2025 (7) TMI 447 - HC - Income Tax

Reopening of assessment u/s 147 - period of limitation - scope of TOLA - notice issued after 31.03.2021 though bearing the date of 31.03.2021 - effect on pending notices which have been covered by the provision of Section 149 of the new regime under the Act - HELD THAT - Admittedly the respondent has not issued any notice under Section 148A(b) of the Act within the 30 days from the date of the decision of the Hon ble Apex Court in case of Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT that is 04.05.2022 and therefore the question of considering the deemed notice under Section 148B of the Act would not arise in the facts of the case and as such the impugned notice dated 31.03.2021 would be a time barred notice as per the decision of the Hon ble Apex Court in the case of Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) more particularly as referred to in paragraph 113 of the said decisions having extracted herein-above. Reassessment proceedings set aside - Decided in favor of assessee.

Summary

The core legal questions considered in this judgment revolve around the validity and timeliness of a notice issued under Section 148 of the Income Tax Act, 1961 ("the Act") for reassessment for the Assessment Year 2013-14, particularly in light of the amended procedural regime introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ("TOLA") and subsequent judicial pronouncements by the Hon'ble Apex Court.

Specifically, the issues considered include:

• Whether the impugned notice dated 31.03.2021, which was physically issued after 31.03.2021, can be considered validly issued within time under the new regime applicable from 01.04.2021.
• Whether the procedural requirements under Section 148A(b) and Section 148A(d) of the Act, as clarified by the Hon'ble Apex Court in the cases of Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal, were complied with by the Assessing Officer in issuing the notice and passing the assessment order.
• Whether the failure to follow the directions of the Hon'ble Apex Court regarding issuance of show cause notices and providing relevant information to the assessee renders the impugned notice and consequent assessment order time-barred and invalid.
• The applicability of the legal fiction created by the Hon'ble Apex Court under Article 142 of the Constitution of India, which deemed certain notices issued between 01.04.2021 and 30.06.2021 as stayed until relevant information was supplied to the assessee.
• The effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ("TOLA") on the limitation period and procedural requirements for reassessment notices issued during the COVID-19 pandemic period.

These issues are interlinked and collectively determine the validity of the reassessment proceedings initiated against the petitioner.

Issue-wise Detailed Analysis:

Issue 1: Validity and Timeliness of the Notice Dated 31.03.2021

Legal Framework and Precedents: The reassessment proceedings under Section 148 of the Income Tax Act require that the notice be issued within the prescribed time limits under Section 149. The TOLA amended certain time limits in view of the COVID-19 pandemic, extending deadlines to 30.06.2021. The Hon'ble Apex Court in Ashish Agarwal and Rajeev Bansal clarified that notices deemed to be issued between 01.04.2021 and 30.06.2021 were effectively stayed until relevant information was supplied to the assessee. The Court emphasized the necessity of complying with the new procedural requirements under Section 148A(b) and Section 148A(d) of the Act.

Court's Interpretation and Reasoning: The Court found undisputed facts that the impugned notice dated 31.03.2021 was not actually issued on that date but was physically dispatched on 04.04.2021 and received on 06.04.2021. The notice was also uploaded on the e-filing portal only on 03.04.2021. Therefore, the notice could not be considered as issued on 31.03.2021 for the purposes of limitation. Since the notice was issued after 01.04.2021, the new regime under TOLA and the directions of the Hon'ble Apex Court apply.

Application of Law to Facts: The Court applied the principle that the issuance date of a notice is the actual date on which it is communicated to the assessee, either physically or electronically, not merely the date printed on the notice. Since the notice was issued after 31.03.2021, the new procedural safeguards and timelines apply.

Conclusions: The notice dated 31.03.2021, being issued after 01.04.2021, must comply with the new regime and cannot be treated as validly issued within time merely by bearing the earlier date.

Issue 2: Compliance with Section 148A(b) and Section 148A(d) and Directions in Ashish Agarwal and Rajeev Bansal

Legal Framework and Precedents: The Hon'ble Apex Court in Ashish Agarwal (444 ITR 1) mandated that before issuing a reassessment notice under Section 148, the Assessing Officer must issue a show cause notice under Section 148A(b) along with all relevant information and material relied upon. Only after the assessee's reply and consideration thereof, can the order under Section 148A(d) be passed. Rajeev Bansal extended and explained these directions, emphasizing the legal fiction that deemed notices issued between 01.04.2021 and 30.06.2021 were stayed until relevant information was supplied, and that the limitation period was accordingly extended.

Court's Interpretation and Reasoning: The Court noted that the respondent Assessing Officer failed to issue any notice under Section 148A(b) within 30 days from the date of the Ashish Agarwal judgment (04.05.2022), nor supplied the relevant information and material to the petitioner. The Assessing Officer also passed the assessment order dated 30.03.2022 without following the mandated procedure. The Court held that such failure renders the impugned notice and assessment order invalid and time-barred.

Key Evidence and Findings: The petitioner's submissions and the respondent's affidavit revealed that the procedural requirements under Section 148A were not complied with. The Assessing Officer did not provide the reasons for reopening with annexures initially and only supplied them after the writ petition was filed. The assessment order was passed despite an interim stay granted by the Court.

Treatment of Competing Arguments: The respondent conceded non-compliance with the directions of the Hon'ble Apex Court but argued that the notice was uploaded on the e-filing portal and sent by speed post. However, the Court emphasized that mere dispatch or upload without compliance with Section 148A is insufficient.

Conclusions: Non-compliance with Section 148A(b) and Section 148A(d) and the Apex Court directions invalidates the notice and assessment order.

Issue 3: Effect of Legal Fiction and Time-Barred Nature of the Notice

Legal Framework and Precedents: The Hon'ble Apex Court created a legal fiction deeming notices issued between 01.04.2021 and 30.06.2021 as stayed until supply of relevant information and allowed two weeks for response. The limitation period for issuance of reassessment notices runs only after these conditions are fulfilled. Notices issued beyond the surviving time limit post these exclusions are time-barred.

Court's Interpretation and Reasoning: Applying this principle, the Court found that since the respondent did not issue the show cause notice under Section 148A(b) and did not supply relevant information within the stipulated time, the limitation period never commenced running. Therefore, the impugned notice issued after 31.03.2021 is time-barred.

Application of Law to Facts: The petitioner's notice was effectively issued after 31.03.2021 but without compliance with the new regime and without supply of relevant information, thus the limitation period for issuance of the reassessment notice did not start. The assessment order passed thereafter is invalid.

Conclusions: The impugned notice and assessment order are time-barred and liable to be quashed.

Issue 4: Applicability of TOLA and Extension of Time Limits

Legal Framework and Precedents: TOLA extended various time limits for completion of proceedings falling between 20.03.2020 and 31.03.2021 due to the COVID-19 pandemic. The Apex Court clarified that TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing time limits for issuance of reassessment notices.

Court's Interpretation and Reasoning: The Court found that TOLA's extended time limits apply to the present case as the relevant period falls within its ambit. The Assessing Officer was required to comply with these extended timelines and procedural safeguards, which was not done.

Conclusions: The impugned notice, issued beyond the extended period and without compliance with TOLA and Apex Court directions, is invalid.

Significant Holdings:

"The notice dated 31.03.2021 was not issued on the same date, but the notice was issued to the petitioner by speed post on 04.04.2021. The notice was uploaded on the e-filing portal on 03.04.2021. Therefore, admittedly the notice cannot be said to have been issued on 31.03.2021."

"The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside."

"The respondent authorities have not followed the directions issued in the aforesaid two decisions and as such the impugned notice has to be treated as time barred notice."

"A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer."

"The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021."

"The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 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 Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices."

Ultimately, the Court quashed and set aside the impugned notice dated 31.03.2021 and the assessment order dated 30.03.2022, holding that the reassessment proceedings were initiated without jurisdiction and were time-barred due to non-compliance with the procedural safeguards mandated by the amended provisions of the Income Tax Act and the directions of the Hon'ble Apex Court.