2023 (3) TMI 1550 - HC - Income Tax

Reassessment notices under Section 148 for AY 2013-14 and 2014-15 declared time-barred and illegal

BHAGCHAND JAIN HUF Versus INCOME TAX OFFICER

BHAGCHAND JAIN HUF Versus INCOME TAX OFFICER - 2023:GUJHC:17041 - DB Issues Involved:1. Legality of notices issued under Section 148 of the Income Tax Act, 1961 for reopening assessments for the years 2013-14 and 2014-15.2. Application of limitation periods under the old and new regimes of the Income Tax Act.3. Impact of the Supreme Court's decision in Ashish Agarwal on the issuance of notices.4. Validity of extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.Detailed Analysis:1. Legality of Notices Issued Under Section 148:The petitioners challenged the notices issued under Section 148 of the Income Tax Act, 1961, which sought to reopen assessments for the years 2013-14 and 2014-15. The core argument was that these notices were issued beyond the permissible time limit, making them illegal and without jurisdiction. The court noted that the notices were treated as show-cause notices under Section 148A(b) following the Supreme Court's decision in Ashish Agarwal. However, the court emphasized that these notices were issued after the statutory period of six years from the end of the relevant assessment year, rendering them time-barred under the old regime.2. Application of Limitation Periods:Under the old regime, as per Section 149 of the Act, a notice under Section 148 could be issued within four to six years from the end of the relevant assessment year if the income that escaped assessment was likely to exceed one lakh rupees. The Finance Act, 2021, introduced a new regime effective from 01.04.2021, which reduced the time limit to three years, extendable to ten years if the escaped income exceeded fifty lakh rupees. However, the court clarified that the new provisions could not revive notices that had become time-barred under the old regime. Therefore, the notices issued for the assessment years 2013-14 and 2014-15 were beyond the six-year limit and thus invalid.3. Impact of Supreme Court's Decision in Ashish Agarwal:The Supreme Court in Ashish Agarwal held that notices issued between 01.04.2021 and 30.06.2021 under the old regime should be treated as issued under Section 148A of the new regime. However, the court maintained that all defenses available under Section 149 and other legal rights remained intact. Consequently, the limitation defenses under the old regime continued to apply, meaning that notices time-barred before the new regime could not be revived or validated by the Supreme Court's directions.4. Validity of Extensions Granted Under the Taxation and Other Laws Act, 2020:The court examined the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, due to the COVID-19 pandemic. These extensions were intended to prolong the time limits for issuing reassessment notices. However, the court concluded that these extensions could not override the principal legislation, which was the Finance Act, 2021. The court held that the secondary legislation could not extend the time limits for issuing notices that were already time-barred under the old regime.Conclusion:The court set aside the notices and orders issued under Sections 148 and 148A(d) for the assessment years 2013-14 and 2014-15, declaring them illegal and without jurisdiction due to being time-barred. The petitions were allowed on this legal ground, and all other factual and legal issues were kept open for future consideration. The decision reaffirmed the principle that time-barred notices under the old regime could not be revived under the new regime, despite legislative changes or extensions granted during the pandemic.