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of <h1>Section 148 notice dated 01.04.2022 reopening AY 2015-16 held time-barred; post-limitation orders and notices quashed</h1> <h3>SHRI. SIDDAIAH GURAPPAJI Versus THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 7 (1) (1), BANGALORE, THE ASSESSMENT UNIT/VERIFICATION UNIT/TECHNICAL UNIT/REVIEW UNIT NATIONAL FACELESS ASSESSMENT CENTRE, INCOME TAX DEPARTMENT NEW DELHI, PRINCIPAL COMMISSIONER OF INCOME TAX BANGALORE-2, PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, KARNATAKA AND GOA REGION, BENGALURU</h3> HC held that the Section 148 notice dated 01.04.2022 reopening assessment for AY 2015-16 was time-barred, as notices for that year should have been issued ... Reopening of assessment beyond period of limitation - TOLA applicability - HELD THAT:- The proceedings relating to assessment year 2015-16, the notice under Section 148 of the I.T. Act ought to have been issued on or before 31.03.2021 and any notice issued after the aforesaid date including the instant notice issued on 01.04.2022 was barred by limitation as held in the case of Union of India & others vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] and subsequently followed in the case Nehal Ashit Shah [2025 (4) TMI 1095 - SC ORDER] IIn the instant case, it is an undisputed fact that the impugned proceedings is relating to the Assessment Year 2015-16, while the impugned notice under Section 148 of the Act dated 01.04.2022 was issued beyond/after 01.04.2021 which is impermissible in law and barred by limitation and consequently, the impugned orders/notices etc., deserve to be quashed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice under Section 148 of the Income-Tax Act issued on 01.04.2022 in respect of Assessment Year 2015-16 is barred by limitation and therefore invalid. 2. Whether consequent proceedings/orders and a follow-up notice under Section 142(1) based on the time-barred Section 148 notice are maintainable. 3. The legal effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the first proviso to Section 149(1)(b) (post-Finance Act, 2021 regime) on the limitation for issuance of reassessment notices for assessment years up to 2021-22-specifically the interplay determining whether notices issued after 01.04.2021 but before 30.06.2021 are saved, and whether notices for AY 2015-16 issued on or after 01.04.2021 are permissible. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Section 148 notice dated 01.04.2022 for AY 2015-16 (limitation). Legal framework: Reassessment under Section 148 is subject to time-limits prescribed by the law. The Finance Act, 2021 altered the limitation regime for reassessment by introducing a new Section 149 with longer periods; the first proviso to Section 149(1)(b) requires consideration of whether the time limit under the old regime continues to exist for assessment years up to and including 2021-22. TOLA extended certain limitation deadlines by operation of law for specified periods. Precedent Treatment: The Court applied the reasoning and conclusions of the apex authority in the recent decisions holding that TOLA and the proviso to Section 149 must be read together to determine whether notices fall within limitation; those authorities held that for AY 2015-16 notices issued on or after 01.04.2021 are not saved by TOLA and are therefore time-barred. Interpretation and reasoning: The Court examined the tabulation and reasoning adopted by the apex authority showing which assessment years had their limitation periods extended by TOLA (notably notices issued between 01.04.2021 and 30.06.2021 for certain years). For AY 2015-16 the six-year limitation under the pre-existing regime expired on 31.03.2022 and TOLA did not operate to extend the expiry of limitation for that year into the April-June 2021 window. The proviso to Section 149(1)(b) prevents the retrospective application of the new ten-year limitation where the prior shorter period had already expired, thereby protecting assessee rights. Applying that legal matrix, a notice dated 01.04.2022 falls outside the permissible period for AY 2015-16 because it was issued after the expiry of any applicable extended limitation and after 01.04.2021 when no saving applies for that year. Ratio vs. Obiter: The determination that a Section 148 notice dated 01.04.2022 for AY 2015-16 is time-barred, premised on the combined application of TOLA and the proviso to Section 149(1)(b), is treated as ratio in the decision as it directly disposes of the legal controversy in the appeal before the Court (and follows the binding apex precedent). Observations describing general policy or other assessment years in the tabulation are explanatory (obiter) insofar as they do not affect the present year's core holding. Conclusions: The Section 148 notice dated 01.04.2022 in respect of AY 2015-16 is barred by limitation and invalid. Consequently, any action founded on that notice cannot stand. Issue 2: Validity of consequent proceedings and Section 142(1) notice issued after the time-barred Section 148 notice. Legal framework: Proceedings under Sections 142(1) and related provisions derive jurisdiction from a valid initiation (e.g., a valid Section 148 notice). If the initiating notice is void for being time-barred, consequential steps lack legal foundation. Precedent Treatment: The Court applied the legal consequences recognized by the apex authority whereby proceedings founded upon or consequent to an invalid reopening notice must be quashed, since jurisdictional defects in the initiating notice infect subsequent orders. Interpretation and reasoning: Given the Court's conclusion that the Section 148 notice of 01.04.2022 is invalid for AY 2015-16, the subsequent order dated 31.03.2022 predicated on the same jurisdictional basis and the later Section 142(1) notice dated 08.08.2023 are likewise without legal authorization. The Court reasoned that allowing consequential actions to stand would subvert the limitation protections conferred by TOLA and the proviso to Section 149(1)(b). Ratio vs. Obiter: The holding that consequential orders and notices issued pursuant to a time-barred Section 148 notice are liable to be quashed is ratio with respect to the facts before the Court; ancillary statements about the general principle that procedural steps depend on a valid jurisdictional foundation are declaratory and not obiter. Conclusions: The impugned order and the Section 142(1) notice which flowed from the time-barred Section 148 notice are quashed as they are jurisdictionally unsustainable. Issue 3: Effect of TOLA and proviso to Section 149(1)(b) on retrospective application of extended limitation. Legal framework: TOLA provided temporal relaxation for certain statutory time lines. The Finance Act, 2021 introduced a new reassessment regime, including a ten-year limitation subject to the first proviso to Section 149(1)(b), which limits retrospective operation of the extended period where earlier shorter periods had already expired. Precedent Treatment: The Court followed the apex authority's construction that TOLA applies to the Income-Tax Act as a whole but does not uniformly save notices for all assessment years; the proviso to Section 149(1)(b) must be interpreted to avoid granting the Revenue retrospective ten-year powers where the shorter pre-existing limitation had already run. Interpretation and reasoning: The Court accepted the tabulated scheme adopted by the higher court illustrating which assessment years received a TOLA-based extension into the April-June 2021 window and which did not. For assessment years where TOLA did not extend the limitation into that window (including AY 2015-16 for the purposes relevant here), notices issued on or after 01.04.2021 cannot be validated by either TOLA or Section 149(1)(b) proviso. The proviso is read as protective of assessees against a new retrospective ten-year exposure. Ratio vs. Obiter: The interpretive construction of TOLA and the proviso to Section 149(1)(b) as limiting retrospective operation of the new ten-year regime is treated as binding ratio to the extent necessary to resolve the present controversy; broader policy comments about legislative intent are ancillary. Conclusions: TOLA and the proviso to Section 149(1)(b), read together, do not validate the Section 148 notice issued on 01.04.2022 for AY 2015-16; the proviso constrains retrospective application of the extended period and preserves limitation protection afforded under the earlier regime. Disposition Because the Section 148 notice dated 01.04.2022 for AY 2015-16 is time-barred under the established legal framework and binding precedent, the Court quashed the impugned order founded on that notice and the consequent notices, including the Section 142(1) notice dated 08.08.2023.
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