Notice under Income Tax Act to Reopen 2014-15 Assessment Ruled Illegal & Time-barred

The court held that the notice issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2014-15 was illegal and beyond the permissible time limit. Consequently, the notice, order under Section 148A(d), and all consequential actions were quashed and set aside. The petition was allowed, and the rule was made absolute.

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Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Application of limitation period for reopening assessments under the old and new regimes of the Income Tax Act, 1961.
3. Validity of the notice issued beyond the prescribed time limit as per the old regime.
4. Impact of the Finance Act, 2021, and relevant Supreme Court judgments on the reopening of assessments.

Summary:

Issue 1: Legality of Notice Issued under Section 148 of the Income Tax Act, 1961
The petitioner challenged the notice dated 19.07.2022 issued by the respondent-assessing officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2014-15. The petitioner also challenged the order dated 19.07.2022 passed under Section 148A(d) of the Act.

Issue 2: Application of Limitation Period for Reopening Assessments
The petitioner argued that the notice issued under Section 148 and the consequential order under Section 148A(d) were barred by limitation, as they were issued after six years from the end of the relevant assessment year. The court referred to the decision in Keenara Industries Pvt. Ltd. vs. The Income Tax Officer, which held that the notice for reopening assessments could only be issued if the limitation period under the old regime had not expired before the Finance Act, 2021, came into force.

Issue 3: Validity of Notice Issued Beyond the Prescribed Time Limit
The court noted that under the old regime, Section 149 allowed notice under Section 148 to be issued within four/six years from the end of the relevant assessment year. The Finance Act, 2021, introduced new provisions, including Section 148A and a recast Section 149, effective from 01.04.2021. However, the first proviso to Section 149 of the new regime stipulated that no notice under Section 148 could be issued if it was already time-barred under the old regime before 01.04.2021.

Issue 4: Impact of Finance Act, 2021, and Supreme Court Judgments
The court referred to the Supreme Court's decision in Union of India vs. Ashish Agarwal, which directed that notices issued under the old regime between 01.04.2021 and 30.06.2021 should be treated as show-cause notices under Section 148A(b) of the new regime. However, the court emphasized that the limitation period under the old regime would still apply, and notices that were time-barred under the old regime could not be revived under the new regime.

Conclusion:
The court concluded that the notice dated 19.07.2022 for reopening the assessment for the assessment year 2014-15 was beyond the permissible time limit and, therefore, illegal and without jurisdiction. Consequently, the notice, the order under Section 148A(d), and all consequential actions were quashed and set aside. The petition was allowed, and the rule was made absolute.

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