Reassessment notice under Section 148 quashed as time-barred beyond six-year limitation period

Gujarat HC quashed reassessment notice under Section 148 for Assessment Year 2013-14 as time-barred. Court held that notices issued between 01.04.2021 to 30.06.2021 under old regime exceeded prescribed six-year limitation period from end of relevant assessment year. Following precedents in Keenara Industries and Rajeev Bansal, HC ruled such notices cannot be issued under amended provisions either. Revenue could not dispute established legal position. Notice and consequential actions under Section 148A(d) were quashed for being beyond permissible time limit and without jurisdiction.

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Issues Involved:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment for the Assessment Year 2013-14.
2. Applicability of the time limit for issuing such notices under the old and new regimes of the Income Tax Act.
3. Impact of the Supreme Court decision in Ashish Agarwal on the validity of notices issued between 01.04.2021 and 30.06.2021.
4. Relevance of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 on the extension of time limits for issuing reassessment notices.

Issue-wise Detailed Analysis:

1. Legality of the Notice under Section 148:

The petitioner challenged the notice dated 31.07.2022 issued by the respondent-assessing officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2013-14. The petitioner contended that the notice and the consequential order under Section 148A(d) were barred by limitation as they were issued more than six years after the end of the relevant assessment year, thus rendering them without jurisdiction.

2. Applicability of Time Limits:

The court examined the provisions of Section 149 of the Income Tax Act as they existed prior to the Finance Act, 2021 (old regime) and after the amendments introduced by the Finance Act, 2021 (new regime). Under the old regime, notices under Section 148 could be issued within four to six years from the end of the relevant assessment year if the income chargeable to tax that escaped assessment amounted to one lakh rupees or more. The new regime, effective from 01.04.2021, reduced this period to three years, extendable to ten years under specific conditions. The court noted that the First Proviso to Section 149, as introduced by the Finance Act, 2021, stipulated that no notice could be issued for assessment years beginning on or before 01.04.2021 if it was already time-barred under the old regime.

3. Impact of the Supreme Court Decision in Ashish Agarwal:

The Supreme Court in Union of India vs. Ashish Agarwal held that notices issued between 01.04.2021 and 30.06.2021 under the old regime should be treated as show-cause notices under the new Section 148A of the Act. However, the court emphasized that all defenses available under Section 149 and the Finance Act, 2021, remained open to the assessee. The Gujarat High Court, in Keenara Industries Pvt. Ltd., clarified that notices time-barred under the old regime could not be revived under the new regime, even with the Supreme Court's directions in Ashish Agarwal.

4. Relevance of the Taxation and Other Laws Act, 2020:

The court addressed the impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, which extended the time limits for issuing reassessment notices due to the COVID-19 pandemic. However, it was held that this secondary legislation could not override the principal legislation, and the extended time limits could not apply to notices that were already time-barred under the old regime. The court reiterated that the Finance Act, 2021 did not save the old regime's provisions, and thus, notices that had become time-barred could not be issued post-01.04.2021.

Conclusion:

Based on the above analysis, the court concluded that the notice dated 31.07.2022 issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2013-14, 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. All other questions on facts and law were kept open for future consideration.

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