2025 (7) TMI 110 - AT - Income Tax

Validity of reopening of assessment - time-line prescribed by limitation stipulated u/s.153(2) - HELD THAT - No order of assessment/re-assessment shall be made u/s.147 of the Act after the expiry of nine (9) months from the end of the Financial Year in which notice u/s.148 was served. In the present case notice u/s.148 of the Act was issued by the AO on 24.03.2018. Therefore the AO had time of nine (9) months from the end of the Financial Year i.e. up to 31.12.2018 to frame the assessment/re-assessment u/s. 147 of the Act. Sec.153(2) prohibits the AO to frame an assessment after 31.12.2018 unless the Revenue was able to show that despite the notice u/s. 148 was issued on 24.03.2018 the same hadn t been served on or before 31.03.2018 and instead it was served upon the assessee only on or after 01.04.2018. But in this case the AO categorically recorded in the assessment order that notice u/s. 148 of the Act was issued to the assessee on 24.03.2018 after recording reasons and after obtaining necessary approval from the Ld.PCIT Salem and the same was duly served on the assessee . In the light of the factual assertion as made by AO of issue and serving of notice in March 2018 we are of the view that he was duty bound to frame the assessment on or before 31.12.2018 as per the time-line prescribed by limitation stipulated u/s.153(2) of the Act. In other words the AO was barred from framing the assessment/reassessment after 31.12.2018 and therefore the impugned assessment order dated 04.12.2019 after a year is certainly barred by limitation and therefore the ibid legal issue raised by the assessee is allowed in its favour.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issue considered by the Tribunal was whether the reassessment order dated 04.12.2019 passed by the Assessing Officer (AO) under section 147 of the Income Tax Act, 1961, was barred by limitation under section 153(2) of the Act, given that the notice under section 148 was issued on 24.03.2018. Specifically, the question was whether the AO was legally competent to complete the reassessment beyond the prescribed nine-month period from the end of the financial year in which the notice was served, i.e., beyond 31.12.2018.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Limitation for completion of reassessment under section 153(2) of the Income Tax Act

Relevant legal framework and precedents: Section 153(2) of the Income Tax Act, 1961, stipulates that no order of assessment, reassessment, or re-computation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served. The provision aims to impose a strict time limit on the AO to complete reassessment proceedings once a notice under section 148 is issued, thereby ensuring finality and certainty in tax assessments.

Court's interpretation and reasoning: The Tribunal examined the timeline and the statutory language of section 153(2). The notice under section 148 was issued on 24.03.2018, which falls within the financial year 2017-18. Accordingly, the nine-month limitation period for completing reassessment expired on 31.12.2018. The reassessment order was, however, passed on 04.12.2019, which is beyond the prescribed limitation period.

The AO had recorded in the assessment order that the notice under section 148 was issued and duly served on the assessee on 24.03.2018 after obtaining necessary approvals. Since the notice was served within the financial year ending 31.03.2018, the AO was bound by the limitation period expiring on 31.12.2018. The Tribunal emphasized that the AO must complete the reassessment within this period unless the notice was served after 31.03.2018, which was not the case here.

Key evidence and findings: The AO's own admission in the assessment order that the notice under section 148 was issued and served on 24.03.2018 was a critical factual finding. There was no evidence or claim that the notice was served after 31.03.2018, which could have extended the limitation period.

Application of law to facts: Applying the statutory provision strictly, the Tribunal held that the reassessment order dated 04.12.2019 was beyond the nine-month limitation period and therefore barred by limitation under section 153(2). The reassessment order was thus non-est in the eyes of law.

Treatment of competing arguments: The Departmental Representative supported the AO's reassessment and opposed interference. However, the Tribunal found no merit in this contention since the limitation prescribed by the statute is mandatory and cannot be extended unless the notice is served after the financial year-end. The assessee's argument that the order was barred by limitation was accepted in full.

Conclusions: The Tribunal concluded that the reassessment order passed beyond the prescribed limitation period was void and quashed the assessment order dated 04.12.2019. The appeal was allowed in favour of the assessee.

3. SIGNIFICANT HOLDINGS

The Tribunal succinctly stated the legal position: "No order of assessment, reassessment or re-computation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served."

It further held that since the notice under section 148 was issued and served on 24.03.2018, the AO was duty bound to complete the reassessment on or before 31.12.2018. The reassessment order dated 04.12.2019 was therefore "barred by limitation and therefore, the impugned assessment order dated 04.12.2019 is held to be non-est in the eyes of law and therefore, quashed."

Core principles established include the strict adherence to the limitation period under section 153(2) and the mandatory nature of the time bar for reassessment proceedings once a valid notice under section 148 is served within a financial year.

The final determination was that the reassessment order passed beyond the limitation period prescribed under section 153(2) is invalid and cannot sustain, leading to the allowance of the assessee's appeal.