2022 (3) TMI 1428 - HC - Income Tax

Court halts proceedings on Income Tax Act Section 148 notices over E-notice validity issues

The Court stayed proceedings on reassessment notices issued under Section 148 of the Income Tax Act due to complexities in the validity of E-notices. ... Reopening of assessment u/s 147 - validity of E-notices issued u/s 148 - HELD THAT:- Allahabad High Court in Daujee Abhushan Bhandar Pvt. Ltd. vs. Union of India [2022 (3) TMI 784 - ALLAHABAD HIGH COURT] held Section 13(1) of the Act, 2000 provides that unless otherwise agreed, the dispatch of an electronic record occurs when it enters into computer resources outside the control of the originator. Thus, the point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator i.e. the assessing authority that shall the date and time of issuance of notice under section 148 read with Section 149 of the Act, 1961. We hold that mere digitally signing the notice is not the issuance of notice. Since the impugned notice under Section 148 of the Act, 1961 was issued to the petitioner on 06.04.2021 though e-mail, therefore, we hold that the impugned notice under section 148 of the Act, 1961 is time barred. Consequently, the impugned notice is quashed. Keeping in view the aforesaid judgment, this Court is of the view that the present batch of matters requires detailed examination. This Court is of the view that it would not be possible to pass a judgment prior thereto. Accordingly, proceedings pursuant to the impugned reassessment notices are stayed till further orders. Issues Involved:1. Validity of E-notices issued under Section 148 of the Income Tax Act, 1961.2. Classification of writ petitions into categories based on the timing and method of notice issuance and receipt.3. Reference to the Allahabad High Court judgment in Daujee Abhushan Bhandar Pvt. Ltd. vs. Union of India regarding the issuance of digitally signed notices.Issue-wise Detailed Analysis:1. Validity of E-notices Issued under Section 148 of the Income Tax Act, 1961:The core issue addressed in the judgment is the validity of E-notices issued under Section 148 of the Income Tax Act, 1961. The petitioners challenged the validity of these notices based on their issuance and receipt dates, as well as the method of dispatch. The Court examined whether the notices were issued within the statutory time frame and whether the method of issuance complied with legal requirements.2. Classification of Writ Petitions into Categories:The petitioners categorized the writ petitions into five distinct groups based on the specifics of the notice issuance:- Category A: Notices dated 31st March 2021 or before, digitally signed on or after 1st April 2021, and received on or after 1st April 2021.- Category B: Notices dated 31st March 2021 or before, not digitally signed, but sent and received on or after 1st April 2021.- Category C: Notices dated 31st March 2021 or before, digitally signed on or before 31st March 2021, but received on or after 1st April 2021.- Category D: Notices dated 31st March 2021 or before, digitally signed on or before 31st March 2021, with no service by email or post, and the assessee became aware later through the portal or subsequent notice under Section 142(1).- Category E: Notices dated 31st March 2021 or before, manually signed, not served by email but dispatched through speed post on or after 1st April 2021.3. Reference to the Allahabad High Court Judgment:The judgment referenced the Allahabad High Court's decision in Daujee Abhushan Bhandar Pvt. Ltd. vs. Union of India, which held that the issuance of a digitally signed notice is not complete merely by signing; it must be dispatched and enter computer resources outside the control of the originator. The Court observed:- 'Section 13(1) of the Act, 2000 provides that unless otherwise agreed, the dispatch of an electronic record occurs when it enters into computer resources outside the control of the originator.'- 'Mere digitally signing the notice is not the issuance of notice. Since the impugned notice under Section 148 of the Act, 1961 was issued to the petitioner on 06.04.2021 through e-mail, therefore, we hold that the impugned notice under section 148 of the Act, 1961 is time-barred.'Court's View and Order:The Court acknowledged the need for a detailed examination of the issues raised, especially in light of the Allahabad High Court's interpretation. Given the impending deadline for passing assessment orders (31st March 2022), the Court decided it would not be feasible to deliver a judgment before this date. Consequently, the Court ordered a stay on proceedings pursuant to the impugned reassessment notices until further orders and scheduled the next hearing for 11th April 2022.Conclusion:The judgment highlights the complexities involved in the issuance and validity of E-notices under Section 148 of the Income Tax Act, emphasizing the importance of compliance with statutory requirements and the timing of notice dispatch and receipt. The Court's decision to stay proceedings reflects the need for thorough judicial scrutiny of these matters.