time period, within which a notice can be issued u/s 148 of the Act as stipulated u/s 149(1) of the Act, is not applicable in the facts of the case, is unmerited.

Issues Involved:

1. Validity of the notice issued under Section 148A(b) of the Income Tax Act, 1961.
2. Legitimacy of the reassessment proceedings initiated for Assessment Year (AY) 2015-16.
3. Applicability of the time limitation under Section 149(1) of the Act for issuing notice under Section 148.
4. Interpretation of findings and directions under Section 150 of the Act in light of previous judgments.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148A(b):

The petitioner challenged the notice dated 31.08.2024, issued under Section 148A(b) of the Income Tax Act, which proposed to initiate reassessment proceedings for AY 2015-16. The notice was followed by an order dated 24.09.2024 under Section 148A(3) and a subsequent notice under Section 148. The court scrutinized the basis of these notices, noting that the reassessment was predicated on the assumption that the previous court decision contained findings and directions for such action. The court found this assumption to be flawed, as the decision did not provide any such directions under Section 150 of the Act.

2. Legitimacy of the Reassessment Proceedings:

The reassessment proceedings were initiated based on the Revenue's interpretation of the Supreme Court's decision in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell Private Limited. The court clarified that the Supreme Court's decision did not permit the reopening of assessments where the necessary conditions for invoking Sections 147 and 148 were not met. The court emphasized that the reassessment must comply with the statutory conditions, and the Revenue's reliance on the Supreme Court's decision was misplaced.

3. Applicability of the Time Limitation Under Section 149(1):

The court examined whether the notices issued under Section 148 were within the prescribed time limits as per Section 149(1). It was evident that the impugned notice was issued beyond this period. The Revenue argued that Section 150's non-obstante clause allowed for an extension of this period, but the court rejected this argument. The court reiterated that the observations in previous judgments did not override the statutory limitation period, and reassessment must adhere to these time constraints.

4. Interpretation of Findings and Directions Under Section 150:

The court discussed the interpretation of findings and directions under Section 150 in the context of previous judgments, particularly the Supreme Court's ruling in Abhisar Buildwell. The court noted that the Supreme Court's observations did not constitute a carte blanche for the Revenue to bypass statutory limitations. The reassessment powers were to be exercised within the framework of the law, and the previous judgments did not provide a basis for extending the limitation period. The court emphasized that any findings or directions must be explicitly stated and relevant to the case at hand.

Conclusion:

The court concluded that the notices and orders issued for reassessment were not justified, as they were beyond the statutory time limits and lacked the necessary legal basis under Sections 147 and 148. Consequently, the petition was allowed, and the impugned order and notice were set aside. The court's decision reinforced the importance of adhering to statutory provisions and limitations in reassessment proceedings. Pending applications were also disposed of accordingly.

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