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2025 (5) TMI 365 - HC - Income TaxReopening of assessment u/s 147 beyond period of limitation - notice u/s 148A (b) - scope of new regime - HELD THAT - As notice was deemed to be a notice under Section 148A (b) of the Act by virtue of the decision of the Supreme Court in Union of India Ors. v. Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT . The Supreme Court also granted further time to provide the material required to accompany such a notice. As explained by the Supreme Court in the case of Union of India v. Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) the period from the date of issuance of the notice till 04.05.2022 the date on which the Supreme Court rendered its decision in Union of India Ors. v. Ashish Agarwal (supra) was required to be excluded. Additionally the time provided until the material required to accompany the notice u/s 148A (b) of the Act as well as the time available to the Assessee to respond to the said notice was also required to be excluded by virtue of the Third Proviso to Section 149 (1) of the Act as applicable at the material time. In the present case the AO had seven days to issue the notice u/s 148 of the Act after receipt of the reply of the Assessee. The said period expired on 18.06.2022. However the impugned notice was issued on 11.07.2022 which is beyond the prescribed period. Therefore the notice issued was beyond the period of limitation. Concededly the said controversy is covered in favour of the Assessee by the decision of this court in Ram Balram Buildhome Pvt. Ltd. 2025 (2) TMI 55 - DELHI HIGH COURT
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court were:
2. ISSUE-WISE DETAILED ANALYSIS Validity and Limitation Period for Notice under Section 148 The relevant legal framework governing the issuance of notice under Section 148 of the Income Tax Act, 1961 is Sections 148, 148A, and 149 of the Act, alongside the amendments introduced by TOLA and judicial precedents. Before 31.03.2021, notices under Section 148 could be issued based on the then-prevailing procedural regime. However, post 31.03.2021, the procedure was amended by insertion of Section 148A, which mandates the AO to provide material and information justifying the issuance of the notice and to allow the Assessee an opportunity to respond before proceeding. In Mon Mohan Kohli v. Assistant Commissioner of Income Tax, the Delhi High Court invalidated notices issued after 31.03.2021 that did not comply with Section 148A. Subsequently, the Supreme Court in Union of India & Others v. Ashish Agarwal clarified that such notices would be treated as issued under Section 148A(b), and directed the AO to supply the material on which the notice was based, granting the Assessee time to respond. In the present case, the initial notice under Section 148 was issued on 23.06.2021, within the extended limitation period granted by TOLA, which extended the six-year period to 30.06.2021. However, this notice was issued before the Supreme Court's ruling in Ashish Agarwal and thus did not comply with Section 148A procedural requirements. Exclusion of Time Under Section 149(1) of the Act The Court examined the effect of the Supreme Court's decision in Union of India & Others v. Ashish Agarwal and the subsequent ruling in Union of India v. Rajeev Bansal, which clarified that the period from issuance of the initial notice till the Supreme Court's decision (04.05.2022) must be excluded from the limitation period calculation. Furthermore, the time allowed to the Assessee to respond to the notice under Section 148A(b) is also excluded pursuant to the Third Proviso to Section 149(1). Thus, the limitation period for issuing a valid notice was effectively extended beyond the original expiry date, accounting for the exclusion of the period during which the Assessee was entitled to respond. Issuance of the Order under Section 148A(d) on 11.07.2022 The AO issued an order under Section 148A(d) on 11.07.2022, which the Assessee contended was beyond the permissible period. The Court analyzed the timeline and noted that the AO had seven days from the receipt of the Assessee's reply to issue the notice. Since the Assessee did not file any reply to the notice dated 26.05.2022, the seven-day period expired on 18.06.2022. Accordingly, issuance of the order on 11.07.2022 was beyond the prescribed period, rendering the notice invalid on grounds of limitation. Application of TOLA Extension The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extended the limitation period for issuance of notices under Section 148 to 30.06.2021. The initial notice dated 23.06.2021 was issued within this extended period, thereby satisfying the temporal requirement for issuance of the original notice. However, due to the subsequent procedural requirements under Section 148A and the Supreme Court's rulings, the limitation period calculation had to factor in exclusions, which ultimately rendered the impugned notice beyond limitation. Treatment of Competing Arguments The Respondents contended that the notice was valid as it was issued within the extended limitation period and complied with the Supreme Court's directions. The Assessee argued that the impugned notice was issued beyond the extended and excluded limitation period and was thus invalid. The Court relied on the binding precedents of the Supreme Court and this Court's prior ruling in Ram Balram Buildhome Pvt. Ltd. v. Income Tax Officer, which supported the Assessee's contention that the notice issued post expiry of the exclusion period was invalid. 3. SIGNIFICANT HOLDINGS The Court held:
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