2025 (6) TMI 1484 - AT - Income Tax

Validity of reopening of assessment - period of limitation - Scope of TOLA - Period of limitation under new tax regime - Notice issued old law - HELD THAT - We note that in the instant case surviving period i.e. number of days between date of issuance of original notice u/s 148 under old law and 30.06.2021 is only 7 days. Upon considering the period of exclusion prescribed by the Hon ble Apex Court in the case of UOI vs. Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) i.e. the period between date of issuance of original notice w/s 148 under the old law and the due date of filing response to communication issued by the Ld. JAO furnishing material being relied upon i.e. period between 23.06.2021 and 17.06.2022 the surviving period would be 7 days after 17.06.2022 i.e. 24.06.2022. Accordingly the period of limitation for issuance of notice u/s 148 of the new law as envisaged in aforesaid judgement of Hon ble Apex Court was 24.06.2022. AO issued the notice in accordance with new law on 29.07.2022 which is more than a month after expiry of period of limitation. Consequently the notice dated 29.07.2022 issued under section 148 of the Act is time-barred. Accordingly by virtue of period of limitation prescribed by the Hon ble Apex Court in the case of UOI vs. Rajeev Bansal (Supra) and correlated facts of the case of the assessee it is abundantly clear that the statutory notice issued u/s 148 of the new law is barred by limitation and therefore the same deserve to be quashed. Consequently the assessment order dated 29.05.2023 also bad in law. Impugned reassessment proceedings initiated under Section 148 of the Act vide notice dated 29.07.2022 is barred by limitation and deserve to be quashed and consequently the reassessment order passed u/s 147 r.w.s Section 144B of the Act dated 29.05.2023 also deserve to be quashed. Decided in favour of the assessee.

Summary

The core legal issue considered by the Tribunal in this case pertains to the validity and limitation of the notice issued under Section 148 of the Income Tax Act for reopening assessment for the Assessment Year 2015-16. Specifically, the question was whether the notice issued on 29.07.2022 under Section 148 was barred by limitation in view of the statutory provisions, including the first proviso to Section 149(1) of the Act, as well as the impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and relevant judicial pronouncements.

In addressing this issue, the Tribunal examined the following legal questions:

• What is the applicable limitation period for issuance of notice under Section 148 of the Income Tax Act for AY 2015-16, considering amendments by the Finance Act, 2021 and the TOLA Act?
• Whether the notice issued on 29.07.2022 was within the prescribed limitation period or barred by limitation?
• How do the judicial decisions, particularly the Supreme Court rulings in Union of India v. Rajeev Bansal and Union of India v. Ashish Agarwal, affect the computation of limitation and the validity of the notice?
• What is the effect of the exclusion of certain periods from limitation as per the third and fourth provisos to Section 149 of the Act, as interpreted by the Supreme Court?
• Whether the reassessment proceedings and consequential assessment order passed pursuant to the notice are legally sustainable if the notice is barred by limitation?

The Tribunal's detailed analysis proceeded as follows:

Relevant Legal Framework and Precedents:

The limitation for issuance of notice under Section 148 is governed by Section 149 of the Income Tax Act. For AY 2015-16, the six-year period expired on 31.03.2022. The Finance Act, 2021 introduced a new regime for reassessment notices, replacing the old provisions. The TOLA Act, 2020 provided certain relaxations and amendments, including extension of limitation periods due to the COVID-19 pandemic. The first proviso to Section 149(1) and Section 3 of TOLA apply to the entire Income Tax Act, including reassessment provisions.

Judicial precedents such as the Supreme Court decisions in Union of India v. Rajeev Bansal and Union of India v. Ashish Agarwal are pivotal. The Rajeev Bansal judgment clarified that the period between issuance of the original notice under the old law and the due date for filing a response to the communication issued under Section 148A(b) of the new law is to be excluded from the limitation period. It further held that if the remaining time for issuance of notice is less than seven days, the Assessing Officer is entitled to issue a notice within seven days from the end of the exclusion period.

Additionally, the Delhi High Court in Ibibo Group Private Limited and Pratishtha Garg cases, as well as ITAT Mumbai in Income Tax Officer v. Sumitra Rajeshbhai Jain, have reaffirmed that notices issued beyond the prescribed limitation period are legally unsustainable and liable to be quashed.

Court's Interpretation and Reasoning:

The Tribunal noted that the original notice under the old law was issued on 23.06.2021. The limitation period under the old law expired on 31.03.2022. The TOLA Act extended the limitation to 30.06.2022 for certain assessment years, but this extension was not applicable to AY 2015-16.

Following the Ashish Agarwal judgment, the original notice dated 23.06.2021 was treated as a show-cause notice under Section 148A(b) of the new law. The Assessing Officer supplied the material on 01.06.2022 and allowed the assessee to respond by 17.06.2022. The period from issuance of the original notice to the date of filing the response (23.06.2021 to 17.06.2022) was excluded from the limitation period as per Rajeev Bansal.

After exclusion, the surviving period for issuance of the notice under the new law was only seven days, i.e., until 24.06.2022. However, the notice under Section 148 was issued on 29.07.2022, which was beyond the surviving limitation period.

The Tribunal held that since the notice was issued after the expiry of the limitation period, it was barred by limitation and hence void ab initio. Consequently, the reassessment proceedings and the assessment order passed thereon were also invalid.

Key Evidence and Findings:

• The original return was filed on 17.09.2015 for AY 2015-16.
• The original notice under Section 148 was issued on 23.06.2021.
• The limitation period for AY 2015-16 expired on 31.03.2022 under the old law.
• The TOLA Act extension was not applicable to AY 2015-16.
• The Assessing Officer issued communication under Section 148A(b) on 01.06.2022, with response due by 17.06.2022.
• The notice under Section 148 was issued on 29.07.2022, beyond the surviving period of 24.06.2022.
• Judicial precedents confirmed that notices issued beyond limitation are invalid.

Application of Law to Facts:

Applying the statutory provisions and judicial rulings, the Tribunal concluded that the Assessing Officer had no jurisdiction to issue the notice on 29.07.2022 as it was beyond the prescribed limitation period. The exclusion period granted by the Supreme Court judgments was correctly computed, and the surviving period was only until 24.06.2022. Issuance of notice after this date rendered the reassessment proceedings void.

Treatment of Competing Arguments:

The Revenue contended that the reassessment notice was valid and relied on the order of the Commissioner of Income Tax (Appeals) who had dismissed the limitation objection. However, the Tribunal, after considering the statutory provisions, TOLA, and binding Supreme Court decisions, rejected the Revenue's contention. The Tribunal also relied on authoritative High Court and ITAT decisions supporting the assessee's case.

Conclusions:

The Tribunal held that the notice issued under Section 148 on 29.07.2022 was barred by limitation and hence invalid. The reassessment proceedings and the assessment order passed under Section 147 read with Section 144B of the Act were quashed. The assessee's appeal on this ground was allowed, and the Revenue's cross-appeal was dismissed as infructuous.

Significant Holdings:

The Tribunal preserved the following crucial legal reasoning verbatim:

"...the impugned reassessment proceedings initiated under Section 148 of the Act vide notice dated 29.07.2022 is barred by limitation and deserve to be quashed and consequently, the reassessment order passed under Section 147 r.w.s Section 144B of the Act dated 29.05.2023 also deserve to be quashed."

Core principles established include:

• The limitation period for issuance of notice under Section 148 must be strictly adhered to as per the amended law and judicial pronouncements.
• The period excluded between issuance of original notice under old law and filing of response under new law must be accounted for in computing limitation.
• Notices issued beyond the surviving limitation period are void ab initio.
• Reassessment proceedings and consequent assessment orders based on such invalid notices cannot sustain.

Final determinations on the issue of limitation were decisively in favor of the assessee, resulting in quashing of the reassessment notice and order. Other grounds raised by the assessee were dismissed as not pressed, and the Revenue's appeal was dismissed as academic following the quashing of reassessment proceedings.