2025 (5) TMI 1968 - HC - Income Tax

Validity of reopening of assessment u/s 147 - period of limitation - petitioner contends that the proceedings initiated pursuant to the impugned notice are required to be set aside in view of the concession made by the Revenue before the Supreme Court in Union of India and Ors. v. Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) HELD THAT - The notice dated 13.07.2022 issued under Section 148 of the Act stands quashed and set aside. Concededly the controversy is covered in favour of the petitioner by the decision of this court in Makemytrip India Pvt. Ltd 2025 (4) TMI 46 - DELHI HIGH COURT wherein the impugned notice was issued on 27.07.2022 which was admittedly beyond the period of limitation as prescribed under Section 149 (1). Since TOLA was not applicable in respect of the said notices u/s 148 of the Act for AY 2015-16 as conceded by the Revenue in the case of Union of India v. Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) thus the impugned notice is liable to be set aside.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the notice dated 13.07.2022 issued under Section 148 of the Income Tax Act, 1961, reopening the assessment for AY 2015-16, is valid in light of the procedural and limitation provisions under the amended reassessment regime introduced by the Finance Act 2021 and subsequent judicial pronouncements.

- Whether the Assessing Officer's failure to follow the procedure under Section 148A of the Act, as mandated post 31.03.2021, renders the reassessment notice and proceedings invalid.

- The applicability and effect of the Supreme Court's decisions in Union of India & Ors. v. Ashish Agarwal and Union of India & Ors. v. Rajeev Bansal on the limitation and validity of reassessment notices issued for AY 2015-16 after 1 April 2021.

- The impact of the concession made by the Revenue before the Supreme Court in Rajeev Bansal regarding the limitation period and consequent validity of reassessment notices issued on or after 1 April 2021 for AY 2015-16.

- Whether the impugned notice and subsequent proceedings should be quashed and set aside based on the above legal framework and precedents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the notice dated 13.07.2022 issued under Section 148 of the Income Tax Act for AY 2015-16

Relevant Legal Framework and Precedents:

The reassessment regime under the Income Tax Act was substantially amended by the Finance Act, 2021, which introduced a new procedural framework under Sections 148A and 149, replacing the earlier regime. The new regime prescribes strict timelines and procedural safeguards for reopening assessments.

The Supreme Court decisions in Union of India & Ors. v. Ashish Agarwal and Union of India & Ors. v. Rajeev Bansal clarified the applicability of the new regime and the limitation periods for issuance of reassessment notices, especially in light of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), which extended limitation periods due to the COVID-19 pandemic.

Court's Interpretation and Reasoning:

The Court noted that the AO issued the initial notice under Section 148 on 08.06.2021 but failed to comply with the procedural requirements under Section 148A, which became mandatory after 31.03.2021. The subsequent communication dated 24.05.2022 attempted to cure this defect by treating the original notice as one under Section 148A(b), but the petitioner was unaware and did not respond.

More critically, the Court examined the concession made by the Revenue in Rajeev Bansal, which acknowledged that for AY 2015-16, all notices issued on or after 1 April 2021 must be dropped as they fall outside the limitation period prescribed under TOLA and the amended provisions.

The Court relied on the tabulated limitation expiry dates provided in the Rajeev Bansal decision, which explicitly stated that TOLA does not apply to AY 2015-16 for notices issued after 31.03.2022, and therefore notices issued post 1 April 2021 for this AY cannot be sustained.

Key Evidence and Findings:

The impugned notice dated 13.07.2022 was issued well after 1 April 2021. The Revenue's concession before the Supreme Court in Rajeev Bansal unequivocally stated that such notices for AY 2015-16 are to be dropped. The Court also referred to the Supreme Court's decision in Deepak Steel and Power Ltd. v. Central Board of Direct Taxes, which upheld this concession and quashed similar reassessment notices.

Application of Law to Facts:

The Court applied the concession and binding precedents to the facts of the case, concluding that the impugned notice and related proceedings are barred by limitation and procedural non-compliance. The failure to follow the new reassessment procedure and the limitation bar under TOLA rendered the notice invalid.

Treatment of Competing Arguments:

The Revenue's initial attempt to validate the notice by invoking the Ashish Agarwal decision and treating the original notice as one under Section 148A(b) was considered but rejected due to non-compliance and the petitioner's unawareness. The subsequent concession by the Revenue before the Supreme Court was determinative and disposed of any contrary contentions.

Conclusions:

The notice dated 13.07.2022 issued under Section 148 of the Act and all proceedings arising therefrom are invalid and liable to be quashed and set aside.

Issue 2: Effect of procedural non-compliance with Section 148A of the Act

Relevant Legal Framework and Precedents:

Section 148A prescribes mandatory procedural safeguards before issuing a notice under Section 148 for reassessment, including issuance of a notice under Section 148A(b) and opportunity to the assessee to respond.

The Finance Act, 2021, made these provisions mandatory for notices issued after 31.03.2021. Non-compliance with these procedures has been held to vitiate the reassessment proceedings.

Court's Interpretation and Reasoning:

The Court observed that the initial notice dated 08.06.2021 was issued without following Section 148A procedures, as it was premised on the pre-amendment regime. Although the AO later attempted to cure this defect by treating the notice as under Section 148A(b), the petitioner was unaware and did not respond, resulting in a breach of natural justice.

Key Evidence and Findings:

The absence of compliance with Section 148A procedural safeguards was established on record. The petitioner's lack of knowledge about the proceedings was noted.

Application of Law to Facts:

The Court held that the procedural non-compliance compounded the limitation issue and further invalidated the reassessment proceedings.

Treatment of Competing Arguments:

The Revenue's attempt to retrospectively validate the notice under Section 148A(b) was rejected due to the petitioner's unawareness and the mandatory nature of the procedure.

Conclusions:

Non-compliance with Section 148A procedural requirements vitiates the reassessment notice and proceedings.

Issue 3: Applicability of the Supreme Court's decisions and Revenue's concession in Rajeev Bansal and Deepak Steel

Relevant Legal Framework and Precedents:

The Supreme Court in Rajeev Bansal clarified the interplay between the amended reassessment regime and TOLA, particularly the limitation periods for notices issued for various assessment years. The Revenue conceded that notices issued on or after 1 April 2021 for AY 2015-16 must be dropped.

In Deepak Steel, the Supreme Court applied this concession to quash reassessment notices issued post 1 April 2021 for AY 2015-16.

Court's Interpretation and Reasoning:

The Court placed decisive reliance on these authoritative pronouncements, emphasizing that the Revenue's concession binds the Department and the Courts. The decisions establish that the impugned notice cannot be sustained.

Key Evidence and Findings:

The Court extracted and reproduced the concession paragraphs from Rajeev Bansal and the relevant extracts from Deepak Steel, underscoring their binding effect.

Application of Law to Facts:

The impugned notice dated 13.07.2022 falls squarely within the category of notices that must be dropped as per the concession and Supreme Court rulings.

Treatment of Competing Arguments:

No contrary argument was sustainable in light of the clear concession and binding precedents.

Conclusions:

The impugned notice and proceedings are barred by limitation and must be quashed.

3. SIGNIFICANT HOLDINGS

"The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020." (Union of India & Ors. v. Rajeev Bansal, para 19(f))

"In view of the aforesaid, in such circumstances referred to above the original writ petition nos.2446 of 2023, 2543 of 2023 and 2544 of 2023 respectively filed before the High Court of Orissa at Cuttack stands allowed." (Deepak Steel and Power Ltd. v. Central Board of Direct Taxes)

The Court held: "The notice dated 13.07.2022 issued under Section 148 of the Act stands quashed and set aside."

Core principles established:

• Reassessment notices issued for AY 2015-16 on or after 1 April 2021 are barred by limitation under the amended reassessment regime and TOLA.
• Procedural compliance with Section 148A is mandatory for notices issued post 31.03.2021; failure to comply vitiates proceedings.
• Revenue's concession before the Supreme Court is binding and determinative on the validity of reassessment notices.

Final determinations:

The impugned notice dated 13.07.2022 and all proceedings arising therefrom are quashed and set aside. The petition is allowed accordingly.