Limitation for reassessment notice turns on issuance, not service, and the connected penalty cancellation failed.

Section 149 of the Income-tax Act, 1961 is satisfied by issuance of a reassessment notice within the prescribed period; actual service within that period is not required. The Court treated the use of "issued" as deliberate, distinguished older authorities under different wording, and held that reading a service requirement into the provision would defeat the limitation scheme in sections 148, 149 and 151. As the notice was validly issued in time, the reassessment was not barred by limitation, and the connected cancellation of penalty under section 271(1)(a) was also held unsustainable.

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Issues: (i) Whether, under section 149 of the Income-tax Act, 1961, limitation is satisfied by issuance of the notice under section 148 within time or whether the notice must also be actually served within time; (ii) whether the penalty under section 271(1)(a) could be cancelled when the reassessment was upheld.

Issue (i): Whether, under section 149 of the Income-tax Act, 1961, limitation is satisfied by issuance of the notice under section 148 within time or whether the notice must also be actually served within time.

Analysis: The provision in section 149 deliberately uses the word "issued" and omits the earlier phraseology of the 1922 Act that referred to service of notice. The legislative change was treated as meaningful and intended to create a definite limitation tied to the date of issuance, not the uncertain date of service. The Court distinguished earlier authorities that interpreted "issued" more broadly in a different statutory setting and held that those decisions did not control the construction of section 149. It further held that reading service into section 149 would frustrate the object of the limitation scheme and create uncertainty inconsistent with the structure of sections 148, 149 and 151.

Conclusion: The notice need only be issued within the limitation period; actual service within that period is not required. This was held in favour of the Revenue and against the assessee.

Issue (ii): Whether the penalty under section 271(1)(a) could be cancelled when the reassessment was upheld.

Analysis: The penalty issue depended on the validity of the reassessment proceedings. Once the notice under section 148 was held to have been validly issued within time under section 149, the foundation for annulling the reassessment and the connected penalty no longer survived.

Conclusion: The cancellation of penalty was not justified. This was held in favour of the Revenue and against the assessee.

Final Conclusion: The reference was answered by holding that reassessment was not barred by limitation merely because service of the notice occurred after the limitation date, and the connected penalty cancellation was also unsustainable.

Ratio Decidendi: For reassessment under the Income-tax Act, 1961, the statutory time limit under section 149 is satisfied by issuing the notice within the prescribed period, and actual service on the assessee within that period is not a condition of validity.

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