Reassessment notice for AY 2013-14 quashed as time-barred under Section 149(1)(b) despite TOLA extension

The Bombay HC quashed a reassessment notice dated 28th July 2022 for AY 2013-14 as barred by limitation. The court held that under unamended Section 149(1)(b), the six-year time limit to issue notices under Section 148 expired on 31st March 2020, extended to 31st March 2021 under TOLA. The amended provision's first proviso prevents issuing notices if they were already time-barred under the pre-amended Act. Since the impugned notice was issued beyond the extended limitation period, it was invalid. The court rejected the Revenue's arguments regarding TOLA's applicability and the relate-back theory, ruling in favor of the assessee.

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Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Compliance with the statutory procedure under Sections 148, 148A, 149, and 151 of the Act.
3. Applicability of the Central Board of Direct Taxes (CBDT) Instruction No. 1 of 2022.
4. Limitation period for issuing the notice.
5. Compliance with the Supreme Court's directives in Union of India V/s. Ashish Agarwal.

Summary:

Issue 1: Validity of Notice under Section 148
The petitioner challenged the notice dated 28th July 2022 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for AY 2013-14. The petitioner argued that the notice was illegal, without jurisdiction, arbitrary, and in violation of the principles of natural justice. The court held that the validity of a notice issued under Section 148 must be judged based on the law existing on the date of issuance. The notice dated 28th July 2022 was found to be issued beyond the period of limitation.

Issue 2: Compliance with Statutory Procedure
The petitioner argued that the Assessing Officer did not follow the mandatory procedure stipulated under Sections 148, 148A, 149, and 151 of the Act before issuing the notice. The court noted that the Assessing Officer must follow the stipulated mandatory procedure before assuming jurisdiction and issuing any notice under Section 148.

Issue 3: Applicability of CBDT Instruction No. 1 of 2022
The petitioner contended that the CBDT Instruction No. 1 of 2022 was beyond jurisdiction, illegal, contrary to the directions of the Apex Court, and ultra vires. The court observed that instructions/circulars are binding on the Revenue but not on the assessees or the courts. The court also noted that the Delhi High Court had declared paragraphs 6.1 and 6.2(ii) of the Instructions as bad in law.

Issue 4: Limitation Period
The court focused on the preliminary issue of whether the notice was issued beyond the period of limitation. The court held that the limitation for AY 2013-14 expired on 31st March 2020, extended under Section 3(1) of TOLA to 31st March 2021. The impugned notice dated 28th July 2022 was thus barred by limitation. The court referred to similar judgments by the Calcutta High Court and Rajasthan High Court, confirming that notices issued after 1st April 2021 must comply with the amended provisions of the Act.

Issue 5: Compliance with Supreme Court's Directives
The court noted that the Supreme Court, in Union of India V/s. Ashish Agarwal, had modified the orders passed by various High Courts to the effect that the notices issued under Section 148 of the Act shall be deemed to have been issued under Section 148A(b) of the Act. The court held that the validity of the reopening notice must be decided based on the law existing at the time of issuance, i.e., 28th July 2022.

Conclusion:
The court quashed and set aside the impugned notice dated 28th July 2022, holding it to be barred by limitation. The petition was disposed of accordingly, with no order as to costs. The court did not delve into other grounds of challenge, allowing the petitioner to raise those contentions independently in any other proceeding.

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