Reassessment notices under Sections 147, 148, 149 issued using TOLA Section 3(1) held time-barred, quashed

HC allowed the writ petitions, holding that the reassessment notices issued u/s 148 for AY 2015-16 during the extended period 01.04.2021 to 30.06.2021 under TOLA were invalid. Applying the amended s.149 and the ratio of SC in Rajeev Bansal and subsequent orders, HC held that the Revenue could not invoke s.3(1) of TOLA to extend the limitation for issuing reassessment notices for AY 2015-16. As the notices were issued beyond the permissible period of limitation, the reopening u/s 147 stood vitiated and all impugned notices were quashed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether reassessment notices issued under section 148 of the Income Tax Act, 1961, for Assessment Year 2015-2016 during the extended period (01.04.2021 to 30.06.2021) under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance/Act, 2020 (TOLA), and consequential proceedings under sections 148A(b), 148A(d) and fresh section 148 notices issued in 2022, are valid in law in light of section 149 as amended with effect from 01.04.2021 and the binding decisions of the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of reassessment notices for AY 2015-2016 issued after 01.04.2021 under TOLA and subsequent proceedings under sections 148A(b), 148A(d) and 148

(a) Legal framework (as discussed by the Court)

2.1 The Court noted that:

(i) Notices under section 148 for AY 2015-2016 were issued after 31.03.2021, up to 30.06.2021, by invoking the time extension under TOLA.

(ii) With effect from 01.04.2021, the new reassessment regime including sections 148A(b), 148A(d) and amended section 149 came into force.

(iii) In Union of India v. Ashish Agarwal, the Supreme Court treated notices issued under section 148 between 01.04.2021 and 30.06.2021 as deemed notices under section 148A(b) and directed completion of the new procedure, culminating in fresh notices under section 148.

(iv) In Union of India v. Rajeev Bansal, the Supreme Court considered limitation in terms of section 149 (post 01.04.2021) and the effect of TOLA, and also the validity of sanction under section 151.

(v) In Rajeev Bansal, the Revenue expressly conceded that for AY 2015-2016 all notices issued on or after 01.04.2021 would have to be dropped, as they could not validly be completed within the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

(vi) In Deepak Steel and Power Ltd. v. CBDT, the Supreme Court applied the concession recorded in Rajeev Bansal and quashed section 148 notices for AY 2015-2016 issued after 01.04.2021.

(vii) The Court also referred to its earlier judgment in Keenara Industries (P.) Ltd. v. ITO and to its own subsequent decision in Mayurkumar Babubhai Patel v. ACIT, where, following Deepak Steel and Power Ltd. and the concession in Rajeev Bansal, it held that for AY 2015-2016, notices issued on or after 01.04.2021 are time-barred; and that notices under section 148A(b) issued after 31.03.2022 and the resulting section 148 notices dated 27/28/29.07.2022 were barred on limitation.

(viii) The Court further noticed that several High Courts (Delhi, Punjab and Haryana, Rajasthan, Karnataka) have taken the same view for AY 2015-2016, and that similar orders have been passed by the Supreme Court in other matters following Rajeev Bansal and Deepak Steel and Power Ltd..

(b) Interpretation and reasoning

2.2 The Court recorded that in all petitions the impugned reopening related to AY 2015-2016, and the initial section 148 notices were issued after 31.03.2021 during the extended period under TOLA (01.04.2021 to 30.06.2021).

2.3 The Court noted the subsequent procedural steps: following Ashish Agarwal, the original section 148 notices (issued between 01.04.2021 and 30.06.2021) were treated as section 148A(b) notices; replies were invited; orders under section 148A(d) were passed; and fresh section 148 notices were then issued in July-August 2022.

2.4 The Court relied squarely on the ratio and explicit concession recorded in Rajeev Bansal, as reiterated and applied in Deepak Steel and Power Ltd. and in its own earlier judgment in Mayurkumar Babubhai Patel, that for AY 2015-2016:

- all notices issued on or after 01.04.2021 must be dropped; and

- such notices cannot be sustained as they do not fall for completion within the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 when read with section 149 as applicable from 01.04.2021.

2.5 Applying that legal position to the facts, the Court held that:

(i) The original notices issued under section 148 for AY 2015-2016 between 01.04.2021 and 30.06.2021, purportedly saved by TOLA, are invalid in view of Rajeev Bansal and Deepak Steel and Power Ltd..

(ii) The subsequent notices under section 148A(b), the orders under section 148A(d), and the fresh notices under section 148 issued in 2022 are all founded upon those invalid base notices and upon a limitation regime which, as clarified by the Supreme Court, does not permit reopening for AY 2015-2016 after 01.04.2021.

(iii) In particular, following the reasoning in Mayurkumar Babubhai Patel, notices under section 148A(b) issued after 31.03.2022 and resultant section 148 notices issued in July 2022 are independently time-barred under section 149 as in force from 01.04.2021.

2.6 The Court considered that, in light of the binding pronouncements of the Supreme Court and the admitted concession by the Revenue at that level, "nothing further is required to be adjudicated" on limitation for AY 2015-2016; the impugned notices fall within the same class of notices already declared unsustainable.

(c) Conclusions

2.7 The Court concluded that:

(i) All impugned section 148 notices for AY 2015-2016, issued during the extended period 01.04.2021 to 30.06.2021 under TOLA, are invalid.

(ii) Consequently, reassessment proceedings initiated and continued thereafter (including notices under section 148A(b), orders under section 148A(d), and fresh section 148 notices in July-August 2022) cannot be sustained.

(iii) The petitions are allowed and the impugned notices under section 148 for AY 2015-2016 are quashed as being time-barred and invalid, the Rule being made absolute to that extent, with no order as to costs.

---