2023 (4) TMI 1001 - HC - Income Tax

Court declares notices under Section 148 of Income Tax Act for 2013-14 and 2014-15 illegal and without jurisdiction.

MEHUL KANTILAL PATEL Versus INCOME TAX OFFICER, WARD 2 (3) (1), SURAT

The court held that the notices issued under Section 148 of the Income Tax Act for the assessment years 2013-14 and 2014-15, as well as the orders passed ... Reopening of assessment u/s 147 - time limit for issuance of notice for reopening of the assessment - 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. Challenge to notices issued under Section 148 of the Income Tax Act, 1961.2. Validity of orders passed under Section 148A(d) of the Income Tax Act, 1961.3. Limitation period for issuing notices under the old and new regimes of the Income Tax Act, 1961.Summary:Issue 1: Challenge to Notices Issued Under Section 148 of the Income Tax Act, 1961All these Special Civil Applications seek to challenge the notices issued for reopening the assessment for the assessment years concerned under Section 148 and the orders passed under Section 148A(d) of the Income Tax Act, 1961.The respective petitioners have called in question the notice issued by the respondent assessing officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment in respect of assessment year 2013-14 or assessment year 2014-15, as the case may be. Also challenged are the orders passed under Section 148A(d) of the Income Tax Act, 1961.Issue 2: Validity of Orders Passed Under Section 148A(d) of the Income Tax Act, 1961While in the respective impugned orders under section 148A(d) of the Act mentioned are the factual details and the reasons on the basis of which the assessing officer has found that the cases are fit to be reopened for the assessment in respect of the year under consideration, it is inter alia stated that the notice under section 148 of the Act was originally issued for the assessment years 2013-14 or 2014-15, as the case may be. All the said notices were treated as show-cause notices under section 148A(b) of the Act in light of the decision of the Supreme Court in Union of India vs. Ashish Agarwal.Issue 3: Limitation Period for Issuing Notices Under the Old and New Regimes of the Income Tax Act, 1961Learned advocate for the petitioner submitted that the notice issued under section 148 of the Act and the consequential order under section 148A(d) of the Act issued by the department for assessment years 2013-14 and 2014-15 are barred on the ground of limitation, the notices having been issued after the passage of six years from the end of the relevant assessment year.In view of the decision of the Division Bench of this Court in Keenara Industries Pvt Ltd. vs. The Income Tax Officer, the question of legality of the notice issued in respect of Assessment Year 2013-14 and Assessment Year 2014-15 is covered and the impugned notice is without jurisdiction as it is beyond the time limit prescribed.The Supreme Court in Ashish Agarwal held that all notices issued under Section 148 of the Act between 01.04.2021 to 30.06.2021 shall be deemed to have been issued under section 148A of the Act to be treated as show-cause notices under section 148A(b) of the Act. The Supreme Court observed that new provisions substituted by the Finance Act, 2021 were remedial and benevolent in nature.As per the provisions of Section 149 of the Act in the old regime, a notice under Section 148 could have been issued to the assessee if four years had elapsed from the end of the Assessment Year, but not six years. After six years from the end of the Assessment Year, notice under section 148 was barred.In Keenara Industries Pvt. Ltd., 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 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.Conclusion:In view of the 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.All other questions on facts involved in the reasons weighed with Assessing Officer seeking to reopen the assessment are kept open in all cases.All the petitions stand allowed. Rule is made absolute in each petition.