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2025 (4) TMI 1490 - HC - Income TaxReopening of assessment u/s 147 - AO has jurisdiction to undertake assessment for the year 2020-21 before 01.04.2024 or not? - HELD THAT - Perusal of the dates and event it is evident that AO had issued notice u/s 148A Clause (b) on 28.03.2024 which is much earlier to the time-limit stipulated i.e. within three years. Petitioner s contention that for the purpose of limitation number of days is required to be counted from the date of notice dated 22.04.2024. It is to be noted that notice dated 22.04.2024 was issued pursuant to the petitioner s reply to the notice dated 28.03.2024 i.e. reply dated 31.03.2024. There was no occasion for the Revenue to issue notice on 22.04.2024 if the petitioner s contention in reply to the notice dated 31.03.2024 in particularly therefore proceedings have been initiated by issuing notice on 28.03.2024. If proceedings commenced on 28.03.2024 insofar as issuing notice u/s 148A Clause (b) which is the relevant and crucial date for the purpose of taking note of limitation period. Combined reading of 5th and 6th Proviso it is crystal clear that delay is required to be taken note of with reference to notice. In the present case notice means first notice issued on 28.03.2024 and it is within the time-limit stipulated and AO has jurisdiction. The present writ petition is pre-mature. Accordingly the present writ petition stands disposed of reserving liberty to the petitioner to participate in the process undertaken by the Revenue in the light of impugned order and notice and co-operate.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are: (a) Whether the Assessing Officer had jurisdiction to issue a notice under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2020-21 beyond the prescribed time limit under Section 149 of the Act? (b) Whether the impugned order dated 30.04.2024 under Section 148A(d) of the Act was valid, given that it was passed without consideration of the petitioner's reply? (c) How the limitation period for issuance of notices under Section 148 and the related provisions, including the 5th and 6th provisos to Section 149(1), apply in the facts of this case? (d) The applicability and interpretation of the recent Supreme Court decision in Union of India & Ors. Vs. Rajeev Bansal, particularly vis-`a-vis Sections 149(1)(a) and 149(1)(b) of the Income Tax Act and their provisos. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a): Jurisdiction of Assessing Officer to issue notice under Section 148 after time limit Relevant legal framework and precedents: Section 148 of the Income Tax Act empowers the Assessing Officer to issue a notice for reassessment if income has escaped assessment. Section 149 prescribes the time limits for issuance of such notices. Specifically, Section 149(1)(a) bars issuance if more than three years have elapsed from the end of the relevant assessment year, except where clause (b) applies, which allows up to ten years if certain conditions are met. The 5th and 6th provisos to Section 149(1) exclude certain periods (such as time allowed to the assessee to reply or periods of stay by court orders) from the computation of limitation. The petitioner relied heavily on the Supreme Court decision in Union of India & Ors. Vs. Rajeev Bansal, which clarified the application of the new regime under Section 149(1)(b) and its provisos, especially for assessment years beginning on or before 1 April 2021. However, the Court noted that the Bansal judgment primarily dealt with Section 149(1)(b) and its provisos, not Section 149(1)(a), which is the provision relevant in this case. Court's interpretation and reasoning: The Court examined the timeline of notices issued. The first notice under Section 148A(b) was issued on 28.03.2024, which is within the three-year time limit from the end of the assessment year 2020-21 (which ended on 31.03.2021). The petitioner argued that the relevant date for limitation should be the second notice dated 22.04.2024, which was beyond the three-year period. The Court held that the limitation period is to be counted from the date of the first notice, i.e., 28.03.2024, and not the subsequent notice issued on 22.04.2024. The second notice was issued pursuant to the petitioner's reply to the first notice, seeking further information. Therefore, the proceedings were initiated within time, and the Assessing Officer retained jurisdiction. Key evidence and findings: The petitioner's reply dated 31.03.2024 explicitly requested details and information regarding the alleged undisclosed income and investigation reports, which necessitated the issuance of the second notice on 22.04.2024. This sequence demonstrated that the proceedings were ongoing and within the statutory time frame. Application of law to facts: Applying Section 149(1)(a) and the 5th and 6th provisos, the Court found that the time period during which the petitioner was allowed to reply was excluded from the limitation computation. Hence, the issuance of the first notice on 28.03.2024 was valid and within the prescribed period. Treatment of competing arguments: The petitioner's reliance on the Bansal decision was distinguished on the ground that it concerned Section 149(1)(b) and the monetary threshold for reopening assessments, whereas the present case involves Section 149(1)(a) and a three-year limitation period. The respondent's argument that the first notice dated 28.03.2024 was the operative date for limitation was accepted. Conclusion: The Assessing Officer had jurisdiction to issue the notice under Section 148 for the assessment year 2020-21 as the first notice was issued within the three-year period, and the subsequent notices and proceedings were continuations of the same assessment process. Issue (b): Validity of the order under Section 148A(d) without consideration of petitioner's reply Relevant legal framework: Section 148A(d) mandates that before passing an order reopening an assessment, the Assessing Officer must consider the reply of the assessee to the notice issued under Section 148A(b). Court's interpretation and reasoning: The petitioner contended that the order dated 30.04.2024 was passed without considering the reply submitted on 25.04.2024, rendering the order invalid. However, the Court noted that the proceedings were premature and that the petitioner was at liberty to participate and cooperate with the Revenue in the ongoing process. Key evidence and findings: The record showed that the petitioner had submitted replies on 31.03.2024 and 25.04.2024 in response to notices. The Court did not find sufficient evidence that the Assessing Officer completely ignored the replies. Application of law to facts: The Court observed that the petitioner's challenge to the order was premature, as the assessment proceedings were ongoing, and the petitioner could still participate and present his case. Treatment of competing arguments: The petitioner's argument for quashing the order was rejected on grounds of prematurity. The respondent's position that the order was part of ongoing proceedings was accepted. Conclusion: The Court declined to quash the order under Section 148A(d) at this stage, reserving liberty for the petitioner to participate in the assessment proceedings. Issue (c): Interpretation of the 5th and 6th provisos to Section 149(1) regarding computation of limitation Relevant legal framework: The 5th proviso excludes from the limitation period the time or extended time allowed to the assessee as per show-cause notice under Section 148A(b) or the period during which proceedings are stayed by court orders. The 6th proviso provides that if the remaining period for passing an order under Section 148A(d) is less than seven days after such exclusion, it shall be extended to seven days. Court's interpretation and reasoning: The Court held that these provisos ensure fairness by excluding periods when the assessee is engaged in responding or when proceedings are stayed, thus extending the limitation period accordingly. In the present case, the time taken by the petitioner to reply to the initial notice was excluded, validating the issuance of subsequent notices and orders within the extended limitation period. Application of law to facts: The petitioner's reply dated 31.03.2024 to the first notice triggered the exclusion of the period spent in responding from the limitation computation. Therefore, the second notice on 22.04.2024 and the order on 30.04.2024 were within the extended time frame. Conclusion: The 5th and 6th provisos were correctly applied by the Revenue, and the limitation period was appropriately extended, preserving the Assessing Officer's jurisdiction. Issue (d): Applicability of the Supreme Court decision in Rajeev Bansal to the present case Relevant legal framework and precedents: The Rajeev Bansal judgment clarified the retrospective application of the new regime under Section 149(1)(b), the monetary threshold for reopening assessments, and the interplay between old and new limitation periods. Court's interpretation and reasoning: The Court distinguished the present case from Rajeev Bansal as the latter dealt with Section 149(1)(b) and the conditions for reopening assessments beyond three years but within ten years if income escaped assessment exceeded fifty lakh rupees. The present case involves Section 149(1)(a) with a three-year limitation period and does not engage the monetary threshold or the extended ten-year period. Conclusion: The Rajeev Bansal decision does not assist the petitioner in challenging jurisdiction under Section 149(1)(a) in this case. 3. SIGNIFICANT HOLDINGS The Court held: "Combined reading of 5th and 6th Proviso, it is crystal clear that delay is required to be taken note of with reference to notice. In the present case notice means first notice issued on 28.03.2024 and it is within the time-limit stipulated and Assessing Officer has jurisdiction." "Reading of the aforementioned decision [Rajeev Bansal], it does not assist the petitioner in view of the fact that there was no interpretation of Section 149(1)(a) which provision is involved in the present writ petition." "There was no occasion for the Revenue to issue notice on 22.04.2024, if the petitioner's contention in reply to the notice dated 31.03.2024, in particularly, para 3 to 6, therefore, proceedings have been initiated by issuing notice on 28.03.2024. If proceedings commenced on 28.03.2024 insofar as issuing notice under Section 148A Clause (b) which is the relevant and crucial date for the purpose of taking note of limitation period." Core principles established include:
Final determinations: (i) The Assessing Officer had jurisdiction to issue the notice under Section 148 for the Assessment Year 2020-21 as the first notice was issued within the three-year time limit. (ii) The impugned order under Section 148A(d) was not quashed as the petitioner's challenge was premature and the petitioner was granted liberty to participate in the ongoing assessment proceedings. (iii) The limitation period was correctly computed by excluding the period taken by the petitioner to reply, in accordance with the 5th and 6th provisos to Section 149(1).
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