2025 (6) TMI 2017 - HC - Income Tax

Validity of reopening of assessment u/s 147 - period of limitation - issuance of a notice u/s 148A(b) - Period provided less than 7 days - HELD THAT - As in this case in terms of the notice issued u/s 148A(b) of the said Act the original period for filing the response was till 13th March 2023 which stood extended till 27th March 2023. Having regard to the third proviso contained in Section 149(1) of the said Act the AO is entitled to the exclusion of the time provided for seeking response including the extended time therefor. Having regard thereto in our view the assessing officer was entitled to exclusion of 25 days. Admittedly the order impugned has been passed on 6th April 2023 and as such there was no application of the fourth proviso at all. Contention raised that the order passed u/s 148A(d) of the said Act is beyond the period of limitation cannot be sustained. Since the petitioner otherwise has an alternative remedy to challenge the order passed u/s 147 r/w Section 144 and Section 144B of the said Act the petitioner shall be at liberty to pursue his remedy before the statutory authority. The above observations and findings are also in tune with an unreported judgment delivered by a Coordinate Bench of this Court in the case of Giriraj Commercial Private Limited versus Union of India and others 2023 (7) TMI 1523 - CALCUTTA HIGH COURT though the same pertains to the substituted provisions of Section 149(1) of the said Act as substituted by Finance Act 2023. This apart having regard to the fact that the instant writ petition was pending before this Court for sometime and since substantial questions in the form of limitation had been raised I am of the view that the petitioner should be given an opportunity to pursue its statutory remedy. Thus petitioner files an appeal within a period of 4 weeks from the date of receipt of the downloaded copy of this order from the official website of this Court upon compliance of all formalities by the petitioner the appellate authority shall hear out and dispose of the appeal on merit.

Summary

The core legal questions considered in this judgment revolve around the validity and limitation of the order passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961, particularly focusing on:

• Whether the notice issued under Section 148 of the Income Tax Act by the jurisdictional assessing officer is valid, especially in light of the Scheme notified under Section 151A of the Act.
• Whether the order passed under Section 148A(d) is barred by limitation, considering the time frames prescribed under the amended provisions of Section 149(1) of the Income Tax Act.
• The propriety of entertaining a writ petition challenging the assessment order when an alternative statutory remedy is available.

Issue-wise Detailed Analysis

1. Validity of the Notice Issued under Section 148

The petitioner contended that the notice under Section 148 was bad in law as it was issued by the jurisdictional assessing officer subsequent to the Scheme notified under Section 151A of the Income Tax Act. The petitioner argued that their participation in the proceedings should not be construed as submission to the jurisdiction of the assessing officer to issue such a notice.

The respondents countered by asserting that the writ petition was filed as an afterthought, pointing out that the petitioner had participated in the proceedings without raising the jurisdictional objection at the time. They further argued that since the order passed is an appellable order, the writ petition should not be entertained to bypass the statutory remedy.

The Court noted its reluctance to entertain the writ petition on the ground of jurisdictional defect in issuing the notice under Section 148 at a belated stage, especially since the petitioner had participated in the proceedings. The Court emphasized the availability of statutory remedies and the principle that a writ petition is not ordinarily maintainable where an alternative remedy exists.

2. Limitation and Time Bar under Section 149(1) of the Income Tax Act

The pivotal issue examined was whether the order passed under Section 148A(d) was barred by limitation. The petitioner relied on the fourth proviso to Section 149(1), as substituted by the Finance Act, 2021, which prescribes the time limits for issuance of notices and passing of orders under Sections 148 and 148A(d).

The Court carefully analyzed the relevant statutory provisions, particularly Section 149(1) and its provisos, which provide:

• No notice under Section 148 shall be issued after three years from the end of the relevant assessment year unless certain conditions are met.
• For computing the limitation period, the time or extended time allowed to the assessee to respond to a show-cause notice under Section 148A(b), as well as any period during which the proceedings are stayed by court injunction, shall be excluded.
• If after excluding such periods, the remaining limitation period is less than seven days for passing an order under Section 148A(d), the period shall be extended to seven days.

In the instant case, the notice under Section 148A(b) was issued on 2nd March 2023, with the original response deadline of 13th March 2023 extended to 27th March 2023. The impugned order under Section 148A(d) was passed on 6th April 2023.

The Court held that the assessing officer was entitled to exclude the extended response period of 25 days while computing limitation. Since the order was passed within a reasonable time after the exclusion, the contention that the order was time-barred was rejected. The Court observed that there was no application of the fourth proviso extending the limitation period further, as the order was passed beyond the extended response time but within a permissible period.

3. Availability of Alternative Remedy and Maintainability of Writ Petition

The respondents argued that the petitioner had an alternative statutory remedy to challenge the assessment order and that the writ petition was an attempt to circumvent this remedy. The Court agreed with this contention, emphasizing that the petitioner should pursue the remedy before the appellate authority as provided under the Income Tax Act.

However, considering that the writ petition had been pending for some time and substantial questions of limitation had been raised, the Court directed that the petitioner be allowed to file an appeal within four weeks from the date of receipt of the order. The appellate authority was directed to hear and dispose of the appeal on merits after compliance with formalities.

Treatment of Competing Arguments

The Court balanced the petitioner's challenge on limitation grounds with the respondents' emphasis on procedural propriety and availability of alternative remedies. While declining to entertain the writ petition on jurisdictional grounds, the Court examined the limitation issue in detail and rejected the petitioner's contention. The Court's approach reflects a careful adherence to statutory provisions and procedural safeguards, ensuring that the petitioner is not deprived of the opportunity to challenge the order through the prescribed appellate mechanism.

Significant Holdings

The Court held:

"Upon issuance of a notice under Section 148A(b) of the said Act, while computing the period of limitation, the time or the extended time allowed to the assessee as per the show cause notice issued under Section 148A(b) of the said Act is excluded, in addition to the period during which the proceeding under Section 148A remains stayed by order or injunction of any Court."

"In my view, the assessing officer was entitled to exclusion of 25 days. Admittedly, the order impugned has been passed on 6th April 2023 and as such, there was no application of the fourth proviso at all."

"The contention raised by Ms. Roychowdhury that the order passed under Section 148A(d) of the said Act is beyond the period of limitation, cannot be sustained."

"Since the petitioner otherwise has an alternative remedy to challenge the order passed under Section 147 read with Section 144 and Section 144B of the said Act, I am of the view that the petitioner shall be at liberty to pursue his remedy before the statutory authority."

The Court also relied on a coordinate bench's unreported judgment which aligns with the principles applied here concerning the substituted provisions of Section 149(1).

In conclusion, the Court disposed of the writ petition with a direction permitting the petitioner to file an appeal within four weeks, mandating the appellate authority to hear and decide the appeal on merits expeditiously. The Court underscored the importance of adhering to procedural timelines and statutory remedies under the Income Tax Act, 1961.