2024 (12) TMI 1265 - HC - Income Tax

Reopening of assessment beyond period of limitation - notice beyond period of six years - HELD THAT - A notice for reopening assessment for AY 2014-15 could not be issued beyond the period of six years from the said date. However, since the initiation of reassessment proceedings are premised on material containing information allegedly pertaining to the petitioner, the assessments/reassessment could be initiated u/s 153C of the Act Uploading of information by the investigation wing of the Income Tax department would not be a substitute for recording of a satisfaction note by the AO of a searched person and handing over the assets, books of accounts or other material to the AO of the person other than the searched person for the purpose of initiation of proceedings u/s 153C of the Act. There is no reference of an asset representing income escaping assessment. Thus, reopening the assessments for a period of ten years as contemplated u/s 153A of the ACT may not be applicable. In the present case, a notice has been issued beyond the period of six years from the end of the AY 2014-15 and therefore, the notice is clearly beyond the period of limitation. The petition is allowed and the impugned notices issued u/s 148A (b) and 148 of the Act, are set aside. Decided in favour of assessee.

Issues Involved:

1. Whether the initiation of reassessment proceedings is barred by limitation.
2. Applicability of Section 153C in the context of reassessment proceedings initiated post-31 March 2021.
3. Validity of the notices issued under Sections 148A(b) and 148 of the Income Tax Act, 1961.

Detailed Analysis:

1. Barred by Limitation:

The primary issue in this case is whether the reassessment proceedings initiated against the petitioner are barred by limitation. The petitioner challenges the notices dated 23.08.2024 and 31.08.2024, as well as the order passed under Section 148A(d) of the Income Tax Act, 1961, on the grounds of being issued beyond the permissible time limit. According to the first proviso to Section 149 of the Act, no notice under Section 148 can be issued for any assessment year beginning on or before 1st April 2021 if it could not have been issued at that time due to being beyond the time limit specified under Section 149(1)(b) or Sections 153A or 153C. The court noted that a notice for reopening assessment for AY 2014-15 could not be issued beyond the period of six years from the end of the relevant assessment year, thereby rendering the notice dated 31.08.2024 beyond the period of limitation.

2. Applicability of Section 153C:

The court examined the applicability of Section 153C in the context of reassessment proceedings initiated after 31 March 2021. The learned counsel for the Revenue conceded that the case is covered by the decision in Dinesh Jindal v. Assistant Commissioner of Income Tax, where it was held that reassessment pursuant to a search conducted after 01.04.2021 must adhere to the timeframe specified under Sections 153A and 153C. The court emphasized that Section 153C(3) embodies a sunset clause, indicating that any search conducted after 01 April 2021 would not be governed by this provision. Instead, the First Proviso to Section 149(1) requires consideration of the timeframes specified in Sections 149, 153A, and 153C as they stood before the Finance Act, 2021. The court further clarified that the computation of the six or ten-year assessment blocks is governed by the First Proviso to Section 153C, which shifts the reference point to the date of receipt of books of account by the jurisdictional AO.

3. Validity of Notices Issued:

The court found that the notices issued under Sections 148A(b) and 148 of the Act were not valid. The petitioner argued that the proceedings were initiated based on information allegedly pertaining to the petitioner, without any asset being found representing income that had escaped assessment. The court agreed, noting that the initiation of reassessment proceedings was not justified as the notice was issued beyond the permissible period of six years. Additionally, the court highlighted that uploading information by the investigation wing does not substitute for recording a satisfaction note by the AO of a searched person, nor does it fulfill the requirements for initiating proceedings under Section 153C.

Conclusion:

In conclusion, the court allowed the petition, setting aside the impugned notices issued under Sections 148A(b) and 148, and the order passed under Section 148A(d) of the Income Tax Act. The court held that the reassessment proceedings were barred by limitation, and the notices were issued beyond the permissible timeframe. The court's decision was guided by the principles established in prior judgments, particularly concerning the applicability of Sections 149 and 153C in the context of searches conducted after 31 March 2021.

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