TMI Blog2024 (3) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod provided in the first proviso, then the fifth proviso could not save such notices. The fifth proviso can only apply where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached. The sixth proviso to Section 149 of the Act has no impact as it only provides a situation where after exclusion of the time period referred to in the fifth proviso, the time available with the Assessing Officer for passing an order under Section 148A(d) of the Act is less than 7 days, then the remaining time frame shall be extended to 7 days and limitation also stands extended by 7 days. The notice u/s 148 of the Act issued on 31st July 2022, therefore, is barred by limitation. As per the fifth proviso to Section 149 of the Act only the period from 24th May 2022 to 8th June 2022 can be excluded since the notice under Section 148A(b) of the Act has been issued for the first time on 24th May 2022 providing time to petitioner till 8th June 2022 to furnish a reply. The Revenue is seeking to exclude a period from 21st May 2021 to 4th May 2022 relying on Ashish Agarwal ( 2022 (5) TMI 240 - SUPREME COURT] which, as explained earlier, cannot a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (g) even on merits no income has escaped assessment for the reasons stated in the impugned order. 3. With the consent of the parties, it was decided to first discuss the preliminary issue, i.e., whether the notice is issued beyond the period of limitation. It was felt, if petitioner would succeed on this aspect of limitation, the other grounds of challenge need not be gone into. Therefore, the Court instructed the counsels to restrict their submissions on the preliminary issue of limitation. 4. Apart from this petition, there are many other pending petitions pertaining to AY 2014-15, where, the validity of the notice issued under Section 148 of the Act pursuant to Ashish Agarwal (Supra) is challenged on the ground of being barred by limitation. 5. Mr. Pardiwalla submitted as under : (a) as per the unamended Section 149(1)(b) of the Act, the outer time limit to issue a notice under Section 148 of the Act was 6 years from the end of the relevant assessment year and, thus, for AY 2014-15, the time limit to issue a notice under Section 148 of the Act expired on 31st March 2021. Under the amended provisions, notice under Section 148 of the Act can be issued with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the provisions as existing on the date when such notices are issued are to be considered. It is a settled position that the validity of a notice issued under Section 148 of the Act must be seen on the basis of the law existing on the date on which the notice is issued. Therefore, the validity of the impugned notice must be tested on the basis of the law which exists at the time when the notice was issued i.e. 31st July 2022. This Court has confirmed this principle of law in the following judgments : (i) The New India Assurance Company Limited (Supra); (ii) Siemens Financial Services Private Limited V/s. Deputy Commissioner of Income Tax Ors. (2023) 457 ITR 647 (Bom); (iii) Tata Communications Transformation Services Ltd. V/s. Assistant Commissioner of Income Tax (2022) 443 ITR 49 (Bom). (e) Issuance of a notice under Section 148 of the Act after 1st April 2021 is permissible only after complying with the newly introduced provisions under Finance Act, 2021. If an assessee had a vested right in him that no proceedings could be initiated after 31st March 2021 for the AY 2014-15 in terms of the unamended provisions, the same notices which became time b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was to relate back to an earlier date and held the same to be entirely flawed and unacceptable. Further, the Revenue cannot seek to take shelter of TOLA as a subordinate legislation cannot override any statute enacted by the Parliament. This Court has upheld this principle in Siemens Financial Services Private Limited (Supra). Further, the Hon ble Allahabad High Court in Ashok Kumar Agarwal V/s. Union of India (2021) 131 taxmann.com 22 (Allahabad) held that TOLA is an enactment to extend timelines only and all references to issuance of notice contained in TOLA from 1st April 2021 must be read as reference to the substituted provisions only. Hence, TOLA and the subsequent notifications have no application to AY 2014-15 to extend the time limit to issue a notice under Section 148 of the Act as the first proviso to Section 149(1) of the Act puts a fetter on issuing a notice under Section 148 of the Act beyond the stipulated period. Hence, the impugned notice issued on 31st July 2022 is barred by limitation and TOLA has no role to play and it cannot salvage the impugned notice; (h) the Instruction No. 1 of 2022 issued by CBDT is misplaced and the entire foundation of permittin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was complied with and final notice under Section 148 of the Act was issued on 31st July 2022. The sanction was granted by authority under Section 151 (ii) of the Act being notice issued beyond 3 years; (d) since the issuance of notice under Section 148 of the Act was within the time limit provided in Notification referred above and as per direction of Hon'ble Supreme Court the notice issued under Section 148 and 148A(d) of the Act was deemed to be issued within the time granted by Hon'ble Supreme Court. The proviso (5) to Section 149 do provide for exclusion of certain periods. Thus period from 21st May 2021 read with Hon'ble Supreme Court s judgment required to be considered. Thus the notice is in time and not barred by limitation; (e) the first proviso to Section 149 of the Act reads as under : Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before I day of April, 2021 [if a notice u/s 148 or section 153A or section 153C could not have been issued at that time on account being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxxxxxxxxxxxxxxxxxxx 21. The Apex Court in Ashish Agarwal (Supra) did not disturb the findings of this Court in Tata Communications (Supra). The Apex Court only modified the orders passed by the respective High Courts to the effect that the notices issued under Section 148 of the Act, which were subject matter of writ petitions before various High Courts, shall be deemed to have been issued under Section 148A(b) of the Act and the Assessing Officer was directed to provide within 30 days to the respective assessee the information and material relied upon by the Revenue so that the assessee could reply to the show cause notices within two weeks thereafter. The Apex Court held that the Assessing Officer shall thereafter, pass orders in terms of Section 148A(d) in respect of each of the concerned assessees and having followed the procedure as required under Section 148A of the Act may issue notice under Section 148 of the Act. The Apex Court also kept open expressly all contentions which may be available to the assessee including those available under Section 149 of the Act and all rights and contentions, which may be available to the concerned assessee and Revenue under the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 29th July, 2022. Prior thereto, the Rajasthan High Court in Sudesh Taneja (Supra), which was followed by this Court in Tata Communications (Supra), in paragraph 37 held as under : xxxxxxxxxxxxxxxxxxxxxx In Sudesh Taneja (Supra), the Court held that for any action of issuance of notice under Section 148 after 1st April 2021 the newly introduced provisions under the Finance Act, 2021 would apply. Mere extension of time limits for issuing notice under Section 148 would not change this position that obtains in law. The Court held that a notice, which had become time barred prior to 1st April 2021 as per the then prevailing provisions, would not be revived by virtue of application of Section 149(1)(b) effective from 1st April 2021. We respectfully agree with this view. As noted earlier in Ashish Agarwal (Supra), the Hon ble Supreme Court categorically confirmed the view taken by various High Courts including the Hon ble Rajasthan High Court. Therefore, the impugned notices pertaining to AY 2013-14 pursuant to Ashish Agarwal (Supra) are barred by limitation. 24. We could also note that the provisions of TOLA have no application relating to AY 2013-14. Section 3(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , relates to issuance of notice under Section 148 as per time limit specified in Section 149 and the time limit for such action expires on 30th April 2021 due to its extension by the said Notifications , such time limit shall further stand extended to 30th June 2021. The Notification dated 27th April 2021 reads as under : xxxxxxxxxxxxxxxxxxxxxx Therefore, it only extends the time limit prescribed in Notification S.O. 1432(E) to 30th June 2021. When the Notification S.O. 1432(E) was not applicable to AY 2013-14, the question of time limit for AY 2013-14 being extended beyond 31st March 2021 does not arise. 27. Therefore, under the Income Tax Act, when the completion of any action relates to issuance of notice under Section 148 as per time limit specified in Section 149 was 31st March 2021, it shall stand extended to 30th April 2021. The time limit under Section 149 expired on 31st March 2021 only for AY 2014-15 (and not for AY 2013-14, which expired on 31st March 2020) and has got extended by virtue of clause (a) of sub-section (1) of Section 3 of TOLA. The Notification does not say issuance of notice under Section 148 as per time limit specified in Section 149 as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous in this regard, i.e., travel back to the original date. Paragraphs 28 to 31 of the said judgment read as under : xxxxxxxxxxxxxxxxxxxxxx 33. In Ganesh Dass Khanna (Supra), the Delhi High Court has already declared paragraph 6.1 and 6.2(ii) of the Instructions as bad in law. Further, this Court in Group M Media India P. Ltd. (Supra) has held that a declaration of a Board's instruction as ultra vires by a competent Court would be binding on all authorities administering the Act all over the country and accordingly, the officers implementing the Act were bound by the decision of the Delhi High Court. Paragraphs 44.4, 49, 51, 52 and 55 of Ganesh Dass Khanna (Supra) read as under : xxxxxxxxxxxxxxxxxxxxxx Paragraphs 6 and 8 of Group M Media India P. Ltd. (Supra) read as under : xxxxxxxxxxxxxxxxxxxxxx 34. It will be also useful to note that even in Hindustan Aeronautics Ltd. (Supra) the Apex Court has held that circulars/instructions are only binding on the Revenue and not on the assessees and certainly not on the Hon'ble Courts. 35. The Revenue s contention that the reopening notice was to relate back to an earlier date is entirely flawed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... armal Meghraj (HUF) the Hon ble Apex Court held : xxxxxxxxxxxxxxxxxxxxxx For AY 2013-14, the time limit to issue a notice under Section 148 of the Act had already expired on 1st April 2021. On the said date, the assessee had a vested right, which de hors the 1st proviso to the amended Section 149 of the Act, could not be taken away and thus, based on the well settled principles of law, the reopening of the AY 2013-14 after 31st March 2021 is invalid, without jurisdiction and barred by limitation. 37. We shall deal with Mr. Sharma s submissions as under : (a) As regards reliance on the provisions of the Limitation Act, 1963, the provisions of the Limitation Act, 1963 do not apply to the provisions of the Income Tax Act, 1961 and especially, not in the present case in view of the specific period provided for in the provisions of the Act as well as TOLA. In any case, this defence of respondents cannot be sustained as they have not taken any such contention in either the order passed under Section 148A(d) or in the affidavit in reply; (b) As regards applicability of Section 3 of TOLA - exclusion of Covid period, this argument is, in effect, nothing but the theo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess, is unacceptable. This argument clearly fails to appreciate that the effect of Revenue s contention is that despite the substantive defence available to the assessee in Section 149 of the amended Act, as well as the express directions of the Hon'ble Supreme Court allowing the assessee to take all defences available under the Act, the judgment of Ashish Agarwal (Supra) would permit them to reopen the assessment of AY 2013-14 would not only make the defence expressly available to the assessees useless and unusable, but would be contrary to well established principles of law. In Supreme Court Bar Association (Supra), the Hon'ble Supreme Court espoused that its powers conferred under Article 142 of the Constitution of India, being curative in nature and even with the width of its amplitude, cannot be construed as powers which authorise the Court to ignore the substantive rights of a litigant while dealing with a cause pending before it. Article 142 would not be used to supplant substantive law applicable to a case or cause and it will not be used to build a new edifice where none existed earlier by ignoring express statutory provisions dealing with a subject and thereby to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready expired on 31st March 2019 or earlier. The provisions of TOLA obviously could not save such a time limit and the Revenue could not have validly issued reopening notices for years prior to AY 2013-14 on or after 1st April 2019. Therefore, the defence so expressly allowed to be taken by the Hon'ble Supreme Court would otherwise be unnecessary; (f) The submission that the Apex Court, in exercise of power under Article 142 of the Constitution, has deemed the notices issued between 1st April 2021 to 30th June 2021 under Section 148A(b) of the Act issued within limitation and by following the manner of computation of limitation provided in TOLA, the days from 1st April 2021 to 30th June 2021 would stand excluded and, therefore, the notices could be deemed to be issued on 31st March 2021, we find it to be rather fallacious. The fallacy of this contention of Revenue is conspicuous inasmuch as if the notices issued under Section 148 between 1st April 2021 and 30th June 2021, which according to them, are deemed to be issued on 31st March 2021, then it is obvious that the provisions of the new reassessment law introduced by the Finance Act, 2021 cannot apply as they came into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued in July 2022 and, therefore, beyond the statutory time limit. In any case, as stated above, the Hon'ble Supreme Court, while invoking powers under Article 142, consciously and categorically granted liberty to assessees to raise all defences available to the assessee, including the defences under Section 149 of the Act. This specific and express directions cannot be set at naught. Accepting this contention of the Revenue would be a travesty of justice. 38. In the circumstances, in our view, the notice issued under Section 148 of the Act, impugned in this petition, for AY 2013-14 is issued beyond the period of limitation. 39. Having decided in favour of assessee/petitioner on this issue of limitation, we are not discussing the other grounds of challenge raised in the petition. Petitioner may raise all those contentions independently in any other proceeding. 40. Petition disposed accordingly. No order as to costs. 10. The Revenue s stand in the affidavit in reply relying on Instruction No. 1 of 2022 was that the impugned notice would travel back in time to the original date and for the first time now relies on the fifth proviso to Section 149 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been issued on the 31st day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of, - (a) a search under section 132 which is initiated: or (b) a search under section 132 for which the last of authorisations is executed; or (c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:] Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh a reply by 8th June 2022. Petitioner filed a detailed reply in response to the show cause notice on 8th June 2022 and, therefore, only the period from 24th May 2022 to 8th June 2022 could be excluded by virtue of the first limb of the fifth proviso to Section 149 of the Act. Subsequently, petitioner received another letter dated 28th June 2022 which annexed certain details and provided further time for making detailed submissions upto 8th July 2022. Petitioner replied to the letter and made detailed submissions on 2nd July 2022. Therefore, even assuming this period is to be excluded, the period which could be excluded is only from 24th May 2022 to 8th June 2022. Even after considering the letter dated 28th June 2022 and the reply dated 2nd July 2022, at the highest a further period from 28th June 2022 to 8th July 2022 could be excluded but the period of time from 8th June 2022 to 28th June 2022 cannot be excluded as per the fifth proviso. This is because petitioner on 8th June 2022 did not request for any further time and furnished its response to the show cause notice under Section 148A(b) of the Act. It is the Assessing Officer who has suo moto issued another letter on 28th Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, then the fifth proviso could not save such notices. The fifth proviso can only apply where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached. 16. The sixth proviso to Section 149 of the Act has no impact as it only provides a situation where after exclusion of the time period referred to in the fifth proviso, the time available with the Assessing Officer for passing an order under Section 148A(d) of the Act is less than 7 days, then the remaining time frame shall be extended to 7 days and limitation also stands extended by 7 days. 17. The notice under Section 148 of the Act issued on 31st July 2022, therefore, is barred by limitation. As per the fifth proviso to Section 149 of the Act only the period from 24th May 2022 to 8th June 2022 can be excluded since the notice under Section 148A(b) of the Act has been issued for the first time on 24th May 2022 providing time to petitioner till 8th June 2022 to furnish a reply. The Revenue is seeking to exclude a period from 21st May 2021 to 4th May 2022 relying on Ashish Agarwal (Supra) which, as explained earlier, cannot apply. Hence, the impugned notice dated 31st J ..... 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