Validity of reopening of assessment: six-year limitation expired for AY 2016-17, notice issued thereafter is time-barred and invalidated

Validity of reopening of assessment concerns whether pre-existing six-year limitation under the old regime continued to apply for assessment year 2016-17 and whether the new ten-year limitation applies only prospectively. The analysis finds that the six-year period from the end of AY 2016-17 expired on 31.03.2023, and the notice issued thereafter is time-barred; consequently the notice is invalidated. The new regime's ten-year limitation is treated as prospective, so it does not retroactively revive notices issued after the old regime limitation expired.

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Issues: Whether the notice issued under Section 148 of the Income-tax Act, 1961 for AY 2016-17, after the expiry of six years from the end of the relevant assessment year, is barred by limitation.

Analysis: The impugned notice under Section 148 was issued after 31.03.2023, which is the date on which the six-year period from the end of the assessment year 2016-17 expired. The question turns on the application of the proviso to Section 149(1)(b) and the temporal operation of the limitation period applicable to the old regime so as to determine whether a notice under Section 148 can be validly issued after the six-year bar has lapsed. The cited precedents interpret the proviso to Section 149(1)(b) as preserving the shorter six-year limitation for assessment years beginning on or before 1 April 2021, thereby preventing retrospective extension of the reopening period where the six-year period had already expired at the time of issuance of the notice.

Conclusion: The notice under Section 148 issued for AY 2016-17 after the expiry of the six-year period is barred by limitation and is set aside. Relief in favour of the assessee is granted.

Ratio Decidendi: Where the six-year limitation from the end of the relevant assessment year has expired at the time a Section 148 notice is issued for assessment years beginning on or before 1 April 2021, the proviso to Section 149(1)(b) precludes issuance of a valid notice and bars reopening of assessment.

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