2025 (1) TMI 1236 - HC - Income Tax

Reopening of assessment u/s 148 as barred by limitation as prescribed un/s 149 - notices issued u/s 148 under the old regime but after 01.04.2021 be construed as notices under Section 148A (b) - Notice issued without the necessary mandatory approvals - HELD THAT - Notice issued u/s 148 of the Act in the earlier round was set aside on the ground that the AO had not followed the mandatory requirement of seeking an approval from the competent authority. Clearly the fact that the petitioner had succeeded in its challenge to the said notice cannot be a ground for exclusion of the period spent by the assessee in pursuing the said litigation. The time spent by the petitioner in pursuing the challenge can neither be excluded nor can be claimed as resulting in extension of the period of limitation. Revenue is required to take all necessary steps for initiation of the assessment proceedings within the period of limitation. This would obviously mean proper steps in accordance with law. The fact that the Revenue had not taken the steps in accordance with law cannot possibly be construed as a factor in favour of the Revenue for extending the limitation as stipulated under Section 149 of the Act. Plainly there was no court order impeding the Revenue from issuing a notice under Section 148 of the Act in accordance with law. We reject the contention that the period of limitation as stipulated u/s 49 (1) of the Act stood extended by virtue of the proceedings initiated by the orders passed in TWYLIGHT INFRASTRUCTURE PVT LTD ARUN GARG R.P. BASIA CO SUSHMA GOEL ADA NEWS IN SHORTS PVT LTD ABHINAV JINDAL MANGLA 2024 (1) TMI 759 - DELHI HIGH COURT Thus the present petition is allowed and reassessment order and notices quashed - Decided in favour of assessee.

The Court considered several issues in this case, primarily revolving around the validity of notices issued under the Income Tax Act, 1961, specifically under Sections 148 and 148A, and the application of limitation periods under Section 149. The petitioner challenged the notices and orders issued by the Assessing Officer (AO) on the grounds of being time-barred and lacking mandatory approvals.

Issues Presented and Considered:

The core legal questions considered were:

Whether the notice dated 24.04.2024 issued under Section 148 of the Act was barred by the period of limitation as prescribed under Section 149.
Whether the AO followed the mandatory requirement of obtaining approval from the specified authority before issuing the notice under Section 148.
Whether the period during which the petitioner was pursuing legal challenges could be excluded from the limitation period.

Issue-wise Detailed Analysis:

1. Limitation Period under Section 149:

Legal Framework and Precedents: The Court referred to the decision in Manju Somani v. Income Tax Officer and the Supreme Court's ruling in Union of India & Ors. v. Rajeev Bansal, which clarified that a notice under Section 148 cannot be issued if the period of six years from the end of the relevant assessment year has expired.
Court's Interpretation and Reasoning: The Court emphasized that the notice for AY 2016-17 was issued beyond the permissible six-year period, which expired on 31.03.2023. The Court rejected the Revenue's argument that the limitation period was extended due to a stay order in a related case.
Key Evidence and Findings: The AO had issued a notice under the old regime, which was subsequently deemed under Section 148A(b) by the Supreme Court's directive. However, the notice was still time-barred.
Application of Law to Facts: The Court held that the limitation period was not extended by the proceedings in W.P.(C) 1006/2023, as there was no court order preventing the issuance of a valid notice within the limitation period.
Conclusions: The notice dated 24.04.2024 was set aside as it was issued beyond the limitation period.

2. Mandatory Approval Requirement:

Legal Framework and Precedents: The Court analyzed the provisions of Sections 148, 149, and 151, both before and after the Finance Act 2021 amendments. It referred to the decision in Twylight Infrastructure Pvt. Ltd. v. Income Tax Officer, which highlighted the necessity of obtaining approval from the specified authority.
Court's Interpretation and Reasoning: The Court found that the AO failed to obtain the necessary approval from the competent authority as required under the amended Section 151.
Key Evidence and Findings: The AO issued the notice without the approval of the specified authority, which was mandatory under the amended provisions.
Application of Law to Facts: The Court held that the lack of approval rendered the notice invalid, and the Revenue's argument that approval was not mandatory was untenable.
Conclusions: The notices and orders were quashed due to the absence of the required approval.

Significant Holdings:

The Court reaffirmed the principle that the limitation period for issuing notices under Section 148 is strictly governed by Section 149, and any deviation without a valid legal basis renders the notice invalid.
The mandatory requirement of obtaining approval from the specified authority before issuing a notice under Section 148 was emphasized, reinforcing the procedural safeguards for taxpayers.
The Court concluded that the period during which the petitioner pursued legal challenges could not be excluded from the limitation period, nor could it extend the limitation period.
The Court set aside the impugned notices and orders, allowing the petition in favor of the petitioner.

The judgment underscores the importance of adhering to statutory requirements and procedural safeguards in tax assessment proceedings, ensuring that taxpayers' rights are protected against retrospective and unauthorized actions by tax authorities.

← Previous Next →