Reassessment Notices for AY 2013-14: Upholding the Doctrine of Limitation

Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

Reported as:

2024 (1) TMI 803 - BOMBAY HIGH COURT

Introduction

The present judgement deals with a crucial issue concerning the validity of reassessment notices issued u/s 148 of the Income Tax Act, 1961 (the Act) for the Assessment Year (AY) 2013-14. The case revolves around the interplay between the amended provisions of Section 149 of the Act, introduced by the Finance Act, 2021, and the applicability of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) in extending the time limit for issuing such notices.

Arguments Presented

The petitioner challenged the reassessment notice issued on 28th July 2022 for AY 2013-14, contending that it was barred by limitation. The primary arguments advanced by the petitioner were as follows:

1. The time limit for issuing a reassessment notice for AY 2013-14 under the erstwhile Section 149 of the Act had expired on 31st March 2020, and the extension granted by TOLA was not applicable to this case.
2. The amended provisions of Section 149, introduced by the Finance Act, 2021, which came into effect on 1st April 2021, could not be circumvented by invoking the "travel back in time" theory propounded by the Central Board of Direct Taxes (CBDT) in its Instruction No. 1 of 2022.
3. The petitioner relied on the judgements of the Delhi High Court in Ganesh Dass Khanna, Pytex Impex Private Limited, M.R. Auxiliary Services Private Limited, Archna Gakhar, Amit Jain, Sunil Nosaria, Rita Somani, Samta Educational Minority Trust, Kartik Infratown Private Limited, Anita Kathuria, Jhawar Lal Jain, Geeken Seating Collection Private Limited, Versus Income Tax Officer And Anr, Assistant Commissioner Of Income Tax Circle 19 (1) , Delhi & Anr., Principal Commissioner Of Income Tax Delhi 10 & Anr., Income Tax Officer Ward Exemption 2 (1) Delhi & Ors., - 2023 (11) TMI 763 - DELHI HIGH COURT and the Supreme Court in Union of India & Ors. Versus Versus Ashish Agarwal - 2022 (5) TMI 240 - Supreme Court, which had rejected the "travel back in time" theory.

The respondents (Revenue) contended that the reassessment notice was valid and within the extended time limit granted by TOLA. They argued that the Supreme Court, in Ashish Agarwal, had deemed the notices issued between 1st April 2021 and 30th June 2021 to be within the limitation period by invoking its powers under Article 142 of the Constitution.

Discussions and Findings of the Court

Applicability of Amended Section 149

The Court examined the amended provisions of Section 149 and the judgements in Ganesh Dass Khanna and Ashish Agarwal. It observed that the Supreme Court had categorically allowed assessees to raise all defences available u/s 149 of the Act, including the limitation period.

Rejection of the "Travel Back in Time" Theory

The Court firmly rejected the "travel back in time" theory propounded by the CBDT in its Instruction No. 1 of 2022. It held that neither the Supreme Court's judgement in Ashish Agarwal nor the provisions of TOLA allowed for such a modality. The Court declared paragraphs 6.1 and 6.2(ii) of the Instruction as bad in law.

Limitation Period for AY 2013-14

The Court observed that the limitation period for issuing a reassessment notice for AY 2013-14 under the erstwhile Section 149 had expired on 31st March 2020. Consequently, the Notification No. 20/2021, issued under TOLA, did not apply to the present case as it covered only those cases where the time limit expired on 31st March 2021.

The Court further held that even if the "relate back" theory of the Revenue was accepted, the reassessment notice for AY 2013-14 would still be barred by limitation, as the right to reopen the assessment was already barred under the pre-amended Act on the date when the new legislation came into force.

Analysis and Decision by the Court

The Court comprehensively analyzed the submissions made by both parties and arrived at the following conclusions:

1. The reassessment notice issued on 28th July 2022 for AY 2013-14 was barred by limitation, as the time limit had expired on 31st March 2020 under the erstwhile provisions of the Act.
2. The Notification No. 20/2021, issued under TOLA, did not extend the time limit for issuing reassessment notices for AY 2013-14, as it covered only those cases where the time limit expired on 31st March 2021.
3. The "travel back in time" theory propounded by the CBDT in its Instruction No. 1 of 2022 was rejected as being contrary to the judgements of the Supreme Court and other High Courts.
4. The Court declared paragraphs 6.1 and 6.2(ii) of the CBDT Instruction No. 1 of 2022, which propounded the "travel back in time" theory, as bad in law.
5. The Court upheld the assessee's right to raise all defences available u/s 149 of the Act, including the limitation period, as per the directions of the Supreme Court in Ashish Agarwal.

Consequently, the Court quashed and set aside the impugned reassessment notice dated 28th July 2022 for AY 2013-14, holding that it was issued beyond the period of limitation.

Comprehensive Summary

The judgement comprehensively addresses the issue of the validity of reassessment notices issued for AY 2013-14 u/s 148 of the Income Tax Act, 1961. The Court firmly rejected the "travel back in time" theory propounded by the CBDT and upheld the assessee's right to raise all defences available u/s 149, including the limitation period.

The Court meticulously analyzed the interplay between the amended provisions of Section 149, introduced by the Finance Act, 2021, and the applicability of TOLA in extending the time limit for issuing reassessment notices. It held that the reassessment notice issued on 28th July 2022 for AY 2013-14 was barred by limitation, as the time limit had expired on 31st March 2020 under the erstwhile provisions of the Act, and the Notification No. 20/2021 issued under TOLA did not extend the time limit for this particular case.

The Court's decision reinforces the principles of strict interpretation of taxation statutes and the doctrine of limitation, ensuring that assessees are not subjected to indefinite reassessment proceedings beyond the prescribed time limits. The judgement also upholds the assessee's substantive rights and defences enshrined in the Income Tax Act, as per the directions of the Supreme Court in Ashish Agarwal.

Full Text:

2024 (1) TMI 803 - BOMBAY HIGH COURT