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TMI Blog2025 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... wn (initially for a period of twenty-one days) in the wake of spread of the novel coronavirus (COVID-19) pandemic. 7. On 31.03.2020, the President of India promulgated the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, whereby time limits as stipulated in respect of various actions and compliances, were extended. Thereafter, the Parliament enacted the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [hereafter TOLA], which came into force with effect from 31.03.2020. 8. The Assessing Officer [hereafter the AO] issued a notice dated 01.06.2021 under Section 148 of the Act on the basis that he had reason to believe that the income of the Assessee chargeable to tax in respect of AY 2013-14 had escaped assessment within the meaning of Section 147 of the Act. Such reason to believe is the jurisdictional condition for issuance of such notices under the provisions for reassessment as existed prior to 01.04.2021. The Assessee responded to the notice dated 01.06.2021 disputing the validity of the notice. The Assessee claimed that the notice was void ab initio as the necessary procedure as prescribed under Section 148A of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant assessment year if three years had elapsed from the end of the relevant assessment year unless the case fell within Clause (b) of the said sub-section. Clause (b) proscribed issuance of notice if three years, but not more than ten years, had elapsed from the end of the relevant assessment year unless the AO had in its possession books of account, other documents, or evidence, which revealed that the income chargeable in the form as stipulated, had escaped assessment. And, such income amounted to or was likely to Rs. 50 lacs or more. Thus, no notice under Section 148 of the Act could be issued beyond the period of ten years from the end of the relevant assessment year. However, in terms of the first proviso to Section 149 (1) of the Act, no notice under Section 148 of the Act could be issued in respect of the relevant assessment year beginning on or before 01.04.2021, if such a notice could not be issued, inter alia, under Section 148 of the Act. 16. Concededly, no notice under Section 148 of the Act could be issued under the provisions of Section 149 (1) of the Act as was in force prior to 01.04.2021 if, (i) four years had elapsed from the end of the relevant assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsal 2024 SCC OnLine SC 2693. UNION OF INDIA AND ORS. V. ASHISH AGARWAL 21. As noted at the outset, the proceedings for reassessment were initiated by issuance of the notice dated 01.06.2021 under Section 148 of the Act as in force prior to 01.04.2021. The question regarding validity of such notices was considered by the Supreme Court in Union of India & Ors. v. Ashish Agarwal. It is thus necessary to briefly consider the import of the directions issued by the Supreme Court in that case and the context in which the same were issued. 22. Substantial amendments were introduced by the Finance Act, 2021 with effect from 01.04.2021 in respect of the provisions relating to re-assessment of income that has escaped assessment and Section 147 to 151 of the Act, were substituted. As noted above, notwithstanding the amendments to the said Sections, the AOs had issued various notices under Section 148 of the Act to various assesses - including the notice dated 01.06.2021 to the Assessee - under the regime for re-assessment that was in force prior to 01.04.2021. 23. The aforementioned notices were issued on the premise that the TOLA permitted the AOs to issue such notices by imputing that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 151 have been substituted. 17. Under the substituted provisions of the IT Act vide Finance Act, 2021, no notice under section 148 of the IT Act can be issued without following the procedure prescribed under Section 148-A of the IT Act. Along with the notice under Section 148 of the IT Act, the assessing officer ("AO") is required to serve the order passed under Section 148-A of the IT Act. Section 148-A of the IT Act is a new provision which is in the nature of a condition precedent. Introduction of Section 148-A of the IT Act can thus be said to be a game changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation. 18. But prior to pre-Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in the case of GKN Driveshafts (India) Ltd. (supra). 19. However, by way of Section 148-A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under Section 148, the assessing officer shall: (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement with the view taken by the various High Courts in holding so." 26. However, the Supreme Court was also of the view that the Revenue could not be left remediless and the object of re-assessment could not be frustrated. Accordingly, the Supreme Court allowed the appeals in part and modified and substituted the directions issued by various high courts. The relevant extract of the said order containing the aforesaid directions is set out below: "28. In view of the above and for the reasons stated above, the present Appeals are allowed in part. The impugned common judgments and orders (Ashok Kumar Aggarwal v. Union of India, 2021 SCC OnLine All 799) passed by the High Court of Judicature at Allahabad in WT No. 524 of 2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under: 28.1. The impugned Section 148 notices issued to the respective assessees which were issued under unamended Section 148 of the IT Act, which were the subject-matter of writ petitions before the various respective High Courts shall be deemed to have been issued under Section 148-A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinue to be available to the assessees". THE RELEVANT STATUTORY FRAMEWORK 30. The controversy in the present case is required to be addressed is whether in respect of the provisions relating to procedure of re-assessment as were in force with effect from 01.04.2021 but prior to 01.03.2023. The references to Sections 147, 148, 148A and 149 of the Act hereafter, unless the context indicates otherwise, are to the said provisions as in force with effect from 01.04.2021 but prior to 01.03.2023. 31. In terms of Section 147 of the Act as in force prior to 01.04.2021, an AO would assess/re-assess the income of an assessee for the relevant assessment year if he had reason to believe that the income chargeable to tax for the said relevant AY had escaped assessment. However, this power was not open ended and the period, which an officer could travel back for re-opening the assessment was not indefinite. Section 149 (1) of the Act proscribed the issuance of notice under Section 148 of the Act - which was necessary for initiating the assessment/re-assessment proceedings under Section 147 of the Act - beyond the period of four years from the end of the relevant assessment year. This period wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. Explanation 1.--For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,-- (i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.--For the purposes of clause (b) of this subsection, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.20/2021 dated 31.03.2021 and further stood extended till 30.06.2021 by the notification No.38/21 dated 27.04.2021. 38. Thus, by virtue of the provisions of the TOLA and the notifications issued by the Government of India, the time limit for completion of the specified acts [as defined under Section 3 (1) (a) of the TOLA] stood extended till 30.06.2021. OVERARCHING PERIOD OF LIMITATION UNDER SECTION 149 OF ACT. 39. For the purposes of the present petition, it is important to examine the time periods for issuing notices and passing orders under Section 148A of the Act and the overarching period of limitation as stipulated under Section 149 of the Act. 40. Clause (b) of Section 148A of the Act expressly provides that the AO is required to give a notice to the assessee to show cause why a notice under Section 148 of the Act not be issued, within such time as may be specified in the notice. This time is required to be not less than seven days but not more than thirty days. This time can be further extended by the AO, if an application is made by the assessee in this regard. 41. In terms of Sub-clause (c) of Section 148A of the Act, the AO is required to consider the response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46. If the aforesaid conditions are satisfied, a notice under Section 148 can be issued beyond the period of three years but not beyond the period of ten years. 47. 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. Therefore, the procedure that is required to be completed for issuance of notice under Section 148 of the Act is required to be completed prior to the expiry of the time limit as prescribed under Section 149 (1) of the Act. Such time limit cannot be breached on account of the AO not completing the procedure required for issuance of notice under Section 148 of the Act. There is no ambiguity in this regard given the construct of Section 149 (1) of the Act, which is not in the nature of enabling provision but a provision that proscribes an action. 48. Having stated the above, it is also important to note the provisos to Section 149 (1) of the Act also provide for exclusion of that certain time periods for the purposes of computing the period of limitation as prescribed under Section 149 (1) of the Act as well as for extending the period of limitation. 49. The third to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be extended by such period so as to make available to the AO at least seven days to pass an order under Section 148A (d) of the Act and issue a notice under Section 148 of the Act. Illustratively, if the show cause notice under Section 148A (b) of the Act is issued to an assessee, on the last date on which issuance of such a notice under Section 148 of the Act is permissible, that is, on the last day of expiry of three years from the end of the relevant assessment year or ten years from the end of the assessment year as the case may be, the time made available to the assessee to respond to a notice under Section 148A (b) of the Act (being a minimum of seven days but not exceeding thirty days as provided in the notice plus such further time as extended pursuant to an application), is required to be excluded for the calculation of the period of three years or ten years as the case may be. And, an additional period of seven days is made available for the AO to pass an order. Thus, the period of limitation in such case would be three years (after excluding the time provided to the assessee to respond to the notice under Section 148A (b) of the Act) and seven days, or a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the said order is to accompany the notice under Section 148 of the Act. This is apparent from the opening sentence of Section 148(1) of the Act, which is reproduced below: "148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within [a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee], a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139…." 16. It is apparent that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under this sub-section shall be deemed to be extended accordingly." 18. Thus, the notice under Section 148 of the Act (accompanied by an order under clause (d) of Section 148A of the Act) is required to be issued within the period of three years from the end of the relevant assessment year if the income escaping assessment is less than Rs. 50,00,000/-. The sixth proviso to Section 149 (1) of the Act makes it amply clear that if the time available to the Assessing Officer to pass an order under Clause (d) of Section 148A is truncated to less than 7 days on account of the period of limitation available for issuing a notice under Section 148, the same shall be extended for the said period. 19. In our view, the period of one month from the end of the month in which the time available to the assessee to respond to the notice under Clause (b) of Section 148A expires, is available to the Assessing Officer to pass an order under clause (d) of Section 148A of the Act only within the rubric of Section 149 of Act, that is, within the overall time available in terms of Section 149 (1) of the Act for issuance of a notice under Section 148 of the Act. This is because a notice under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time limit under section 149 (1) (b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs." 61. The next question examined by the Supreme Court was the applicability of the TOLA in the context of provisos to Section 149 (1) of the Act. 62. The Supreme Court also considered the directions in Union of India & Ors. v. Ashish Agarwal in the context of third proviso to Section 149 of the Act (as existed prior to 01.04.2023), which expressly extends the time allowed to an assessee to respond to the notice under Section 148A of the Act and the period during which the proceedings under Section 148 are stayed by an injunction order or an order of the court to be excluded for the purpose of limitation under Section 149 of the Act. In the aforesaid context, the Supreme Court held as under:- "99. In Union of India v. Ashish Agarwal (supra), this court created a legal fiction by deeming the section 148 notices issued under the old regime as show-cause notices under Section 148A (b) of the new regime. The purpose of the legal fiction was to enable the Revenue "to proceed further with the reassessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal fiction in Union of India v. Ashish Agarwal (supra), this court was cognizant of the fact that the Assessing Officers were effectively inhibited from performing their responsibility under Section 148A until the requirement of supply of relevant material and information to the assesses was fulfilled. This court lifted the inhibition by directing the Assessing Officers to supply the assesses with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. Thus, during the period between the issuance of the deemed notices and the date of judgment in Union of India v. Ashish Agarwal (supra), the Assessing Officers were deemed to have been prohibited from proceeding with the reassessment proceedings. *** *** 105. A direction issued by this court in the exercise of its jurisdiction under Article 142 is an order of a court. The third proviso to section 149 of the new regime provides that the period during which the proceedings under Section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under section 148A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the computation of limitation given the third proviso to Section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices. b. Interplay of Ashish Agarwal with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 108. The Income Tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extended the time limit for issuing reassessment notices under section 148, which fell for completion from March 20, 2020 to March 31, 2021, till June 30, 2021. All the reassessment notices under challenge in the present appeals were issued from April 1, 2021 to June 30, 2021 under the old regime. Union of India v. Ashish Agarwal (supra) deemed these reassessment notices under the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefrom.")] 110. The effect of the creation of the legal fiction in Union of India v. Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the Assessing Officers to the assesses in terms of the directions issued by this court in Union of India v. Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show-cause notices must also be excluded in terms of the third proviso to section 149. 111. The clock started ticking for the Revenue only after it received the response of the assesses to the show-causes notices. After the receipt of the reply, the Assessing Officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 31.03.2020, that is, six years from the end of the relevant assessment year. 66. By virtue of Section 3 (1) of TOLA time for completion of specified acts, which fell during the period 20.03.2020 to 31.12.2020 were extended till 30.06.2021 [Notification No.38/21 dated 27.04.2021]. Thus, the notice dated 01.06.2021 was issued twenty-nine days prior to the expiry of period of limitation for issuing a notice under Section 148 of the Act as was extended by TOLA. As noted above, the period from 01.06.2021, the date of issuance of notice, and 04.05.2022, being the date of decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal is required to be excluded by virtue of the third proviso to Section 149 (1) of the Act. 67. Additionally, the period from the date of decision in Union of India & Ors. v. Ashish Agarwal2 till the date of providing material, as required to the accompanied with a notice under Section 148A (b) of the Act, is required to be excluded. Thus, the period between 04.05.2022 to 30.05.2022, the date on which the AO had issued the notice under Section 148A (b) of the Act in furtherance of his earlier notice dated 01.06.2021, is also required to be exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X
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