2025 (6) TMI 1838 - HC - Income Tax

Validity of reopening of assessment - period of limitation - effect of TOLA on the limitation period for issuing notices u/s 148 and 148A(b) for A.Y. 2015-16 - HELD THAT - It is not in dispute that the respondent-Assessing Officer has issued the notice u/s 148A(b) of the Act after the period of six years were over on 31.03.2022. As observed in case of Deepak Steel and Power Ltd 2025 (4) TMI 1367 - SC ORDER and in view of the concession made by the Revenue before the Apex Court for the Assessment Year 2015-16 all the notices issued on or after 01.04.2021 will have to be dropped as they would not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 and therefore nothing further is required to be adjudicated in the matters as the notice so far as the present petitions are concerned though dated 31.03.2021 admittedly have been issued after 01.04.2021. t is also not in dispute that the notices u/s 148A(b) have been issued pursuant to the decision in Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT dated 04.05.2022 admittedly after 31.03.2022. Therefore on both counts the notices issued under section 148 of the Act dated 27/28/29.07.2022 would be time barred.

Summary

The core legal questions considered by the Court in this group of petitions pertain to the validity and maintainability of notices issued under section 148 and section 148A(b) of the Income Tax Act, 1961, specifically for the Assessment Year (A.Y.) 2015-16. The primary issues are:

1. Whether the notices issued under section 148 of the Act after 31.03.2021 for A.Y. 2015-16 are valid in light of the decision of the Supreme Court in Union of India vs. Ashish Agarwal and subsequent rulings.

2. Whether the notices issued under section 148A(b) of the Act after 01.04.2021 survive judicial scrutiny, particularly in view of the Apex Court's ruling in Union of India vs. Rajeev Bansal and the concession made by the Revenue therein.

3. The effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 on the limitation period for issuing notices under section 148 and 148A(b) for A.Y. 2015-16.

4. The impact of subsequent Apex Court decisions, including Deepak Steel and Power Ltd vs. Central Board of Direct Taxes, on the validity of notices issued post 31.03.2021.

Issue-wise detailed analysis:

Validity of Notices under Section 148 issued after 31.03.2021 for A.Y. 2015-16:

The legal framework governing the issuance of notices under section 148 is subject to limitation periods prescribed under the Income Tax Act, as amended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The Apex Court in Union of India vs. Ashish Agarwal held that notices issued after the prescribed limitation period for A.Y. 2015-16 would be invalid.

The Court observed that the notices dated 31.03.2021 and thereafter, issued under section 148, were challenged on the ground that they were beyond the extended limitation period. The Apex Court's decision in Ashish Agarwal (2022) 444 ITR 1 (SC) clarified that the limitation period for issuing notices for A.Y. 2015-16 had expired by 31.03.2021.

The Court further noted that the notices issued after this date, including those on 27/28/29.07.2022, were consequently time-barred. The petitioners relied on this precedent to assert the invalidity of such notices.

The respondents contended that notices under section 148A(b) issued subsequently remedied any procedural defects. However, the Court found that issuance of notices under section 148A(b) after the limitation period did not validate the original notices under section 148.

Validity of Notices under Section 148A(b) issued after 01.04.2021:

The Court examined the Apex Court's ruling in Union of India vs. Rajeev Bansal (469 ITR 46 SC), where the Revenue conceded that for A.Y. 2015-16, all notices issued on or after 01.04.2021 must be dropped as they do not fall within the completion period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

This concession was pivotal. The Court emphasized paragraph 19(f) of the Rajeev Bansal judgment, which explicitly states the Revenue's acceptance that notices issued after 01.04.2021 for A.Y. 2015-16 are invalid.

Further, the Court relied on the subsequent Apex Court decision in Deepak Steel and Power Ltd vs. Central Board of Direct Taxes ([2025] 174 taxmann.com 144 (SC)), which quashed notices issued under section 148A(b) after 31.03.2021 for A.Y. 2015-16, reinforcing the principle established in Rajeev Bansal.

The Court also noted similar orders from various High Courts, including Delhi, Punjab and Haryana, Rajasthan, and Karnataka, which followed this binding precedent and quashed notices issued post the limitation period.

Application of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020:

This legislation extended the limitation period for completion of assessments for certain assessment years due to the COVID-19 pandemic. However, the Apex Court clarified that for A.Y. 2015-16, the extended period ended on 31.03.2021, and notices issued after this date fall outside the permissible window.

The Court found that the notices issued under section 148A(b) after 31.03.2021, including those dated 25.06.2021 and later, were therefore beyond the extended limitation period and could not be sustained.

Treatment of Competing Arguments:

The petitioners argued that the notices issued after the extended limitation period were void and liable to be quashed. They relied heavily on the Apex Court's decisions and the Revenue's concession.

The respondents contended that the issuance of notices under section 148A(b) after the Apex Court's decision in Ashish Agarwal remedied the defects in the earlier notices under section 148 and that the notices were valid.

The Court rejected this argument, holding that the limitation period governs the validity of notices and that procedural compliance under section 148A(b) cannot cure the fundamental defect of limitation expiry.

Conclusions:

The Court concluded that:

- Notices issued under section 148 for A.Y. 2015-16 after 31.03.2021 are time-barred and invalid.

- Notices issued under section 148A(b) after 01.04.2021 for A.Y. 2015-16 are also invalid, as per the Revenue's concession and Apex Court rulings.

- The notices issued under section 148 on 27/28/29.07.2022 and under section 148A(b) post 31.03.2021 are liable to be quashed.

Significant holdings include the Court's reliance on the Apex Court's concession in Rajeev Bansal, which states verbatim:

"19. (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April 1, 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."

The Court also upheld the principle that limitation periods prescribed under the Income Tax Act, as extended by relevant legislation, are mandatory and notices issued beyond such periods are void, notwithstanding procedural compliance under subsequent provisions.

Accordingly, the Court quashed the impugned notices issued under section 148 and section 148A(b) of the Act in the respective petitions, disposing of the matters in favor of the petitioners.