2025 (4) TMI 1268 - AT - Income Tax

Reopening of assessment u/s 147 as barred by limitation - extension granted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 ( the TOLA ) - HELD THAT - Hon ble Supreme Court in Union of India v/s Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) 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 u/s 148 of the Act under the new regime. Therefore the surviving/balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30/06/2021. Since in the present case the period of 4 years from the end of the relevant assessment year expired on 31/03/2021 which falls within the time period from 20/03/2020 to 31/03/2021 in order to compute the surviving/balance time as per the decision of the Hon ble Supreme Court. Since the relief has been granted to the assessee on the aforenoted jurisdictional aspect the other grounds raised by the assessee in the appeal are rendered academic and therefore are left open. Appeal by the assessee is allowed.

Summary

The core legal questions considered by the Tribunal in this appeal are as follows:

1. Whether the notice issued under section 148 of the Income Tax Act, 1961 ("the Act") for reopening the assessment is valid and within the prescribed time limit, or barred by limitation.

2. Whether the reassessment order passed pursuant to the notice under section 148 is valid, given the timeline constraints and procedural requirements under the amended provisions of the Act and relevant judicial precedents.

3. Whether the reopening of the assessment under section 147 of the Act was justified on merits, including the correctness of additions made by the Assessing Officer ("AO").

4. Whether the additional grounds raised by the assessee challenging the validity of the reopening notice under section 148 can be admitted and decided based on the material on record.

Issue-wise Detailed Analysis:

1. Validity and Limitation of Notice Issued under Section 148 of the Act

Relevant Legal Framework and Precedents: The limitation period for issuing a notice under section 148 is governed by section 149 of the Act. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ("TOLA") introduced a legal fiction deeming certain notices issued during the COVID-19 pandemic period to have been issued on 1 May 2021, thereby affecting limitation calculations. The Supreme Court's ruling in Union of India v. Rajeev Bansal (2024) 469 ITR 46 (SC) clarified the computation of the "surviving time limit" for issuance of reassessment notices under the new regime post-TOLA amendments.

Court's Interpretation and Reasoning: The Tribunal examined the timeline of notices issued in this case: the initial notice under section 148 was dated 23 June 2021, with the surviving time limit for issuance of reassessment notices under the old regime expiring on 30 June 2021. The subsequent notices under section 148A(b) and a fresh notice under section 148 were issued on 20 May 2022 and 31 July 2022 respectively. The assessee contended that the notice issued on 31 July 2022 was beyond the permissible time limit and thus invalid.

The Tribunal relied heavily on the Supreme Court's guidance in Rajeev Bansal, which held that the surviving time limit is computed by counting the number of days between the date of the deemed notice (1 May 2021) and 30 June 2021, and that this balance time is available to the Revenue to complete reassessment proceedings after receiving the assessee's response. The Court gave an illustrative example that if the assessee's reply is received on 18 June 2022, the AO has 61 days thereafter to issue a notice under section 148 of the new regime.

Key Evidence and Findings: In the present case, the assessee filed a reply to the notice under section 148A(b) on 14 June 2022, but the notice under section 148 was issued on 31 July 2022, which was beyond the 61-day period calculated from the date of the reply. The Tribunal found that this issuance was not in conformity with the limitation framework laid down by the Supreme Court.

Application of Law to Facts: Applying the Supreme Court's methodology, the Tribunal concluded that the AO did not have jurisdiction to issue the notice under section 148 on 31 July 2022, as the surviving time limit had expired. Therefore, the reassessment proceedings initiated on the basis of this notice were invalid.

Treatment of Competing Arguments: The Departmental Representative argued in favor of the lower authorities' orders, asserting the validity of the notice. However, the Tribunal found the assessee's reliance on the Supreme Court decision persuasive and determinative on the limitation issue.

Conclusion: The Tribunal held that the notice issued under section 148 on 31 July 2022 was barred by limitation and hence void ab initio, rendering the reassessment proceedings invalid.

2. Jurisdictional Validity of Reopening under Section 147 of the Act

Relevant Legal Framework and Precedents: Section 147 permits reopening of assessments if the AO has reason to believe that income chargeable to tax has escaped assessment. However, jurisdictional validity requires that the notice under section 148 be issued within the prescribed limitation period, failing which the reopening is invalid. The Supreme Court's ruling in NTPC v. CIT (1998) 229 ITR 383 (SC) was cited to admit additional legal grounds challenging jurisdiction.

Court's Interpretation and Reasoning: The Tribunal treated the jurisdictional issue as paramount and considered it at the outset. It admitted the additional grounds challenging the reopening notice's validity, relying on the Supreme Court's precedent that legal issues can be decided on the record without remand.

Key Evidence and Findings: The Tribunal noted that the initial notice under section 148 was issued within the original limitation period, but the subsequent notice under section 148 on 31 July 2022 was beyond the surviving time limit calculated under the amended regime and Supreme Court guidance.

Application of Law to Facts: Since the reopening notice issued beyond limitation is jurisdictionally invalid, the reassessment order passed under section 147 read with section 144 was without jurisdiction and void.

Treatment of Competing Arguments: The Revenue's reliance on the impugned order was rejected in light of the binding Supreme Court authority and the statutory scheme.

Conclusion: The Tribunal concluded that the reopening of assessment was invalid for want of jurisdiction due to issuance of the notice beyond the prescribed time limit.

3. Merits of the Additions Made by the Assessing Officer

Relevant Legal Framework and Precedents: The merits of the additions relate to the substantive correctness of income assessed. However, since the jurisdictional issue was dispositive, detailed consideration of merits was not undertaken.

Court's Interpretation and Reasoning: The Tribunal observed that the issue of limitation and jurisdiction being decisive, the other grounds challenging the additions were rendered academic and were left open.

Conclusion: No decision was taken on merits given the jurisdictional invalidity of the reassessment.

4. Admission of Additional Grounds Challenging Validity of Reopening

Relevant Legal Framework and Precedents: The Supreme Court in NTPC v. CIT held that legal issues affecting jurisdiction can be raised and decided at any stage, even by way of additional grounds.

Court's Interpretation and Reasoning: The Tribunal admitted the additional grounds challenging the validity of the notice under section 148 on limitation grounds, as these were purely legal and could be decided on the record.

Conclusion: Additional grounds were admitted and formed the basis for allowing the appeal.

Significant Holdings:

"The surviving/balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30/06/2021."

"After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee."

"Since the notice issued under section 148 on 31 July 2022 is beyond the surviving time limit calculated as per the Supreme Court's decision, the reassessment proceedings are void ab initio."

"The jurisdictional issue raised by the assessee challenging the reopening of assessment under section 147 is considered at the outset and is decisive of the appeal."

"The other grounds challenging the merits of the additions are rendered academic and are left open."

In conclusion, the Tribunal held that the notice under section 148 issued on 31 July 2022 was barred by limitation, rendering the reopening of assessment under section 147 invalid and the reassessment order void. The appeal was allowed on this jurisdictional ground without adjudicating the substantive merits of the additions.