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2025 (2) TMI 55 - HC - Income TaxValidity of reopening of assessment beyond period of limitation - applicability of the TOLA in the context of provisos to Section 149 (1) of the Act - whether the impugned order and the impugned notice was issued beyond the period as prescribed u/s 149 (1)? - HELD THAT - The time granted to the petitioner to respond to the notice dated 30.05.2022 the period of two weeks is also required to be excluded by virtue of the third proviso to Section 149 (1) of the Act. The petitioner had furnished its response to the notice under Section 148A (b) of the Act on 13.06.2022. Thus the period of limitation began running from that date. As noted above by virtue of TOLA the AO had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings which began on 01.06.2021 to issue a notice u/s 148 - The said notice was required to be accompanied by an order u/s 148A (d) - AO was required to pass an order under Section 148A (d) within the said twenty-nine days notwithstanding the time stipulated u/s 148A (d) of the Act. This period expired on 12.07.2022. Since the period of limitation as provided u/s 149 (1) of the Act had expired prior to issuance of the impugned notice on 30.07.2022. The said is squarely beyond the period of limitation. Time available to the AO to pass an order under Section 148A (d) of the Act was necessarily truncated and the same was required to be passed on or before 12.07.2022. The fourth proviso to Section 149 of the Act did not come into play as the time period available for the AO to pass an order u/s 148A (d) of the Act was in excess of the seven days. Thus we find merit in assessee contention that the impugned notice dated 30.07.2022 has been issued beyond the period of limitation. Petition is allowed and the impugned order passed un/s 148A (d) and impugned notice issued u/s 148 quashed - Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment was whether the impugned order dated 30.07.2022 and the notice dated 30.07.2022, issued under Sections 148A(d) and 148 of the Income Tax Act, 1961 (the Act) respectively, were issued beyond the period stipulated under Section 149(1) of the Act. This determination was crucial as it would affect the validity of the subsequent assessment order dated 30.05.2023. 2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents: The legal framework involved Sections 147 to 151 of the Act, which govern the reassessment of income that has escaped assessment. Section 149(1) of the Act, as amended by the Finance Act, 2021, prescribes the time limits for issuing notices under Section 148. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the Supreme Court's decision in Union of India & Ors. v. Ashish Agarwal were pivotal in interpreting these provisions. Court's Interpretation and Reasoning: The Court examined the amendments introduced by the Finance Act, 2021, which streamlined the procedure for reassessment, including the introduction of Section 148A. The Court noted that the Supreme Court in Ashish Agarwal had deemed notices issued under the old regime as notices under Section 148A(b) of the new regime, thus allowing the reassessment process to continue under the new provisions. Key Evidence and Findings: The Court found that the original notice dated 01.06.2021 was issued within the extended time limit provided by TOLA. However, the subsequent proceedings, including the issuance of the notice under Section 148A(b) on 30.05.2022 and the order under Section 148A(d) on 30.07.2022, were subject to the limitation period as extended by the Supreme Court's decision in Ashish Agarwal. Application of Law to Facts: The Court applied the legal principles from Ashish Agarwal and TOLA to determine the applicable limitation period. It concluded that the period from the issuance of the original notice on 01.06.2021 to the Supreme Court's decision on 04.05.2022, and the subsequent period until the material was provided to the Assessee on 30.05.2022, should be excluded from the limitation calculation. This exclusion was based on the third proviso to Section 149(1) of the Act. Treatment of Competing Arguments: The Revenue argued that the order under Section 148A(d) and the notice under Section 148 were issued within the time limits prescribed by the Act, considering the extensions provided by TOLA and the Supreme Court's directions. However, the Court found that the AO's time to issue a notice under Section 148 was truncated by the limitation period, which expired on 12.07.2022, making the issuance of the notice on 30.07.2022 beyond the permissible period. Conclusions: The Court concluded that the impugned notice dated 30.07.2022 and the subsequent assessment order were issued beyond the limitation period prescribed by Section 149(1) of the Act. Consequently, these notices and orders were set aside. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: The Court emphasized, "The opening sentence of Section 149(1) of the Act clearly indicates that the time limit as prescribed under Section 149(1) of the Act is a hard stop." Core Principles Established: The judgment reinforced the principle that the time limits for issuing reassessment notices under the Act are strict and cannot be extended beyond the statutory framework unless explicitly provided by law or judicial directions. Final Determinations on Each Issue: The Court determined that the impugned order and notice were issued beyond the permissible period, rendering them invalid. Consequently, the assessment order dated 30.05.2023 was also set aside.
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