Revenue cannot issue reassessment notice beyond Section 149(1) limitation period despite Abhisar Buildwell ruling

Delhi HC held that reassessment notice issued beyond the limitation period under Section 149(1) was invalid. Revenue argued the notice was valid under Section 150's non-obstante clause, claiming it was based on findings in Abhisar Buildwell case where SC held assessing officers could exercise powers under Sections 147/148 even in search cases under Section 132. However, HC rejected this contention, following its earlier decision in ARN Infrastructures India Ltd., which had dismissed similar arguments. The court ruled that Revenue's interpretation of the Abhisar Buildwell decision as constituting a finding or direction for issuing notices beyond the statutory limitation period was erroneous. The reassessment notice was therefore held to be time-barred and invalid.

---

---

ISSUES:

Whether the issuance of a notice under Section 148 of the Income Tax Act, 1961 for reassessment is valid in the absence of incriminating material found during a search under Section 132.Whether the power of reopening an assessment under Sections 147/148 can be exercised after completion of assessment when no incriminating material is found.Whether Section 150 of the Income Tax Act applies to reopening of assessments without a Supreme Court direction.Whether the limitation period under Section 149 of the Income Tax Act applies to reassessment proceedings initiated post-search when no incriminating material is found.

RULINGS / HOLDINGS:

The court held that in the absence of incriminating material found during the search, no addition or reassessment under Section 148 is permissible, reaffirming that "no addition was permissible in the absence of incriminating material."The power of the Revenue to initiate reassessment under Sections 147/148 is "subject to fulfilment of the conditions mentioned in Sections 147/148 of the Act" and cannot override the statutory restrictions, including the limitation period under Section 149.Section 150(1) is inapplicable in the absence of a Supreme Court direction to reopen the case, and the petitioner's contention on this ground is upheld.The limitation period prescribed under Section 149 applies and cannot be disregarded merely because the reassessment arises from a search where no incriminating material was found; the contention that Section 149 is not applicable is "erroneous and thus, rejected."The impugned notice issued under Section 148 is set aside as it was issued without jurisdiction and contrary to settled legal principles.

RATIONALE:

The court relied on the Supreme Court decision in PCIT v. Abhisar Buildwell Pvt. Limited, which clarified that reassessment powers post-search are preserved but "subject to fulfilment of the conditions mentioned in Sections 147/148" and cannot be exercised as a "carte blanche" to override statutory safeguards.The court applied the statutory framework of the Income Tax Act, particularly Sections 132 (search), 147, 148 (reassessment), 149 (limitation), and 150 (directions by Supreme Court), emphasizing adherence to limitation and procedural requirements.The decision in ARN Infrastructures India Ltd. v. Assistant Commissioner of Income Tax was followed, which underscored that the absence of incriminating material during search limits the Revenue's ability to reopen assessments beyond statutory conditions.The court rejected the Revenue's attempt to invoke Section 150 without a Supreme Court direction, maintaining the principle that reassessment powers are circumscribed by statutory conditions to prevent arbitrary reopening.

---