2023 (3) TMI 1244 - HC - Income Tax

Court rules notices for tax assessments beyond time limit, deems orders invalid. Petitions allowed solely on limitation ground.

The Court held that the notices issued for reopening assessments for the years 2013-14 and 2014-15 under Section 148 of the Income Tax Act, 1961 were ... Reopening of assessment u/s 147 - Validity of order u/s 148A - scope of new enactment of Section 148A - Period of limitation to issue notice issued u/s 148A(b) - notices issued u/s 148 referable to the old regime - HELD THAT:- As already noted, the department took shelter of the time limit extended by Notifications of the Central Board of Direct Taxes to treat the above class of notices to be within time. In Keenara Industries Pvt. Ltd. [2023 (3) TMI 104 - GUJARAT HIGH COURT] this Court proceeded to hold that enacting the provisions in Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, was not the permissible device whereby the time limit could be legitimately extended for the purpose of issuing Notices under Section 148, which were otherwise barred in terms of Section 149, as it exists in the old regime. The Taxation and Other Laws Act, 2020 was rightly viewed to be a secondary legislation. It was therefore held that secondary legislation would not override the principal legislation-the Finance Act, 2021. Also negatived by the Division Bench in Keenara Industries Pvt. Ltd. (supra) as per observations in paragraph 36 of the judgment, the concept of freezing the time limit. It was held that it was not permissible in law for the Revenue to travel back in time. Nor does the Taxation and Other Laws Act endorse to such concept. It was held as per paragraphs 38 and 39 of the Keenara Industries Pvt. Ltd. (supra) that Notifications extending the due dates under the old provisions could not breath any more after the repeal of the old provisions. The point is no more res integra that all original notices under section 148 of the Act referable to the old regime and issued between 01.04.2021 to 30.06.2021 would stand beyond the prescribed permissible timeline of six years from the end of Assessment Year 2013-14 and Assessment Year 2014-15. Therefore, all such notices when they would relate to Assessment Year 2013-14 or Assessment Year 2014-15 would be time barred as per the provisions of the Act as applicable in the old regime prior to 01.04.2021. Furthermore, these notices cannot be issued as per the amended provision of the Act. Revenue was entirely at his receiving end, unable to dispute the position of law holding the field as above. All the impugned notices in the respective petitions under section 148 of the Act relatable to Assessment year 2013-14 or the assessment year 2014-15, as the case may be, are beyond the permissible time limit, therefore, liable to be treated illegal and without jurisdiction. Since the petitions deserve to be allowed on the aforesaid crisp legal ground alone, learned advocates for the parties submitted to agree that facts and other legal issues may not be gone into by the Court. Accordingly, they are neither delineated, nor are gone into in respect of the above petitions. All other questions on facts involved in the reasons weighed with Assessing Officer seeking to reopen the assessment are kept open in all cases. Issues Involved:1. Legality of notices issued under Section 148 of the Income Tax Act, 1961 for reopening assessments.2. Validity of orders passed under Section 148A(d) of the Income Tax Act, 1961.3. Application of limitation periods for issuing such notices.Summary:Issue 1: Legality of Notices Issued Under Section 148All these Special Civil Applications challenge the notices issued for reopening assessments for the assessment years 2013-14 and 2014-15 under Section 148 of the Income Tax Act, 1961. The petitions involve similar facts and identical issues, therefore, they were heard together for disposal by this common judgment and order.In Keenara Industries Pvt. Ltd. vs. The Income Tax Officer, the Division Bench of this Court decided that the notices issued for the assessment years 2013-14 and 2014-15 are barred by limitation as they were issued after six years from the end of the relevant assessment year. This judgment was based on the provisions of Section 149 of the Act as they stood before the Finance Act, 2021.The Supreme Court in Union of India vs. Ashish Agarwal held that notices issued under Section 148 between 01.04.2021 and 30.06.2021 should be deemed to have been issued under Section 148A of the Act and treated as show-cause notices under Section 148A(b). However, the limitation period prescribed in the old regime continues to apply.Issue 2: Validity of Orders Passed Under Section 148A(d)The orders under Section 148A(d) were passed based on the notices issued under Section 148, which were treated as show-cause notices under Section 148A(b) following the Supreme Court's decision in Ashish Agarwal. However, these orders are invalid as the original notices were issued beyond the permissible time limit.Issue 3: Application of Limitation PeriodsPrior to the Finance Act, 2021, Section 149 allowed notices under Section 148 to be issued within four/six years from the end of the relevant assessment year. The Finance Act, 2021, introduced a new regime with Section 148A and amended Section 149, which reduced the time limit to three years, extendable to ten years under certain conditions.The First Proviso to Section 149 of the Finance Act, 2021, stipulates that no notice under Section 148 shall be issued for the relevant assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time due to being beyond the time limit specified under the old regime.In Keenara Industries Pvt. Ltd., it was held that notices issued after six years from the end of the relevant assessment year are barred and without jurisdiction. This position was affirmed by the Allahabad High Court in Rajeev Bansal vs. Union of India.Therefore, all the impugned notices for the assessment years 2013-14 and 2014-15 are beyond the permissible time limit and are illegal and without jurisdiction.Conclusion:All the impugned notices and orders under Section 148 and Section 148A(d) for the assessment years 2013-14 and 2014-15 are set aside as they are barred by limitation. The petitions are allowed on this ground alone, and other factual and legal issues are not addressed.The following orders are passed:(i) Notice dated 30.07.2022 under Section 148 and Order dated 30.07.2022 under Section 148A(d) for the Assessment Year 2013-14 in Special Civil Application No.4860 of 2023 are set aside.(ii) Notice dated 30.07.2022 under Section 148 and Order dated 30.07.2022 under Section 148A(d) for the Assessment Year 2013-14 in Special Civil Application No.4861 of 2023 are set aside.(iii) Notice dated 30.07.2022 under Section 148 and Order dated 30.07.2022 under Section 148A(d) for the Assessment Year 2013-14 in Special Civil Application No.4862 of 2023 are set aside.(iv) Notice dated 30.07.2022 under Section 148 and Order dated 30.07.2022 under Section 148A(d) for the Assessment Year 2013-14 in Special Civil Application No.4863 of 2023 are set aside.(v) Notice dated 30.07.2022 under Section 148 and Order dated 30.07.2022 under Section 148A(d) for the Assessment Year 2013-14 in Special Civil Application No.4865 of 2023 are set aside.(vi) Notice dated 30.07.2022 under Section 148 and Order dated 30.07.2022 under Section 148A(d) for the Assessment Year 2013-14 in Special Civil Application No.4886 of 2023 are set aside.(vii) Notice dated 29.07.2022 under Section 148 and Order dated 29.07.2022 under Section 148A(d) for the Assessment Year 2014-15 in Special Civil Application No.4677 of 2023 are set aside.All the petitions stand allowed. Rule is made absolute in each case.