Court upholds Income Tax reassessment notice, dismissing writ petition.

The Court dismissed the writ petition challenging an order under Section 148A(d) of the Income Tax Act, 1961 and a notice issued under Section 148 for Assessment Year 2013-14. The Court held that the notice was not time-barred as the reassessment notice was issued within the extended time limit provided by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, and the income escaping assessment exceeded Rs.50 lakhs, making the first proviso of Section 149 inapplicable. The Court directed the Assessing Officer to decide the matter on its merits, except for the limitation issue.

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Issues:
Challenging order under Section 148A(d) of the Income Tax Act, 1961 and notice issued under Section 148 for Assessment Year 2013-14, Constitutional vires of CBDT Instruction No.1/2022, Barred by limitation under Section 149(1)(a) & (b) of the Act, Time limit for reassessment under old Section 149(1)(b), Stay of Section 148 notices by High Courts, Validity of notice under unamended provisions, Impact of Supreme Court judgment in Union of India vs. Ashish Agarwal, Interpretation of time limit under TOLA, Revival of notice issued between 1st April 2021 to 30th June 2021.

Analysis:

The petitioner challenged the order passed under Section 148A(d) of the Income Tax Act, 1961, and the notice issued under Section 148 for the Assessment Year 2013-14, primarily contesting the constitutional validity of CBDT Instruction No.1/2022 dated 11th May, 2022. The petitioner argued that the impugned notice issued under Section 148 of the Act was time-barred as per the provisions of Section 149(1)(a) & (b) of the Act, emphasizing that cases for Assessment Year 2013-14 and prior were already time-barred under old Section 149(1)(b) by 31st March, 2020.

The respondent-revenue contended that the Supreme Court judgment in Union of India vs. Ashish Agarwal, 2022 SCC OnLine SC 543, in conjunction with the time extension provided by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, allowed extended reassessment notices to retroactively apply new Section 149 of the Act. The respondent argued that the reassessment proceedings were initiated within the extended time limit provided by TOLA, thus not being time-barred.

The Court noted that the time limit for issuing notices under unamended Section 149 had been extended by TOLA until 30th June, 2021, and clarified that the power of reassessment existing prior to 31st March, 2021 continued to exist until the extended period. The Supreme Court further held that Section 148 notices issued between 1st April 2021 to 30th June 2021 would be deemed to have been issued under Section 148A of the Act, reviving notices issued during that period.

Consequently, the Court found that since the time period for issuing reassessment notices for the assessment year 2013-14 was extended until 30th June, 2021, and the alleged income escaping assessment exceeded Rs.50 lakhs, the first proviso of Section 149 (as amended by the Finance Act, 2021) did not apply in this case. Therefore, even without the benefit of Instruction No.01/2022, the impugned notice was within the limitation period.

In conclusion, the Court dismissed the writ petition, clarifying that the Assessing Officer should decide the matter on its merits without being influenced by any observation made in the order, except regarding the issue of limitation.

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