2025 (5) TMI 2169 - HC - Income Tax

Reassessment notice beyond Section 149(1) limitation period held invalid despite Revenue's Section 150 arguments

The Delhi HC held that a reassessment notice issued beyond the limitation period under Section 149(1) was invalid. The Revenue argued the notice was valid ... Validity of reopening of assessment - period of limitation -limitation period in cases related to search u/s 132 - petitioner’s contention that no incriminating material pertaining to the searched persons was found during the said search thus, no further proceedings were warranted. HELD THAT:- The impugned notice is clearly beyond the period as stipulated u/s 149(1) of the Act. However, it is the Revenue’s case that the impugned notice has been issued within the stipulated time by virtue of the non-obstante clause u/s 150 of the Act. Revenue claims that the impugned notice is premised on the ‘findings and directions’ as embodied in the decision of Abhisar Buildwell (P.) Ltd.[2023 (4) TMI 1056 - SUPREME COURT]. In the said decision, the Supreme Court had held that in certain cases, the assessing officer (AO) could exercise its powers under Section 147/148 of the Act, even in cases which are related to a search conducted under Section 132 of the Act or a requisition made under Section 132A of the Act. The Revenue construes the said decision as constituting a finding or a direction for issuing such notices in respect of cases such as that of the assessee’s. The question whether the decision of Abhisar Buildwell (P.) Ltd [supra] constitutes a finding and/or a direction for issuance of notices under Section 148 of the Act in cases, which are otherwise beyond the period as stipulated u/s 149 of the Act is no longer res integra. This court in the case of ARN Infrastructures India Ltd. [2024 (9) TMI 1573 - DELHI HIGH COURT] had rejected a similar contention. The contention that the time period as stipulated under Section 149 of the Act is not applicable, in the given facts, is erroneous and thus, rejected. ISSUES: Whether the issuance of a notice under Section 148 of the Income Tax Act, 1961 for reopening assessment of a completed assessment year is valid in the absence of incriminating material found during a search under Section 132.Whether the time limit prescribed under Section 149(1) of the Income Tax Act applies to the issuance of reassessment notices under Section 148 in cases related to search or requisition under Sections 132/132A.Whether the decision of the Supreme Court in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. constitutes a 'finding and/or a direction' enabling issuance of reassessment notices beyond the limitation period under Section 149.Whether the invocation of the non-obstante clause under Section 150 of the Income Tax Act can extend the limitation period for issuing reassessment notices under Section 148.Validity of reassessment proceedings initiated without the Assessing Officer's signature on the notice under Section 148A(b). RULINGS / HOLDINGS: The issuance of a notice under Section 148 for reopening a completed assessment year without any incriminating material found during search proceedings is without jurisdiction and contrary to settled legal principles.The time limit under Section 149(1) is applicable to reassessment notices even in cases connected to search or requisition under Sections 132/132A, and cannot be overridden by the non-obstante clause under Section 150.The Supreme Court decision in Abhisar Buildwell does not constitute a carte blanche or a 'finding and/or a direction' permitting issuance of reassessment notices beyond the limitation period; rather, it emphasizes that reassessment powers are 'subject to fulfilment of the conditions mentioned in Sections 147/148 of the Act.'The non-obstante clause under Section 150 does not override the limitation period prescribed under Section 149(1) for issuance of reassessment notices.The notice issued under Section 148A(b) without the signature of the Assessing Officer is invalid and time barred. RATIONALE: The Court applied the statutory framework of the Income Tax Act, 1961, specifically Sections 132, 147, 148, 149, and 150, and relied on binding precedent including Commissioner of Income-tax v. Kabul Chawla and Principal Commissioner of Income-tax v. Meeta Gutgutia, which establish that reopening of completed assessments requires incriminating material found during search.The Court referred to the recent Supreme Court ruling in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell to clarify that the power to reopen assessments post-search is conditional and must comply with statutory limitation periods and procedural safeguards.The Court distinguished the observations in Abhisar Buildwell as cautionary and not authorizing an override of Section 149(1) limitation, emphasizing that reassessment powers are 'saved' but 'subject to the fulfilment of the conditions mentioned in Sections 147/148.'The Court relied on its own prior decision in ARN Infrastructures India Ltd. v. Assistant Commissioner of Income Tax Central Circle-28 Delhi & Ors., which rejected similar contentions regarding limitation and applicability of Supreme Court's Abhisar Buildwell ruling.The Court underscored the necessity of procedural compliance, including proper signing of notices, as a condition precedent for valid reassessment proceedings.