2021 (5) TMI 46 - HC - Income Tax

Court upholds validity of Income Tax Act Section 148 notices for assessment reopening.

Sadhna Tolasariya, Rajesh Gupta, Laxmi Kanta Tolasariya, Smt. Parveen Amin Bhathara Versus The Income Tax Officer, The Assistant Commissioner of Income Tax, The Income Tax Officer, The Income Tax Officer, Non Corporate Ward 12 (3), Chennai

The court dismissed the writ petitions challenging the validity of notices issued under Section 148 of the Income Tax Act, 1961, for reopening ... Reopening of assessment u/s 147 - notice under Section 148 not been served on the petitioners before the last date as per the provisions of the Act - HELD THAT:- 'Issue of Notice' by the Competent Authority is contemplated under Section 149 of the Income Tax Act. However, 'Service of Notice' to the assessee has not been contemplated under the said provision. Thus, the 'time limit' prescribed for 'issue of notice' under Section 148 of the Income Tax Act, would not fall under the definition of 'service' under Section 27 of the General Clauses Act, 1897. Thus, Section 27 of the General Clauses Act, 1897 may not have relevance with reference to Sections 147, 148 and 149 of the Income Tax Act, 1961. 'Issue of Notice' and 'Service of Notice' to the assessee cannot be compared at all. What is contemplated under Section 149 of the Income Tax Act is 'issue of notice' and not 'service of notice' to the assessee. The service part is to be complied with subsequently enabling the assessee to defend his case. Undoubtedly, the assessee can defend his case only after service. However, for reckoning the period of limitation 'issue of notice' is sufficient. As following the principles laid down in GKN Driveshafts (India) Ltd [2002 (11) TMI 7 - SUPREME COURT] the respondents are bound to provide opportunities and assign reasons by following the procedures contemplated as well as the principles settled. With reference to the point of limitation, it is to be construed that the impugned notices under Section 148 of the Act, were signed by the Competent Authorities on 31.03.2018 and as per the typed set of papers filed by the respondents, the notices were dispatched on the same date i.e., on 31.03.2018, which would be sufficient to satisfy the requirements under Section 149 of the Act and thus, the petitioners are at liberty to defend the case as contemplated under the provisions of the Act. Issues Involved:1. Validity of notices issued under Section 148 of the Income Tax Act, 1961 for reopening of assessment.2. Limitation period for issuing notices under Section 148.3. Service of notice and its compliance with Section 27 of the General Clauses Act, 1897.4. Discrepancies in dispatch and franking of notices.Detailed Analysis:1. Validity of Notices Issued Under Section 148 of the Income Tax Act, 1961:The writ petitions (WP Nos. 13425, 13431, and 13432 of 2018) challenge the notices issued under Section 148 of the Income Tax Act for reopening assessments. The petitioners argue that the notices were not served within the prescribed time frame, rendering them invalid. The court examined the procedural compliance of the issuance and dispatch of these notices.2. Limitation Period for Issuing Notices Under Section 148:The primary contention revolves around whether the notices were issued within the limitation period as prescribed under Section 149 of the Income Tax Act. Section 149 stipulates that notices must be issued within four years, or in certain cases, within six years from the end of the relevant assessment year. The court clarified that the term 'issuance of notice' means the signing of the notice by the competent authority within the stipulated time frame. The court found that the notices were signed and dispatched on the last permissible date, i.e., 31.03.2018, thereby satisfying the requirements under Section 149.3. Service of Notice and Compliance with Section 27 of the General Clauses Act, 1897:The petitioners argued that the notices were not served as per the provisions of Section 27 of the General Clauses Act, which defines 'service by post.' The court held that Section 27 pertains to the service of documents and not the issuance of notices. The Income Tax Act distinguishes between the 'issue of notice' and 'service of notice.' The court emphasized that for the purpose of limitation under Section 149, it is sufficient if the notice is issued (signed and dispatched) within the prescribed period. The subsequent service of the notice is a separate procedural requirement.4. Discrepancies in Dispatch and Franking of Notices:The petitioners pointed out discrepancies in the dispatch register and franking details, claiming that the notices were booked at the post office after the last date. The court examined the dispatch records provided by the respondents, which indicated that the notices were indeed dispatched on 31.03.2018. The court concluded that any delay caused by the postal department or other external factors does not affect the validity of the issuance of the notice, as long as the notice was signed and dispatched within the limitation period.Conclusion:The court dismissed the writ petitions (WP Nos. 13425, 13431, 13432, and 11399 of 2018), holding that the notices issued under Section 148 were valid as they were signed and dispatched within the prescribed limitation period. The court reiterated that the issuance of notice is the determining factor for compliance with Section 149, and any delays in service do not invalidate the notice. The petitioners were advised to defend their cases as per the procedures laid down in the Income Tax Act. There were no orders as to costs, and the connected miscellaneous petitions were also dismissed.