2025 (4) TMI 1567 - AT - Income Tax

Reopening of assessment u/s 147 - period of limitation - assessee failed to explain the source of the cash deposit - HELD THAT - We find since the notice u/s 148 of the Act has been issued after the statutory due date as per the decision of Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) therefore such notice for reopening being barred by limitation has to be quashed. We accordingly quash the re-assessment notice issued by the AO. Since the assessee succeeds on this legal ground i.e. validity of re-assessment proceedings therefore the grounds challenging the addition on merit are not being adjudicated being academic in nature. The grounds raised by the assessee are accordingly allowed.

Summary

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

1. Whether the Assessing Officer (AO) had valid jurisdiction to reopen the assessment under section 147 of the Income Tax Act, 1961 (the Act) for the assessment year 2015-16, given the timelines prescribed under the Act and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

2. Whether the notices issued under section 148 of the Act and subsequent notices under section 148A(d) were validly issued as per the procedural requirements and limitations prescribed by law, including compliance with Circulars issued by the Central Board of Direct Taxes (CBDT).

3. Whether the addition of Rs. 2,05,80,344/- under section 69 read with section 115BBE of the Act as unexplained investment was justified on merits, considering the facts and circumstances of the case.

4. The validity and applicability of the Supreme Court's decision in Union of India vs. Rajeev Bansal (2024) with respect to the limitation period for issuance of reassessment notices and the interplay with TOLA and the new reassessment regime effective from 1 April 2021.

Issue-wise Detailed Analysis:

Issue 1 & 2: Validity of Reassessment Notice under Section 147/148 and Procedural Compliance

Legal Framework and Precedents: The reopening of assessment under section 147 of the Act is subject to strict limitation periods prescribed under section 149. The TOLA, enacted to provide relief during the COVID-19 pandemic, modified these limitation periods and extended deadlines for issuance of reassessment notices and related procedural actions. The Finance Act 2021 introduced a new reassessment regime effective from 1 April 2021, which replaced the old regime for notices issued thereafter. The Supreme Court's ruling in Union of India vs. Rajeev Bansal (2024) clarified the application of TOLA and the new regime, holding that reassessment notices issued beyond the extended limitation periods are invalid.

Court's Interpretation and Reasoning: The Tribunal carefully examined the timeline of notices issued in the instant case: the first notice under section 148 dated 08.04.2021 and the subsequent notice under section 148A(d) dated 18.07.2022. As per the Supreme Court's decision, the due date for issuance of the section 148 notice for assessment year 2015-16 was 31.03.2021. Notices issued after this date are barred by limitation. The Tribunal noted that the first notice was issued after this date and the second notice even later, both exceeding the statutory deadline.

The Supreme Court emphasized that TOLA applies notwithstanding anything contained in the Income Tax Act and overrides the limitation periods to the extent specified, but does not extend the life of the old regime beyond the prescribed limits. The Court further clarified that no notice under the new regime (post 1 April 2021) can be issued for assessment years beginning on or before 1 April 2021 if barred under the old regime's limitation period.

Key Evidence and Findings: The Tribunal relied on the Supreme Court's tabulation of limitation expiry dates under the old regime and TOLA, which showed that for AY 2015-16, the last permissible date for issuing a reassessment notice was 31.03.2022 under the old regime, and TOLA did not extend this period. The notice dated 08.04.2021 was thus beyond the permissible date, and the subsequent notice dated 18.07.2022 was also invalid.

Application of Law to Facts: The Tribunal applied the Supreme Court's detailed analysis and conclusions, holding that the reassessment notices issued were barred by limitation and hence invalid. The procedural requirements under section 148 and 148A(d) were not met within the prescribed timelines, rendering the reassessment proceedings void.

Treatment of Competing Arguments: The assessee's counsel relied heavily on the Supreme Court's decision and supporting High Court judgments to argue invalidity of the notices. The Department conceded that the issue was squarely covered in favor of the assessee by the Supreme Court ruling. The Tribunal found no merit in the Department's contrary stance and accepted the assessee's submissions.

Conclusions: The Tribunal concluded that the AO lacked jurisdiction to reopen the assessment as the notices were issued beyond the statutory limitation period. The reassessment proceedings were quashed on this ground.

Issue 3: Merits of Addition under Section 69 read with Section 115BBE

Legal Framework and Precedents: Section 69 of the Act deals with unexplained investments, allowing the AO to add unexplained cash deposits to income if the assessee fails to provide satisfactory explanation. Section 115BBE prescribes tax on such unexplained income. However, such additions are subject to the validity of reassessment proceedings.

Court's Interpretation and Reasoning: Since the Tribunal quashed the reassessment proceedings on the ground of invalid reopening, it did not adjudicate the merits of the addition. The Tribunal held that the grounds challenging the addition were academic in nature given the invalidity of the reassessment notice.

Key Evidence and Findings: The AO had made the addition due to the assessee's failure to explain the source of cash deposits. However, this was not examined in detail as the reassessment itself was invalid.

Application of Law to Facts: No application was made due to the procedural infirmity of reopening.

Treatment of Competing Arguments: The Tribunal refrained from deciding on the merits in view of the prior conclusion on limitation.

Conclusions: The addition was not adjudicated and was effectively deleted due to the quashing of reassessment.

Issue 4: Applicability and Interpretation of Supreme Court Decision in Union of India vs. Rajeev Bansal

Legal Framework and Precedents: The Supreme Court's decision is pivotal in interpreting the interplay between TOLA, the old reassessment regime, and the new regime effective from 1 April 2021. It sets out the conditions under which reassessment notices can be issued and the extent of relief provided by TOLA.

Court's Interpretation and Reasoning: The Tribunal extensively quoted and relied on the Supreme Court's observations, including the breakdown of the proviso to section 149(1)(b), the tabulation of limitation expiry dates, and the conclusions at paragraph 114 of the judgment. The Supreme Court held that TOLA overrides limitation periods only to the extent of relaxing deadlines for completion of actions that fall between 20 March 2020 and 31 March 2021 and that no notice under the new regime can be issued for assessment years beginning on or before 1 April 2021 if barred under the old regime's limitation.

Key Evidence and Findings: The Tribunal noted the Revenue's concession in the Supreme Court case that notices issued on or after 1 April 2021 for AY 2015-16 must be dropped as barred by limitation. This directly applied to the instant case.

Application of Law to Facts: The Tribunal applied the Supreme Court's ruling to find that the reassessment notices issued in April 2021 and July 2022 were invalid.

Treatment of Competing Arguments: The Department accepted the binding nature of the Supreme Court ruling. The Tribunal found no reason to deviate.

Conclusions: The Supreme Court decision was determinative of the limitation issue, leading to quashing of the reassessment notices.

Significant Holdings:

"The reassessment notice issued by the Assessing Officer being barred by limitation has to be quashed."

"No notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021 if it is barred at the time when the notice is sought to be issued because of the time limits specified under the provisions of Section 149(1)(b) of the old regime."

"Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148."

"The reassessment proceedings initiated beyond the surviving period of limitation under the Income Tax Act read with TOLA are time barred and liable to be set aside."

"Since the notice u/s 148 of the Act has been issued after the statutory due date as per the decision of the Hon'ble Supreme Court, such notice for reopening being barred by limitation has to be quashed."

Core principles established include the strict adherence to limitation periods for reassessment notices, the limited scope of TOLA in extending such periods, and the non-applicability of the new reassessment regime for assessment years beginning before 1 April 2021 when barred by the old regime's limitation.

Final determinations:

- The reassessment notices issued under section 148 and 148A(d) for AY 2015-16 were invalid and barred by limitation.

- The reassessment proceedings are quashed accordingly.

- The additions made under section 69 read with section 115BBE are not adjudicated due to the invalidity of reassessment.

- The appeal filed by the assessee is allowed on the ground of invalidity of reassessment proceedings.