2022 (11) TMI 252 - HC - Income Tax

Court quashes Income Tax Dept's notices for AY 2013-14 due to non-compliance with legal requirements

Stalco Consultancy & Systems Private Limited Versus Principal Commissioner of Income Tax, Bhubaneswar-1 and another

The High Court addressed a challenge in a writ petition regarding notices issued by the Income Tax Department to reopen the assessment for AY 2013-14. The ... Reopening of assessment u/s 147 - Time Limit for notice - HELD THAT:- As regards the first notice dated 31st March, 2021, it is seen from the text of the notice itself that it has been issued more than six years after the closure of the relevant AY on 1st April, 2020 and therefore exceeds the time limits set u/s 149 of the Act. That period has not got extended by the 2020 Act. This was explained by the Supreme Court of India while interpreting the amended provisions in Union of India v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] The Supreme Court made a distinction between notices issued on or after 1st April, 2021 and those issued prior thereto. It permitted the proceedings pursuant to notices issued on or after 1st April, 2021 to continue in terms of the amended provisions even while clarifying that the notices issued prior thereto, would have to abide by the provisions as they exist prior to the amendment. This Court in M/s. Ambika Iron and Steel Pvt. Ltd. case [2022 (1) TMI 1291 - ORISSA HIGH COURT] quashed notices issued prior to 1st April, 2021 which was beyond the period of six years after the expiry of the AY in question. Thereafter, in an order in Nutan Bhusan Jena [2022 (5) TMI 1467 - ORISSA HIGH COURT] this Court relied on the Supreme Court judgment in Union of India v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] and quashed notices u/s 148 of the Act which were issued prior to 1st April, 2021 but beyond the period of six years after the expiry of the relevant AY. Following the above orders, as far as the present case is concerned, inasmuch as the impugned notice dated 31st March, 2021 seeking to reopen the assessment for the AY 2013-14 was issued more than six years after the end of the relevant AY, it is hereby quashed. Issues:1. Challenge to notices seeking to reopen assessment for AY 2013-14.2. Validity of notices dated 31st March, 1st April, and 5th April, 2021.3. Compliance with time limits under Section 149 of the Income Tax Act.4. Extension of time limits by the 2020 Act and CBDT notifications.5. Compliance with mandatory requirements under Section 148-A of the Act.6. Quashing of subsequent notices for non-compliance.7. Interpretation of amended provisions by the Supreme Court.8. Quashing of notice dated 31st March, 2021 for exceeding time limits.9. Legal implications of previous court orders on similar cases.10. Permission for the Department to initiate fresh proceedings.Analysis:The High Court addressed the challenge in the writ petition concerning the notices issued by the Income Tax Department to reopen the assessment for the Assessment Year (AY) 2013-14. Notably, the three impugned notices were issued for the same AY, with the latter two being released without withdrawing the initial notice. The Court highlighted the amendments to Sections 147 to 151 of the Income Tax Act by the Finance Act, 2021, effective from 1st April, 2021, impacting the time limits for issuing such notices. The outer time limit of six years had lapsed before the first notice was issued on 31st March, 2021, raising concerns of legality.To address the issue of time limits, the Income Tax Department relied on the provisions of the Taxation and Other Laws Act, 2020, and a subsequent CBDT notification extending the time limit for issuing notices under Section 148 of the Act. However, the Court found that the subsequent notices dated 1st April and 5th April, 2021, failed to comply with the mandatory requirements under Section 148-A of the Act, leading to their quashing. The Court also noted that the first notice dated 31st March, 2021, exceeded the time limits set under Section 149, as explained in a Supreme Court judgment.Referring to previous court orders in similar cases, the High Court emphasized the distinction made by the Supreme Court between notices issued before and after 1st April, 2021, regarding the amended provisions. Following the precedents set by previous court orders, the High Court quashed the notice dated 31st March, 2021, for being issued beyond the prescribed time limits. The Court allowed the Department to initiate fresh proceedings under Section 147 of the Act, provided they comply with the legal requirements as per the amended Sections 147 to 151 under the Finance Act, 2021. The writ petition was disposed of with no order as to costs, concluding the judgment.