2025 (2) TMI 1207 - AT - Income Tax

Validity of the re-assessment proceedings - scope of new regime introduced by the Finance Act 2021 w.e.f. 01/04/2021 - Scope of surviving period - period of limitation - TOLA - notice u/s 148 (new regime) was issued after the expiry of 6 years from the end of the relevant assessment year - contention raised on behalf of the Assessee is that the AO has passed order u/s 148A(d) of the Act and has issued notice u/s 148 (new regime) after the expiry of surviving period as computed according the judgment of the judgment of Union of India vs. Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) Whether the order dated 24/07/2022 passed u/s 148A(d) and notice dated 24/07/2022 issued u/s 148 (new regime) were passed/issued within the prescribed time? HELD THAT - We find in the present case notice under Section 148 of the Act (old regime) was issued on 07/06/2021 and was deemed to be notice issued under Section 148A(b) of the Act (new regime). Thus the surviving time limit can be calculated by computing the number of days between the date of issuance of the deemed notice (i.e. 07/06/2021) and 30/06/2021 which comes to 23 days. The clock started ticking only after Revenue received the response of the Assesses to the show causes notices on 09/06/2022. Once the clock started ticking the Assessing officer was required to complete these procedures within the surviving time limit of 23 days which expired on 02/07/2022. Since notice under Section 148 of the Act was issued on 24/07/2022 which fell beyond the surviving time limit that expired on 02/07/2022 the said notice issued under Section 148 of the Act is time-barred and therefore bad in law. Therefore notice dated 24/07/2022 issued under Section 148 of the Act (new regime) the consequential reassessment proceedings and the Assessment Order dated 26/05/2023 passed under Section 147 read with Section 144B of the Act are quashed. Thus Cross-Objection raised by the Assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this matter are:

(a) Whether the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961 (the Act), in respect of Assessment Year 2014-2015, were validly initiated within the prescribed time limits under the new regime introduced by the Finance Act, 2021, read with the interim relief provided by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)?

(b) Whether the order passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act (new regime) dated 24/07/2022, were barred by limitation, and thus invalid and without jurisdiction?

(c) The interplay and application of the Supreme Court's judgments in Union of India vs. Ashish Agarwal and Union of India vs. Rajeev Bansal, particularly regarding the legal fiction created by Ashish Agarwal and the computation of the surviving time limit for issuance of reassessment notices under the new regime.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Validity and Limitation of Reassessment Proceedings under Section 148 (New Regime)

Relevant Legal Framework and Precedents:

The reassessment proceedings were initiated under Section 148 of the Income Tax Act, 1961. The Finance Act, 2021 introduced a new regime for reassessment notices, including the insertion of Section 148A, which mandates issuance of a show-cause notice before proceeding with reassessment.

The TOLA Act, 2020 extended the time limits for issuance of reassessment notices falling between 20 March 2020 and 31 March 2021, to 30 June 2021. The Supreme Court's judgment in Union of India vs. Ashish Agarwal created a legal fiction treating reassessment notices issued under the old regime as deemed show-cause notices under the new regime from their original date of issuance. Subsequently, the Supreme Court in Union of India vs. Rajeev Bansal clarified the computation of surviving time limits for issuance of reassessment notices under the new regime, particularly in light of the legal fiction created in Ashish Agarwal.

Court's Interpretation and Reasoning:

The Tribunal carefully examined the timeline of events: the original notice under Section 148 (old regime) was issued on 07/06/2021, which was deemed to be a show-cause notice under Section 148A(b) (new regime) as per Ashish Agarwal. The Assessing Officer issued an order under Section 148A(d) and a fresh notice under Section 148 (new regime) on 24/07/2022.

Relying on the Rajeev Bansal judgment, the Tribunal noted that the surviving time limit for issuance of reassessment notices under the new regime is calculated by counting the days between the date of the deemed show-cause notice (07/06/2021) and 30/06/2021, which amounted to 23 days. The clock for limitation starts ticking only after the Assessing Officer receives the assessee's reply to the show-cause notice, which was on 09/06/2022 in this case.

Therefore, the Assessing Officer had 23 days from 09/06/2022, i.e., until 02/07/2022, to issue the reassessment notice under Section 148 (new regime). Since the notice was issued on 24/07/2022, it was beyond the surviving time limit and hence time-barred.

Key Evidence and Findings:

The undisputed facts on record included the dates of issuance of notices and replies: initial notice on 07/06/2021, reply on 09/06/2022, and reassessment notice on 24/07/2022. The Tribunal relied on these dates and the Supreme Court's authoritative guidance to conclude the limitation period was exceeded.

Application of Law to Facts:

The Tribunal applied the legal principles from Ashish Agarwal and Rajeev Bansal to the facts, emphasizing that the legal fiction created by Ashish Agarwal requires the surviving time limit to be computed from the date of the deemed notice to 30/06/2021. The Assessing Officer's delay in issuing the reassessment notice beyond this period rendered the notice invalid.

Treatment of Competing Arguments:

The Revenue contended that the reassessment proceedings were valid and the CIT(A) order was correct. However, the Tribunal found the Revenue's argument untenable in light of the Supreme Court's clear directions on limitation and jurisdictional requirements. The Tribunal held that issuance of a notice beyond the prescribed surviving time limit affects jurisdiction and renders the reassessment proceedings void.

Conclusions:

The Tribunal concluded that the order under Section 148A(d) and the notice under Section 148 (new regime) dated 24/07/2022 were barred by limitation and therefore invalid. Consequently, the reassessment proceedings and the assessment order dated 26/05/2023 were quashed.

3. SIGNIFICANT HOLDINGS

The Tribunal's key legal reasoning includes the following verbatim excerpt from the Supreme Court judgment in Union of India vs. Rajeev Bansal, which was pivotal:

"The logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021."

"The reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred."

The Tribunal established the core principle that the jurisdiction of the Assessing Officer to issue reassessment notices under the new regime is contingent upon compliance with the surviving time limit computed in accordance with the legal fiction created by Ashish Agarwal and the extension under TOLA.

Final determinations on each issue are as follows:

(a) The order under Section 148A(d) and the notice under Section 148 (new regime) dated 24/07/2022 were issued beyond the surviving time limit and are therefore barred by limitation.

(b) The reassessment proceedings and the consequential assessment order dated 26/05/2023 are invalid and quashed.

(c) The cross-objection filed by the Assessee challenging the jurisdictional validity of the reassessment proceedings is allowed.

(d) The appeal filed by the Revenue against the CIT(A) order is dismissed as infructuous in view of the above findings.