2025 (4) TMI 46 - HC - Income Tax

Reopening of assessment as barred by limitation - application of TOLA - HELD THAT - In the present case 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 (1 0) TMI 264 - SUPREME COURT (LB ) thus the impugned notice is liable to be set aside.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

1. Whether the notice issued on 27.07.2022 under Section 148 of the Income Tax Act, 1961, for the Assessment Year (AY) 2015-16 was barred by limitation.

2. Whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) was applicable for reopening assessments for AY 2015-16.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation of Notice Issued under Section 148

Relevant legal framework and precedents: Section 148 of the Income Tax Act, 1961, allows for the issuance of a notice to reassess income. The limitation for such notices is governed by Section 149 of the Act. The Finance Act 2021 introduced a new regime for reassessment, altering the limitation periods.

Court's interpretation and reasoning: The Court noted that the notice in question was issued on 27.07.2022, which was beyond the period of limitation as prescribed under Section 149(1) of the Act. The Court relied on the Supreme Court's decision in Union of India & Others v. Ashish Agarwal, which directed that notices issued under the old regime should be treated as issued under the new regime (Section 148A(b)).

Key evidence and findings: The petitioner had filed its return for AY 2015-16 on 28.11.2015, and the assessment was completed on 29.12.2018. The notice for reassessment was issued much later, on 27.07.2022, which was beyond the permissible period.

Application of law to facts: The Court applied the limitation period as prescribed under the new regime and found that the notice was issued beyond the allowable time frame.

Treatment of competing arguments: The Revenue's argument that the notice was valid was undermined by their own concession in the Supreme Court case of Union of India v. Rajeev Bansal, where it was admitted that TOLA did not apply to AY 2015-16.

Conclusions: The Court concluded that the notice was barred by limitation and thus invalid.

Issue 2: Applicability of TOLA

Relevant legal framework and precedents: TOLA was enacted to provide relaxation in timelines for various compliance and procedural actions under tax laws due to the COVID-19 pandemic. The applicability of TOLA to reassessment notices was under scrutiny.

Court's interpretation and reasoning: The Court referred to the Supreme Court's decision in Union of India and Others v. Rajeev Bansal, where it was conceded by the Revenue that TOLA was not applicable for reopening assessments for AY 2015-16.

Key evidence and findings: The Supreme Court's decision and the Revenue's concession were pivotal in determining the non-applicability of TOLA for AY 2015-16.

Application of law to facts: Given the concession by the Revenue, the Court found that TOLA could not extend the limitation period for the notice in question.

Treatment of competing arguments: The Revenue's concession effectively nullified any argument for the applicability of TOLA to the case at hand.

Conclusions: The Court concluded that TOLA was not applicable, and thus the notice was invalid.

SIGNIFICANT HOLDINGS

The Court held that the notice issued on 27.07.2022 under Section 148 for AY 2015-16 was barred by limitation as it was issued beyond the permissible period under the new regime. The Court also held that TOLA was not applicable for AY 2015-16, as conceded by the Revenue in the Supreme Court case of Union of India v. Rajeev Bansal.

Core principles established: The judgment reinforced the principles regarding the limitation period for reassessment notices under the new regime and clarified the non-applicability of TOLA for specific assessment years when conceded by the Revenue.

Final determinations on each issue: The Court set aside the impugned notice and any proceedings emanating from it, allowing the petition in favor of the petitioner.