2022 (9) TMI 883 - HC - Income Tax

Reopening of assessment u/s 147 - Time limit for notice - Scope of new provision section 148A - mandatory procedure of Section 148A followed or not? - HELD THAT - The time limit for issuing notice under unamended Section 149 which was falling between 20th March, 2020 and 31st March 2021 was extended by Section 3 of TOLA read with Notification No. 20/2021 dated 31st March, 2021, and Notification No. 38/2021 dated 27th April, 2021, until 30th June, 2021. The initial notice in the present proceedings was issued on 23rd June, 2021 i.e. extended time limit. The said notice was quashed by this Court in petitioner s earlier writ petition as Mon Mohan Kohli 2021 (12) TMI 664 - DELHI HIGH COURT as the mandatory procedure of Section 148A of the Act was not followed before issuing the said notice. In the said judgment though this Court struck down the Explanations A(a)(ii) and A(b) to the said notifications, yet it clarified that the power of reassessment that existed prior to 31st March, 2021 continued to exist till the extended period i.e. till 30th June, 2021; as the Finance Act, 2021 had merely changed the procedure to be followed prior to issuance of notice with effect from 1st April, 2021. When the judgment of this Court in Mon Mohan Kohli 2021 (12) TMI 664 - DELHI HIGH COURT was carried forward in appeal, the Supreme Court held that the Section 148 notices issued between 1st April 2021 to 30th June, 2021, will be deemed to have been issued under Section 148A of the Act and therefore the notice dated 23rd June, 2021, issued to the petitioner stood revived. Consequently, since the time period for issuance of reassessment notice for assessment year 2013-14 stood extended until 30th June, 2021 and the income alleged to have escaped assessment is beyond Rs.50 lakhs, the first proviso of Section 149 (as amended by the Finance Act, 2021) is not attracted in the facts of this case and even without the benefit of Instruction No.01/2022 the impugned notice is within limitation. Accordingly, the present writ petition along with the pending application is dismissed.

Summary

Issues:
Challenging order under Section 148A(d) of the Income Tax Act, 1961 and notice issued under Section 148 for Assessment Year 2013-14, Constitutional vires of CBDT Instruction No.1/2022, Barred by limitation under Section 149(1)(a) & (b) of the Act, Time limit for reassessment under old Section 149(1)(b), Stay of Section 148 notices by High Courts, Validity of notice under unamended provisions, Impact of Supreme Court judgment in Union of India vs. Ashish Agarwal, Interpretation of time limit under TOLA, Revival of notice issued between 1st April 2021 to 30th June 2021.

Analysis:

The petitioner challenged the order passed under Section 148A(d) of the Income Tax Act, 1961, and the notice issued under Section 148 for the Assessment Year 2013-14, primarily contesting the constitutional validity of CBDT Instruction No.1/2022 dated 11th May, 2022. The petitioner argued that the impugned notice issued under Section 148 of the Act was time-barred as per the provisions of Section 149(1)(a) & (b) of the Act, emphasizing that cases for Assessment Year 2013-14 and prior were already time-barred under old Section 149(1)(b) by 31st March, 2020.

The respondent-revenue contended that the Supreme Court judgment in Union of India vs. Ashish Agarwal, 2022 SCC OnLine SC 543, in conjunction with the time extension provided by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, allowed extended reassessment notices to retroactively apply new Section 149 of the Act. The respondent argued that the reassessment proceedings were initiated within the extended time limit provided by TOLA, thus not being time-barred.

The Court noted that the time limit for issuing notices under unamended Section 149 had been extended by TOLA until 30th June, 2021, and clarified that the power of reassessment existing prior to 31st March, 2021 continued to exist until the extended period. The Supreme Court further held that Section 148 notices issued between 1st April 2021 to 30th June 2021 would be deemed to have been issued under Section 148A of the Act, reviving notices issued during that period.

Consequently, the Court found that since the time period for issuing reassessment notices for the assessment year 2013-14 was extended until 30th June, 2021, and the alleged income escaping assessment exceeded Rs.50 lakhs, the first proviso of Section 149 (as amended by the Finance Act, 2021) did not apply in this case. Therefore, even without the benefit of Instruction No.01/2022, the impugned notice was within the limitation period.

In conclusion, the Court dismissed the writ petition, clarifying that the Assessing Officer should decide the matter on its merits without being influenced by any observation made in the order, except regarding the issue of limitation.