2025 (1) TMI 972 - HC - Income Tax

Reopening of assessment u/s 147 as barred by limitation - deprive the noticee of due opportunity - HELD THAT - The petitioner ought to have been given some reasonable opportunity else the legislative intent behind the insertion of Section 148A to the Act of 1961 by the amendment made w.e.f. 01.04.2021 would become redundant. It is pertinent herein to observe that when a statute prescribes the requirement of a notice the opportunity therefore to be granted to show cause has to be a reasonable opportunity. Merely because the Departmental Officer woke up late and by that time the period was almost coming to an end would not be a justification to deprive the noticee of due opportunity. In the opinion of this Court the action on the part of the AO was in violation to Section 148A(c) of the Act of 1961. This Court finds another reason to interfere. As stated above the time period for issuance of notice u/s 148 is normally 3(three) years from the end of the relevant assessment year i.e. in the present case upto 31.03.2019 taking into account that for the Assessment Year 2015-16 the period ends on 31.03.2026. In the circumstances the amount which escaped assessment was likely to amount to Rs. 50, 00, 000/-(Rupees Fifty Lakh) or more the extended period for limitation would be for the Assessment Year 2015-16 not beyond 31.03.2016. Therefore the reason so assigned in the affidavit for not granting additional opportunity to the petitioner on the ground that the period would end on 31.03.2022 amounts to complete non-application of mind. The order passed u/s 148A (d) as well as the notice u/s 148 are set aside and quashed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the notice issued under Section 148A(b) of the Income Tax Act, 1961, was barred by limitation.
Whether the petitioner was provided a reasonable opportunity to respond to the notice under Section 148A(b) of the Act.
Whether the actions of the Assessing Officer in issuing the notice and proceeding with reassessment were in compliance with the statutory requirements under the Income Tax Act, 1961.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation of Notice under Section 148A(b)

Relevant Legal Framework and Precedents: The Income Tax Act, 1961, Section 149(1)(a) prescribes a limitation period of three years for issuing a notice under Section 148, while Section 149(1)(b) extends this to ten years if the escaped income exceeds Rs. 50,00,000.
Court's Interpretation and Reasoning: The court examined whether the notice dated 15.03.2022 was within the permissible period under Section 149. The court noted that if the escaped income was less than Rs. 50,00,000, the period expired on 31.03.2019, but if it exceeded, it would extend to 31.03.2026.
Key Evidence and Findings: The notice claimed escaped income of Rs. 78,59,057, suggesting applicability of Section 149(1)(b).
Application of Law to Facts: The court found that the notice was issued within the extended limitation period but questioned the Assessing Officer's failure to provide adequate opportunity to the petitioner.
Treatment of Competing Arguments: The petitioner argued the notice was barred by limitation, while the respondent contended it was within the extended period under Section 149(1)(b).
Conclusions: The court concluded that the notice was not barred by limitation under Section 149(1)(b), but procedural fairness was lacking.

Issue 2: Reasonable Opportunity to Respond

Relevant Legal Framework and Precedents: Section 148A(c) mandates providing a reasonable opportunity to the assessee to respond to the notice.
Court's Interpretation and Reasoning: The court emphasized the need for reasonable time to respond, highlighting the legislative intent behind Section 148A.
Key Evidence and Findings: The petitioner received the notice on 19.03.2022 and was required to respond by 25.03.2022, effectively given only six days.
Application of Law to Facts: The court found the time provided was inadequate, considering the petitioner received necessary documents from banks only after the deadline.
Treatment of Competing Arguments: The petitioner argued insufficient time was given, while the respondent cited time constraints due to impending limitation expiry.
Conclusions: The court held that the petitioner was not given a reasonable opportunity to respond, violating Section 148A(c).

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Merely because the Departmental Officer woke up late and by that time, the period was almost coming to an end, would not be a justification to deprive the noticee of due opportunity."
Core Principles Established: The judgment reinforced the principle that statutory notices must provide a reasonable opportunity for the assessee to respond, irrespective of administrative delays.
Final Determinations on Each Issue: The court quashed the order dated 31.03.2022 and the subsequent notice under Section 148, directing consideration of the petitioner's reply submitted on 20.05.2022 and providing an opportunity for a hearing.

The judgment underscores the importance of procedural fairness and adherence to statutory timelines in tax reassessment proceedings, ensuring taxpayers are given a fair opportunity to present their case.

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