2025 (7) TMI 1929 - AT - Income Tax

Reassessment notices under section 148 held time-barred under section 149; TOLA extension inapplicable for AYs 2013-16

ITAT Delhi-AT held that reassessment notices issued under section 148 for AYs 2013-14, 2014-15 (dated 27.07.2022) and 2015-16 (dated 26.07.2022) were ... Validity of reopening of assessment u/s 147 - notice beyond period of limitation - Notice under section 148A(b) of New Law as amended by Finance Act, 2021 - scope of TOLA - New regime v/s old regime - HELD THAT:- In the present case, in so far as Assessment Year 2013-14 to 2015-16 the notices u/s 148 of the Act have been issued beyond the period of limitation prescribed by the Hon'ble Supreme Court in the case of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] we are of the opinion that the notices issued u/s 148 of the Act dated 27/07/2022 for Assessment Years 2013-14 and 2014-15 and the notice dated 26/07/2022 issued for 2015-16 are barred by the period specified u/s 149 of the Act, consequently, the re-assessment proceedings initiated thereupon for Assessment Year 2013-14 to 2015-16 are hereby quashed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether reassessment notices issued under section 148 for assessment years 2013-14, 2014-15 and 2015-16 were barred by limitation under section 149, read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, and the Supreme Court's decision in Rajeev Bansal, thereby vitiating the consequent reassessment proceedings. 1.2 Whether reassessment proceedings for assessment years 2016-17 and 2017-18 were invalid for want of sanction from the proper 'specified authority' under section 151, where reassessment was initiated after expiry of three years from the end of the relevant assessment years but approval was obtained only from the Principal Commissioner of Income Tax. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Limitation for issue of notice under section 148 for AYs 2013-14 to 2015-16 2.1 Legal framework discussed 2.1.1 The Tribunal, by reproducing and relying on a coordinate Bench decision, examined section 149 as amended by the Finance Act, 2021, including: (i) the 3-year and 10-year limitation structure in section 149(1)(a) and (b); (ii) the first proviso restricting issue of notices for years prior to 1 April 2021 if already time-barred under the pre-amendment section 149(1)(b); (iii) the third proviso excluding, for limitation, the time allowed to respond to a notice under section 148A(b) and the period of any court stay; and (iv) the fourth proviso granting a minimum 7 days to pass an order under section 148A(d) where the remaining time would otherwise be less than 7 days, and extending the limitation accordingly. 2.1.2 The Tribunal also noted the pre-amendment section 149 which allowed issue of reassessment notice: (i) up to 4 years; (ii) more than 4 but not more than 6 years, subject to monetary threshold; and (iii) up to 16 years in cases involving assets outside India. 2.1.3 The Tribunal applied the Supreme Court decisions in Ashish Agarwal (deeming old-regime section 148 notices issued between 1 April 2021 and 30 June 2021 as notices under section 148A(b)) and in Rajeev Bansal (clarifying the operation of TOLA, computation of 'surviving/balance time' between original deemed notice date and 30 June 2021, and exclusion of time under the third proviso to section 149). 2.1.4 The Tribunal referred to the Supreme Court's clarification that: (i) TOLA extends time for reassessment actions falling due between 20 March 2020 and 31 March 2021 to 30 June 2021; (ii) for deemed section 148A(b) notices, the period from original notice till supply of material, plus two weeks allowed to respond, is excluded for limitation; and (iii) the 'surviving' days between the date of the original (deemed) notice and 30 June 2021 constitute the balance time available to issue a fresh section 148 notice under the new regime after receipt of assessee's response. 2.1.5 The Tribunal further noted Delhi High Court's reasoning (as quoted in the coordinate Bench decision) that the statutory period available for section 148 notice under section 149 cannot be enlarged by the one-month outer time limit for passing an order under section 148A(d); the proceedings under section 148A must be completed within the limitation available under section 149, read with TOLA and its provisos. 2.2 Interpretation and reasoning 2.2.1 The Tribunal adopted a detailed computational method, set out in a tabular form, to determine the limitation for each of the three assessment years by applying Rajeev Bansal: - Identify the date of issue of the original section 148 notice within the TOLA-extended period (row A) and the last date under TOLA (30 June 2021) (row B). - Compute 'balance/surviving period' (C = B - A) i.e., number of days between date of original notice and 30 June 2021. - Compare this with the statutory minimum 7 days under the fourth proviso to section 149(1) (row D), and take the higher figure as surviving period (E). - Note the date of assessee's response to the section 148A(b) notice (F). - Add the surviving period E to the response date F to get the last permissible date (H) for issuing a fresh section 148 notice. - Compare this with the actual date of issuance of the new section 148 notice (I), and determine the delay (J = I - H). 2.2.2 Applying this method, the Tribunal recorded the following surviving periods and delays: - AY 2013-14: Surviving period 13 days; last permissible date 16.06.2022; actual notice dated 27.07.2022; delay 41 days. - AY 2014-15: Surviving period 31 days; last permissible date 20.07.2022; actual notice dated 27.07.2022; delay 25 days. - AY 2015-16: Surviving period 13 days; last permissible date 16.06.2022; actual notice dated 26.07.2022; delay 40 days. 2.2.3 The Tribunal noted that a coordinate Bench, on substantially identical facts and computation, had already held that a section 148 notice issued on 28.07.2022 in similar circumstances was time-barred even when granting the Revenue the benefit of the fourth proviso to section 149, because the fresh notice was still issued beyond the extended minimum 7-day period. 2.2.4 The Tribunal also noted that arguments premised on the one-month period for passing an order under section 148A(d) do not override the limitation governing section 148 notices under section 149; where limitation under section 149 expires earlier (as computed with TOLA and the third and fourth provisos), the section 148A(d) order and consequent section 148 notice must be passed within that shorter period. 2.2.5 Considering the undisputed dates in the present appeals and applying the ratio of Rajeev Bansal and the adopted computation methodology, the Tribunal found that, for all three years, the fresh notices under section 148 issued in July 2022 were beyond the outer permissible dates. 2.3 Conclusions 2.3.1 The Tribunal held that the notices issued under section 148 dated 27.07.2022 (for assessment years 2013-14 and 2014-15) and 26.07.2022 (for assessment year 2015-16) were issued beyond the limitation period prescribed under section 149, as interpreted by the Supreme Court in Rajeev Bansal. 2.3.2 The notices under section 148 for assessment years 2013-14 to 2015-16 were declared barred by limitation, void ab initio and bad in law; consequently, the reassessment proceedings initiated thereupon and the resultant assessment orders for those years were quashed. Issue 2 - Validity of reassessment for AYs 2016-17 and 2017-18 for want of proper sanction under section 151 2.4 Legal framework discussed 2.4.1 The Tribunal examined section 151 as it stood at the relevant time, which defined the 'specified authority' for purposes of sections 148 and 148A as: (i) Principal Commissioner/Principal Director/Commissioner/Director, if three years or less had elapsed from the end of the relevant assessment year; and (ii) Principal Chief Commissioner/Principal Director General or, where none exists, Chief Commissioner/Director General, if more than three years had elapsed from the end of the relevant assessment year. 2.4.2 It was noted that, for both assessment years 2016-17 and 2017-18, the reassessment notices were issued after the expiry of three years from the end of the respective assessment years. 2.4.3 The Tribunal relied upon jurisdictional High Court decisions (including Rajesh Gupta (HUF), Abhinav Jindal HUF and Appeal Kids Dream International Pvt. Ltd.) which held that: - Where reassessment is initiated after the lapse of three years, sanction must be obtained from the Principal Chief Commissioner/Chief Commissioner (or equivalent), and sanction by the Principal Commissioner is incompetent. - The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ('TOLA') only extends time limits for taking actions but does not alter or expand the hierarchy or identification of the 'specified authority' under section 151. - The extended timelines under TOLA cannot be read as conferring new jurisdiction or modifying the statutory distribution of sanctioning powers under section 151. 2.4.4 The High Court jurisprudence, as quoted and adopted, clarified that: - TOLA is merely remedial for limitation; it does not amend the structure of approval powers. - The relevant criterion for identifying the competent sanctioning authority remains the length of time elapsed from the end of the relevant assessment year to the date when reassessment is proposed, irrespective of whether such initiation is within normal or extended (TOLA) timelines. - If reassessment is initiated after the three-year (or four-year, as per the earlier regime) threshold, only the higher-level authority (Principal Chief Commissioner/Chief Commissioner etc.) can validly grant sanction; sanction by a lower-rank officer is non est. 2.5 Interpretation and reasoning 2.5.1 For assessment years 2016-17 and 2017-18, the Assessing Officer issued notices under section 148 on 18.06.2021 and 16.06.2021, respectively, both dates being after the expiry of three years from the end of the relevant assessment years. 2.5.2 The assessment orders themselves recorded that the orders under section 148A(d) and the consequent notices under section 148 were issued with prior approval of the Principal Commissioner of Income Tax-15, Delhi. 2.5.3 Applying the plain language of section 151 and the jurisdictional High Court's rulings, the Tribunal held that, where more than three years have elapsed from the end of the relevant assessment year, the only competent authority for sanction is the Principal Chief Commissioner/Principal Director General or, where such office does not exist, the Chief Commissioner/Director General. The Principal Commissioner is competent only where reassessment is sought within three years from the end of the relevant assessment year. 2.5.4 The Tribunal followed the reasoning that TOLA cannot be invoked to justify a sanction by an authority lower than that prescribed by section 151 for a reassessment initiated after the three-year threshold. TOLA extends the time within which action may be taken; it does not amend who may approve that action. 2.5.5 By adopting the High Court's analysis, the Tribunal concluded that, in the facts of these years, because the action for initiation of reassessment was beyond three years and the sanction was accorded only by the Principal Commissioner, the pre-condition of valid sanction by the proper 'specified authority' under section 151 was not satisfied. 2.6 Conclusions 2.6.1 The Tribunal held that the reassessment proceedings for assessment years 2016-17 and 2017-18 suffered from a jurisdictional defect due to absence of sanction from the competent authority prescribed in section 151, as the approval was erroneously obtained from the Principal Commissioner instead of the Principal Chief Commissioner/Chief Commissioner (or equivalent). 2.6.2 Following the binding jurisdictional High Court decisions, the Tribunal quashed the orders under section 148A(d), the consequent notices under section 148, and the resulting assessment orders for assessment years 2016-17 and 2017-18. 2.6.3 Having quashed the reassessments on this preliminary legal ground, the Tribunal did not adjudicate the remaining grounds on merits, treating them as purely academic.