2024 (3) TMI 1451 - HC - Income Tax

Reassessment notice under section 148 served after limitation period renders proceedings time-barred and invalid

Assistant Commissioner of Income Tax (Central) -2, Chhattisgarh, Commissioner of Income Tax Civil Lines, Raipur Chhattisgarh Versus M/s Ardent Steel Limited

The HC dismissed the writ petition challenging reassessment proceedings under section 147 of the IT Act. The court held that the notice under section 148 ... Reopening of assessment u/s 147 beyond period of limitation - HELD THAT:- Had it been a case of the appellants/ respondent therein that notice was served upon the assesse before 31.03.2016, then why they have again issued notice through Chartered Accountant on 13.04.2016 is not understood and therefore, this Court is of the opinion that notice u/s 148 of the IT Act for reassessing the assesse’s income for the assessment year 2009-10 has been served upon him through Chartered Accountant on 13.04.2016 i.e. after the period of limitation which is dated 31.03.2016. Therefore, we are of the considered opinion that the learned Single Judge has not committed any illegality, irregularity or jurisdictional error in the impugned orders warranting interference by this Court. WP dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court include:(a) Whether the writ petition challenging the notice issued under Section 148 read with Section 147 of the Income Tax Act, 1961 (IT Act) is maintainable.(b) Whether the notice dated 15.03.2016 under Section 148(1) of the IT Act was validly issued and served upon the assessee within the prescribed limitation period.(c) Whether service of notice on the Chartered Accountant of the assessee constitutes valid service under Section 148(1) of the IT Act.(d) Whether the assessee's conduct in filing return and participating in reassessment proceedings amounts to waiver of the requirement of valid service of notice under Section 148(1).(e) Whether the reassessment proceedings initiated under Section 148 of the IT Act are barred by limitation or vitiated due to non-service of notice.(f) Whether the review petition filed against the order allowing the writ petition could be entertained on the ground of newly produced documents.2. ISSUE-WISE DETAILED ANALYSIS(a) Maintainability of Writ Petition Challenging Notice under Section 148The Court examined the principle of law relating to maintainability of writ petitions challenging notices issued under Section 148 read with Section 147 of the IT Act. Reliance was placed on precedents including Calcutta Discount Co. Ltd. vs. Income-Tax Officer and Jeans Knit Private Ltd. vs. Deputy Commissioner of Income Tax, which held that writ petitions are maintainable to challenge the issuance of reassessment notices where the challenge pertains to jurisdictional or procedural defects such as limitation or service of notice. The Court concurred with the learned Single Judge's view that the writ petition was maintainable in law to challenge the notice for reassessment.(b) Validity and Service of Notice under Section 148(1)Section 148(1) mandates that before making reassessment under Section 147, the Income Tax Officer must serve a notice on the assessee. The appellants contended that the notice dated 15.03.2016 was issued on the address mentioned in the return and was within limitation. However, the notice was returned undelivered citing 'left' as the reason. The notice was subsequently served on the Chartered Accountant on 13.04.2016, after the limitation period ending 31.03.2016.The Court noted that service of notice on the Chartered Accountant does not amount to valid service on the assessee as per Section 148(1), relying on the Delhi High Court decision in Commissioner of Income-tax (Central)-I vs. Chetan Gupta. The principles laid down therein include:- Mere participation by the assessee or an unauthorized person in reassessment proceedings does not waive the requirement of proper service of notice under Section 148(1).- Reassessment proceedings finalized without proper service of notice under Section 148(1) are invalid and liable to be quashed.- Section 292BB, which deals with deemed service, is prospective and not applicable where the assessee has raised objection to non-service.The Court found that no valid notice under Section 148(1) was served on the assessee within the limitation period, and service on the Chartered Accountant after limitation was ineffective.(c) Effect of Assessee's Conduct in Filing Return and ParticipationThe appellants argued that the assessee, by filing return in response to the notice and participating in reassessment proceedings, waived the right to claim non-service of notice. The Court rejected this contention, holding that participation in proceedings cannot cure the fundamental defect of non-service of notice as mandated by the statute. The Court emphasized that statutory requirements for service cannot be dispensed with by conduct, in line with the precedent cited above.(d) Limitation Bar to Reassessment ProceedingsThe limitation period prescribed under Section 149(1)(b) of the IT Act for issuance of notice under Section 148(1) was 31.03.2016. Since the notice was not served on the assessee within this period, the reassessment proceedings were barred by limitation. The Court held that the initiation of reassessment was without jurisdiction and without authority of law.(e) Review Petition and Admission of New DocumentsThe appellants filed a review petition seeking to rely on documents not filed before the Writ Court but produced before the appellate court. The learned Single Judge dismissed the review petition observing that no sufficient reason was assigned for non-filing of these documents earlier, and there was no error apparent on the face of the record warranting review. The Court upheld this dismissal, emphasizing that review jurisdiction is limited and cannot be used to introduce new evidence without justification.3. SIGNIFICANT HOLDINGSThe Court upheld the following crucial legal reasoning verbatim from the impugned order:'(v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act.(vi) Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed.(vi) Section 292 BB is prospective. In any event the Assessee in the present case, having raised an objection regarding the failure by the Revenue to effect service of notice upon him, the main part of Section 292 BB is not attracted.'The Court established the core principle that valid service of notice under Section 148(1) within the limitation period is mandatory and non-service cannot be cured by subsequent participation or conduct of the assessee.Final determinations on each issue are:(i) The writ petition challenging the reassessment notice is maintainable.(ii) The notice dated 15.03.2016 was not validly served on the assessee within the limitation period.(iii) Service of notice on the Chartered Accountant after limitation is not valid service under Section 148(1).(iv) The assessee's participation in proceedings does not waive the requirement of valid service of notice.(v) The reassessment proceedings initiated are barred by limitation and are without jurisdiction.(vi) The review petition seeking to admit new documents without explanation was rightly dismissed.Accordingly, the impugned orders quashing the reassessment notices and objections were upheld, and the appeal was dismissed.