2025 (4) TMI 1667 - HC - Income Tax

Validity of reopening of assessment - period of limitation -limitation period in cases related to search u/s 132 - petitioner s contention that no incriminating material pertaining to the searched persons was found during the said search thus no further proceedings were warranted. HELD THAT - The impugned notice is clearly beyond the period as stipulated u/s 149(1) of the Act. However it is the Revenue s case that the impugned notice has been issued within the stipulated time by virtue of the non-obstante clause u/s 150 of the Act. Revenue claims that the impugned notice is premised on the findings and directions as embodied in the decision of Abhisar Buildwell (P.) Ltd. 2023 (4) TMI 1056 - SUPREME COURT . In the said decision the Supreme Court had held that in certain cases the assessing officer (AO) could exercise its powers under Section 147/148 of the Act even in cases which are related to a search conducted under Section 132 of the Act or a requisition made under Section 132A of the Act. The Revenue construes the said decision as constituting a finding or a direction for issuing such notices in respect of cases such as that of the assessee s. The question whether the decision of Abhisar Buildwell (P.) Ltd supra constitutes a finding and/or a direction for issuance of notices under Section 148 of the Act in cases which are otherwise beyond the period as stipulated u/s 149 of the Act is no longer res integra. This court in the case of ARN Infrastructures India Ltd. 2024 (9) TMI 1573 - DELHI HIGH COURT had rejected a similar contention. The contention that the time period as stipulated under Section 149 of the Act is not applicable in the given facts is erroneous and thus rejected.

Summary

ISSUES:

Whether a notice under Section 148 of the Income Tax Act, 1961 can be issued beyond the limitation period prescribed under Section 149(1) of the Act based on the Supreme Court's decision in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell Pvt. Ltd.Whether the absence of incriminating material found during a search under Section 132 of the Act precludes the issuance of a reassessment notice under Sections 147/148 for a completed assessment year.Whether Section 150 of the Income Tax Act, 1961 and CBDT Instruction No. 1/2023 permit reopening of assessment without a Supreme Court direction in cases related to search and seizure.The scope and applicability of the Supreme Court's ruling in Abhisar Buildwell Pvt. Ltd. regarding reassessment powers post-search and seizure operations.

RULINGS / HOLDINGS:

The Court held that the impugned notice issued under Section 148 is beyond the limitation period prescribed under Section 149(1) and cannot be saved merely by invoking Section 150 of the Act without a specific Supreme Court direction; the contention that the limitation period is not applicable is "erroneous and thus rejected."In the absence of any incriminating material found during the search, no addition or reassessment is permissible for a completed assessment year, consistent with the principle that "no addition was permissible in the absence of incriminating material."The Court ruled that Section 150(1) is inapplicable without a Supreme Court direction to reopen the case, and reliance on CBDT Instruction No. 1/2023 does not override statutory limitation periods or judicial pronouncements.The Supreme Court's decision in Abhisar Buildwell Pvt. Ltd. does not constitute a "carte blanche" or a "finding or a direction" permitting reassessment beyond the statutory limitation period; rather, it preserves the Revenue's power to reassess subject to "fulfilment of the conditions mentioned in Sections 147/148 of the Act."

RATIONALE:

The Court applied the statutory framework of the Income Tax Act, 1961, particularly Sections 147, 148, 149, and 150, and relied on the authoritative interpretation of the Supreme Court in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell Pvt. Ltd., as well as the Delhi High Court's decision in ARN Infrastructures India Ltd. v. Assistant Commissioner of Income Tax.The Court emphasized that the Supreme Court's observations in Abhisar Buildwell intended to preserve the Revenue's reassessment powers but explicitly conditioned such powers on compliance with the statutory provisions governing reassessment, including limitation periods.The Court rejected the Revenue's expansive interpretation of the Supreme Court's ruling as overriding Section 149(1), reaffirming that limitation periods and procedural safeguards cannot be circumvented by administrative instructions or generalized judicial dicta.No dissent or doctrinal shift was noted; the judgment follows established precedent and statutory interpretation principles to uphold the statutory limitation and procedural requirements for reassessment.