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2025 (6) TMI 1770 - HC - Income Tax


1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

  • Whether the notice issued under Section 148 of the Income Tax Act for the assessment year 2014-15 was validly issued within the time limits prescribed under Section 149(1) of the Income Tax Act, 1961 (IT Act).
  • The interpretation of the term "issue" or "issuance" of the notice under Section 148 in the context of electronic dispatch, particularly with reference to Section 13(1) of the Information Technology Act, 2000.
  • Whether the date and time of dispatch of the electronic notice (email) or the date and time of digital signing by the Assessing Officer constitutes the date of issuance for the purpose of limitation under Section 149(1) of the IT Act.
  • The applicability and binding nature of the precedent set by the Division Bench in Daujee Abhushan Bhandar (P) Ltd. v. Union of India & Ors., which interpreted the meaning of "issue" in the context of electronic notices.
  • Whether the notice dated 31.3.2021 but electronically sent on 01.04.2021 at 3:58:33 AM was issued within the prescribed six-year period from the end of the relevant assessment year (2014-15).
  • The relevance of competing judgments, including Balgopal Holdings & Traders & Ors. v. Deputy Commissioner of Income Tax and Toliram v. State of Maharashtra, in interpreting the term "issue" or "issuance" of notices or charge sheets.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the Notice under Section 148 within the Time Limit Prescribed by Section 149(1) of the IT Act

Relevant legal framework and precedents: Section 149(1) of the IT Act prescribes strict time limits for issuance of notices under Section 148 to reopen assessments. Specifically, no notice shall be issued if four years have elapsed from the end of the relevant assessment year unless certain exceptions apply. If more than four but not more than six years have elapsed, a notice can only be issued if the escaped income exceeds Rs. 1,00,000. The assessment year in question ended on 31.3.2015, and the notice was dated 31.3.2021.

Court's interpretation and reasoning: The Court emphasized the strict compliance with the time limits in a taxing statute. The notice dated 31.3.2021 appeared prima facie to be within the six-year limit. However, the Court focused on the actual date and time of issuance or dispatch, which is critical for determining compliance with the limitation period.

Key evidence and findings: The notice was digitally signed on 31.3.2021 at 18:36:17 hours. However, the email dispatch timestamp showed the notice was sent on 01.04.2021 at 03:58:33 AM, with delivery at 03:58:36 AM. This was evidenced by the screenshot (Page 140) provided by the respondents.

Application of law to facts: The Court applied Section 149(1) strictly, holding that the notice must be "issued" within the prescribed period. The Court relied on the interpretation of "issue" as meaning the dispatch or transmission of the notice, not merely its signing.

Treatment of competing arguments: The respondents argued that the signing date (31.3.2021) constituted issuance and that dispatch delays were due to system congestion. The Court rejected this, noting absence of evidence to prove actual dispatch on 31.3.2021 or any traffic congestion causing delay. The departmental manual cited by respondents was deemed insufficient to establish compliance.

Conclusion: The notice was effectively issued on 01.04.2021, beyond the six-year period from the end of the assessment year 2014-15, rendering it invalid.

Issue 2: Interpretation of the Term "Issue" or "Issuance" of Notice under Section 148 in the Context of Electronic Dispatch

Relevant legal framework and precedents: Section 13(1) of the Information Technology Act, 2000, provides that dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator. The Court relied heavily on the Division Bench ruling in Daujee Abhushan Bhandar (P) Ltd. (2022), which held that issuance of a digitally signed notice occurs when the electronic record is transmitted outside the control of the originator.

Court's interpretation and reasoning: The Court adopted the view that issuance involves not just signing but actual dispatch or transmission. The timing of entry into the recipient's system is critical. This interpretation aligns with the statutory scheme ensuring clarity on when a notice is deemed issued, especially in electronic communications.

Key evidence and findings: The screenshot showing the sent and delivery timestamps was pivotal, demonstrating that the notice was dispatched after the expiration of the limitation period.

Application of law to facts: The Court applied the principle that the notice is deemed issued only when it leaves the control of the sender, i.e., when it enters the recipient's computer system, which in this case was after the limitation period.

Treatment of competing arguments: The respondents' reliance on the signing time as issuance was rejected. The Court distinguished the present case from Toliram v. State of Maharashtra, noting that the latter dealt with departmental proceedings and the issuance of charge sheets, where "issue" was held to mean dispatch, not service. The Court emphasized that the electronic dispatch principles under the IT Act must prevail for notices under the Income Tax Act.

Conclusion: The term "issue" must be understood as the time when the electronic notice is dispatched outside the originator's control, not the time of signing.

Issue 3: Applicability and Binding Nature of Daujee Abhushan Bhandar (P) Ltd. Precedent

Relevant legal framework and precedents: The Daujee Abhushan Bhandar judgment was challenged before the Supreme Court but the Special Leave Petition was dismissed, leaving the Division Bench's interpretation intact.

Court's interpretation and reasoning: The Court held that the precedent remains binding and authoritative on the issue of issuance of notices under Section 148 in electronic form.

Key evidence and findings: The petitioner informed the Court that the SLP against the judgment was disposed of by the Supreme Court without disturbing the findings.

Application of law to facts: The Court applied the Daujee Abhushan Bhandar ruling directly to the facts of the present case.

Treatment of competing arguments: The respondents' reliance on other judgments that did not consider Section 13(1) of the IT Act or the Daujee Abhushan Bhandar precedent was found unpersuasive.

Conclusion: The Daujee Abhushan Bhandar decision governs the interpretation of "issuance" for electronic notices under Section 148 and Section 149(1).

Issue 4: Effect of the Invalid Notice on Subsequent Assessment Orders

Relevant legal framework: An invalid notice under Section 148 vitiates the reopening of assessment and any consequential assessment orders passed thereunder.

Court's interpretation and reasoning: Since the notice was not issued within the statutory time frame, the reopening was invalid and any subsequent assessment orders based on that notice cannot survive.

Key evidence and findings: The Court found no valid issuance of notice within the prescribed period.

Application of law to facts: The assessment year 2014-15 reopening was barred by limitation, and the notice was issued beyond the six-year period.

Conclusion: The notice under Section 148 is quashed and the consequent assessment orders stand invalidated.

Issue 5: Request for Stay of Judgment

The respondents requested a stay of the judgment. The Court declined the request, finding no reason to stay the quashing of the notice, given the clear statutory violation.

3. SIGNIFICANT HOLDINGS

"Thus, considering the provisions of s. 282 and 282A of the Act, 1961 and the provisions of s. 13 of the Act, 2000 and meaning of the word 'issue' we find that firstly notice shall be signed by the assessing authority and then it has to be issued either in paper form or be communicated in electronic form by delivering or transmitting the copy thereof to the person therein named by modes provided in s. 282 which includes transmitting in the form of electronic record. Sec. 13(1) of the Act, 2000 provides that unless otherwise agreed, the dispatch of an electronic record occurs when it enters into computer resources outside the control of the originator. Thus, the point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator i.e. the assessing authority that shall the date and time of issuance of notice under s. 148 r/w s. 149 of the Act, 1961."

"The word despatch, therefore, assumes significance and since we are dealing with a case, where it has been dispatched electronically, in terms of Section 13(1), the time and place of despatch and receipt of electronic record, would occur when it enters a computer resource outside the control of the originator."

"The fact of actual 'service' of charge sheet on the Government servant is not a necessary part of the requirement of 'issuance' of charge sheet." (In the context of departmental proceedings, distinguished from the present case.)

Final determinations:

  • The notice under Section 148 of the Income Tax Act dated 31.3.2021 but electronically dispatched on 01.04.2021 was not issued within the statutory time limit prescribed under Section 149(1) of the IT Act.
  • The term "issue" or "issuance" of a notice under Section 148 must be understood as the time when the notice is dispatched outside the control of the originator, particularly in electronic communication, as per Section 13(1) of the Information Technology Act.
  • The reopening of assessment for the assessment year 2014-15 based on the invalid notice is barred and the consequential assessment orders do not survive.
  • The petition challenging the notice is allowed and the notice under Section 148 is quashed.
  • The request for stay of the judgment is declined.

 

 

 

 

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