2025 (3) TMI 454 - AT - Income Tax

Reopening of assessment u/s 147 as barred by limitation - scope of extended period prescribed under the TOLA - assessee is a beneficiary of bogus capital gains from transaction in penny stocks - HELD THAT - From the plain reading of Section 149 of the Act prior to its amendment by the Finance Act 2021 it is evident that the same provides period of 4 years up to 6 years and up to 16 years for issuance of notice u/s 148 of the Act provided the conditions laid down therein are satisfied. In the present case it cannot be disputed that the time limit of 4 years from the end of the relevant assessment year i.e. assessment year 2015-16 expired on 31.03.2020 and the period of 6 years from the end of the relevant assessment year expired on 31.03.2022. Therefore even if the submissions of the learned DR that the extended time period provided under the TOLA is applicable to the present case is accepted it is pertinent to note that in the present case the time period covered under the provisions of the TOLA only includes 30.03.2020 i.e. 4 years from the end of the relevant assessment year as the period of 6 year from the end of the relevant assessment year expired on 30.03.2022 which is beyond the period from 20.03.2020 to 31.03.2021. We find that while examining the validity of notices issued from 01.04.2021 to 30.06.2021 under the old regime the Hon ble Supreme Court in Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) analysing the interplay of Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT with the TOLA held that the surviving time under the Act read with the TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notice including issuance of re-assessment notice under section 148 of the Act under the new regime. We find that the Revenue had only 15 days (i.e. between 16.06.2021 to 30.06.2021) to issue notice under section 148 of the Act of the new regime in the present case i.e. till 25.06.2022 after receipt of the response from the assessee to the show cause notice under section 148A(b) of the Act on 10.06.2022. However undisputedly in the present case the notice under section 148 of the Act was issued on 29.07.2022 i.e. 34 days after the surviving/balance time period as per the directions of the Hon ble Supreme Court in Rajeev Bansal (supra). Notice u/s 148 of the Act in the present case was issued beyond the time period provided under the Act. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core issues considered in this judgment are:

Whether the notice issued under section 148 of the Income Tax Act, 1961, for the assessment year 2015-16, is barred by limitation as per section 149 of the Act.
Whether the reassessment proceedings initiated under section 147 of the Act, based on the notice issued under section 148, are valid.
The Revenue's challenge to the relief granted by the CIT(A) regarding the genuineness of transactions involving shares of M/s. JRI Industries and Infrastructure Ltd.
The assessee's challenge to the jurisdiction of the reassessment proceedings.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of the Notice under Section 148

Relevant Legal Framework and Precedents: The legal framework involves sections 148, 149, and 147 of the Income Tax Act, 1961, as amended by the Finance Act, 2021, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The precedents include the decisions of the Hon'ble Supreme Court in Union of India vs. Ashish Agrawal and Union of India vs. Rajeev Bansal.
Court's Interpretation and Reasoning: The Tribunal noted that per section 149, as amended, no notice under section 148 could be issued after three years from the end of the relevant assessment year unless specific conditions were met. The Tribunal also considered the effect of TOLA on extending timelines.
Key Evidence and Findings: The Tribunal observed that the original notice under section 148 was issued on 16.06.2021, which was deemed to be under section 148A(b) following the decision in Ashish Agrawal. The Tribunal found that the period for issuing the notice had expired on 31.03.2020, and the extended period under TOLA did not apply.
Application of Law to Facts: The Tribunal applied the Supreme Court's guidance in Rajeev Bansal, which stated that for the assessment year 2015-16, notices issued after 01.04.2021 must be dropped as they fall outside the permissible period under TOLA.
Treatment of Competing Arguments: The Revenue argued that the notice was within the extended period due to TOLA, but the Tribunal found this argument inconsistent with the Supreme Court's decision in Rajeev Bansal.
Conclusions: The Tribunal concluded that the notice issued on 29.07.2022 was barred by limitation and thus void ab initio, rendering the reassessment proceedings invalid.

2. Jurisdictional Challenge to Reassessment Proceedings

Relevant Legal Framework and Precedents: Sections 147, 148, and 151 of the Income Tax Act, 1961, and the procedural requirements for valid reassessment.
Court's Interpretation and Reasoning: The Tribunal focused on the procedural lapses in issuing the notice under section 148, which affected the jurisdiction of the reassessment proceedings.
Key Evidence and Findings: The Tribunal noted procedural violations, including the issuance of the notice beyond the prescribed limitation period.
Application of Law to Facts: The Tribunal applied the procedural requirements under the Act and found that the reassessment proceedings were void due to the invalid notice.
Treatment of Competing Arguments: The Tribunal did not delve deeply into competing arguments as the procedural lapse was clear.
Conclusions: The Tribunal concluded that the reassessment proceedings were void ab initio due to the invalid notice.

3. Revenue's Challenge on Merits

Relevant Legal Framework and Precedents: The genuineness of transactions under sections 68 and 69 of the Income Tax Act, 1961.
Court's Interpretation and Reasoning: The Tribunal did not address the merits due to the procedural findings that rendered the reassessment proceedings void.
Key Evidence and Findings: Not applicable as the Tribunal did not reach this issue.
Application of Law to Facts: Not applicable as the Tribunal did not reach this issue.
Treatment of Competing Arguments: Not applicable as the Tribunal did not reach this issue.
Conclusions: The appeal by the Revenue was dismissed as infructuous due to the procedural findings.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed the principle that notices under section 148 must comply with the limitation periods prescribed by section 149, as amended, and the effect of TOLA.
Final Determinations on Each Issue: The Tribunal quashed the notice under section 148 and the subsequent reassessment proceedings as void ab initio. The appeal by the Revenue was dismissed as infructuous.
Verbatim Quotes: The Tribunal emphasized, "...the notice issued under section 148 of the Act on 29.07.2022 is barred by limitation period specified under section 149 of the Act. Accordingly, we are of the considered view that notice issued under section 148 of the Act on 29.07.2022 is void ab initio and bad in law."

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