Notices under s.148A(d) and s.148 for assessment year 2015-16 held invalid and time-barred for noncompliance with 2021 procedure

HC held that notices and orders for the assessment year 2015-16 issued on 30.06.2022 (under s.148A(d) and consequential s.148) and the show-cause notice dated 10.03.2025 were invalid and barred by limitation, because they were issued without complying with the procedure introduced by the Finance Act, 2021 and, per the concession in Rajeev Bansal, notices issued on or after 01.04.2021 could not be completed for that year. The writ petition was allowed and the said orders and notices were set aside.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the order under Section 148A(d) and the consequential notice under Section 148 (and subsequent show-cause notice) issued for the assessment year 2015-16 after 01.04.2021 are barred by limitation under Section 149 read with applicable relaxations (TOLA/Relaxation Act) and thus invalid.

2. Whether substituted Sections 147-151 (Finance Act, 2021) apply to reassessment notices issued after 01.04.2021 and the effect of the Supreme Court's decision construing pre-amendment notices as deemed show-cause notices under Section 148A(b) (i.e., the effect of the decision in Ashish Aggarwal and its implementation) on such notices.

3. What is the effect of the Supreme Court's subsequent decision in Rajeev Bansal (and concessions made therein) on reassessment notices issued after 01.04.2021 for assessment years where TOLA/notifications do not permit completion within the extended period, specifically assessment year 2015-16.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation - whether the impugned Section 148A(d) order, Section 148 notice and Section 142(1)/show-cause notice are time-barred for AY 2015-16.

Legal framework: Sections 147-149 and 151 (as substituted w.e.f. 01.04.2021) set the scheme for reassessment, provide the timeline for issuing notices (Section 149), and make Section 148A a pre-condition to issuance of Section 148 notices. The Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA/Relaxation Act) and notifications under it extended limitation periods in specified windows; the Explanation to those notifications preserved application of pre-amendment provisions to reassessment proceedings initiated under the relaxations.

Precedent treatment: The Supreme Court in Ashish Aggarwal held that many notices issued after 01.04.2021 under the unamended Section 148 should be deemed to have been issued under substituted Section 148A and be treated as show-cause notices under Section 148A(b), with directions for information disclosure and further procedure. In Rajeev Bansal the Supreme Court addressed whether TOLA and its notifications apply to reassessment notices issued after 01.04.2021 and whether notices issued between July-September 2022 are valid, and recorded the Revenue's concession with respect to AY 2015-16 (that notices issued on or after 01.04.2021 must be dropped as they cannot be completed within the TOLA period for that AY).

Interpretation and reasoning: The court examined (a) timing of issuance of the original notice and subsequent proceedings (original Section 148 notices issued after 01.04.2021); (b) application of Ashish Aggarwal which required treating such notices as Section 148A show-cause notices and mandated fresh compliance; and (c) Rajeev Bansal which clarified applicability of TOLA and contained the Revenue's concession for AY 2015-16. For AY 2015-16 the effect of TOLA/notifications is that the extended period for issuance/completion does not cover notices issued on or after 01.04.2021; the Revenue accepted that such notices cannot be validly completed and must be dropped. The court applied that concession and precedent to conclude the impugned orders/notices are barred by limitation.

Ratio vs. Obiter: The holding that the specific impugned orders and notices for AY 2015-16 are time-barred is ratio as applied to facts of the petition. The broader observations about the operation of TOLA and the interplay with Section 149 insofar as they follow Rajeev Bansal and Ashish Aggarwal are authoritative treatments relied upon (ratio insofar as necessary to decide limitation for the AY in question); ancillary comments about policy and general application of Ashish Aggarwal embody reasoning but are not necessary to the narrow disposal (obiter to the extent they expand beyond the AY and notices before the Court).

Conclusion: The order dated 30.06.2022 under Section 148A(d), the consequential Section 148 notice dated 30.06.2022 and the show-cause notice dated 10.03.2025 insofar as they relate to AY 2015-16 are barred by limitation and are set aside.

Issue 2: Applicability and effect of substituted Sections 147-151 (Finance Act, 2021) and Ashish Aggarwal on reassessment notices issued after 01.04.2021.

Legal framework: The Finance Act, 2021 introduced substantive procedural changes (notably Section 148A as a condition precedent to issuance of a Section 148 notice, new timelines in Section 149, and specified authority/sanction regimes in Section 151). The Relaxation Act notifications temporarily extended timelines and indicated that pre-amendment provisions applied to reassessments initiated under those notifications.

Precedent treatment: Ashish Aggarwal recognized the reformative nature of substituted provisions and, in light of widespread bona fide administrative non-application, directed that notices issued under the unamended law after 01.04.2021 be treated as if they were issued under Section 148A(b), with directions for disclosure of material and subsequent compliance with 148A. Ashish Aggarwal permitted a remedial, pan-India modification rather than outright quashing of such notices, while preserving assessees' defences under the substituted regime.

Interpretation and reasoning: The Court accepted Ashish Aggarwal's reasoning that substituted provisions are remedial and intended to protect assessees, but that the Revenue should not be made remiss for bonafide administrative error. Therefore pre-amendment notices issued after 01.04.2021 can be construed as Section 148A show-cause notices and the Revenue be allowed to cure procedural lapses subject to full compliance with Section 148A and limitation rules under Section 149 (as read with TOLA where applicable). However, the remedial approach is constrained by limitation - if limitation cannot be cured by TOLA/notifications, the deemed conversion cannot validate a time-barred notice.

Ratio vs. Obiter: Ashish Aggarwal's directions to treat pre-amendment notices as show-cause notices under Section 148A and to permit the Revenue to proceed subject to procedural compliance form binding ratio applied here. The Court followed that framework but limited its operation where limitation cannot be extended (as in AY 2015-16 per Rajeev Bansal concession).

Conclusion: Substituted Sections 147-151 apply to reassessment notices issued after 01.04.2021; Ashish Aggarwal permits conversion of erroneously issued pre-amendment Section 148 notices into Section 148A show-cause notices and further compliance - but such conversion cannot overcome absolute limitation constraints where TOLA/notifications do not render the proceedings timely.

Issue 3: Effect of Rajeev Bansal (including the Revenue's concession) on validity of reassessment notices for AYs where TOLA does not permit completion, specifically AY 2015-16.

Legal framework: TOLA Section 3(1) provides relaxations "notwithstanding anything contained" in specified Acts, and notifications under the Relaxation Act extended timelines for issuance/completion of notices in defined windows. Section 149 of the substituted Act provides curtailed timelines which must be read with TOLA where applicable.

Precedent treatment: Rajeev Bansal examined whether TOLA applies to reassessment notices issued after 01.04.2021 and whether notices issued in July-September 2022 were valid. In that proceeding the Revenue conceded that for AY 2015-16 notices issued on or after 01.04.2021 had to be dropped as they could not be completed within the TOLA-permitted period.

Interpretation and reasoning: The Court in the present matter accepted the concession recorded in Rajeev Bansal as decisive for AY 2015-16. Where the extension under TOLA/notifications does not cover the period necessary to bring a reassessment within the statutory limitation, and the Revenue has effectively conceded that consequence, the reassessment notices issued post-01.04.2021 for that AY cannot be validated and must be quashed.

Ratio vs. Obiter: The application of Rajeev Bansal's concession to quash notices for AY 2015-16 is ratio in the present decision. Observations in Rajeev Bansal about the scope of TOLA and interpretation of Section 149 are treated as binding insofar as they are necessary to determine limitation; any wider commentary beyond that remains persuasive obiter.

Conclusion: Rajeev Bansal's concession that reassessment notices for AY 2015-16 issued on or after 01.04.2021 must be dropped is dispositive; accordingly the impugned orders and notices for AY 2015-16 are held to be barred by limitation and are set aside.

Cross-references and operative outcome

- The court applied Ashish Aggarwal's framework (conversion of pre-amendment Section 148 notices to Section 148A show-cause notices and directions for further procedure) but limited its application where TOLA/notifications and Rajeev Bansal demonstrate that limitation could not be cured.

- In the present facts (AY 2015-16), Rajeev Bansal's concession and the interplay of Section 149 and TOLA lead to the conclusion that the impugned Section 148A(d) order, consequential Section 148 notice and subsequent show-cause notice are time-barred and are set aside.

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