Reassessment notice for AY 2013-14 issued beyond ten-year statutory limit under Section 153C quashed as time-barred

Delhi HC held that reassessment notice for AY 2013-14 issued on 30 March 2023 was beyond the statutory time limit. The court determined that AY 2013-14 fell outside the ten-year block period under Section 153C read with Section 153A. Despite search being conducted after 31 March 2021, the computational exercise for non-searched entities must consider the date when jurisdictional AO decides to proceed against them. The court found no justification to reconstruct the computation point and quashed the notice as time-barred, with all consequential actions also being invalid.

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Issues Involved:
1. Validity of reassessment action u/s 148 of the Income Tax Act, 1961.
2. Applicability of the First Proviso to Section 149(1) in the context of search assessments.
3. Computation of the "relevant assessment year" for reassessment purposes.

Summary:

1. Validity of reassessment action u/s 148 of the Income Tax Act, 1961:
The petitioner challenged the initiation of reassessment action u/s 148 for AY 2013-14, which was based on a search conducted on 09 February 2022. The notice for reassessment was issued on 30 March 2023. The respondents argued that they were exempt from following the procedure prescribed by clauses (b), (c), and (d) of Section 148A due to the First Proviso in that provision, which applies to searches initiated on or after 01 April 2021.

2. Applicability of the First Proviso to Section 149(1) in the context of search assessments:
The Court initially found that the reassessment action might violate Section 149(1) due to the timeframes within which an assessment could be reopened. The petitioner cited previous judgments, including Filatex India Ltd. vs. Deputy Commissioner of Income Tax and Principal Commissioner of Income Tax-1 vs. Ojjus Medicare Pvt. Ltd., to argue that the reassessment for AY 2012-13 would not sustain due to the limitation period specified in Section 149(1)(b).

3. Computation of the "relevant assessment year" for reassessment purposes:
The Court noted that the First Proviso to Section 153C introduces a legal fiction, shifting the reference point for the computation of the six or ten-year block to the date of receipt of books of accounts by the jurisdictional AO. This shift is crucial for determining the "relevant assessment year." The Court found that the reassessment action initiated for AY 2013-14 fell beyond the ten-year block period, making the notice dated 30 March 2023 invalid.

Conclusion:
The Court quashed the impugned notice dated 30 March 2023 and all consequential actions, as the reassessment action was initiated beyond the limitation period. The issue of reading down Explanation 2(iv) to Section 148 was kept open for future consideration in a separate case. The writ petition was allowed, and the impugned order dated 18 May 2023 was quashed.

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