Reassessment notice issued beyond six-year limit under Section 149(1)(b) quashed as time-barred

Delhi HC quashed reassessment proceedings initiated for AY 2016-17 through notice dated 29 April 2024. Court held that under pre-amendment Section 149(1)(b), reassessment notices cannot be issued beyond six years from the end of relevant assessment year. Since the six-year period for AY 2016-17 expired on 31 March 2023, the notice issued in April 2024 was time-barred and legally impermissible. The writ petition was allowed, and both the Section 148A(d) order and consequential Section 148 notice were quashed.

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Issues Involved:
1. Validity of the reassessment notice dated 29 April 2024 under Section 148 of the Income Tax Act, 1961.
2. Applicability of the Proviso to Section 149 (1) of the Income Tax Act, 1961.
3. Compliance with procedural requirements post-01 April 2021 amendments.
4. Interpretation of previous court decisions and their impact on the reassessment process.

Detailed Analysis:

1. Validity of the Reassessment Notice Dated 29 April 2024:
The primary issue in this case is the challenge to the reassessment notice issued on 29 April 2024 under Section 148 of the Income Tax Act, 1961, for the Assessment Year (AY) 2016-17. The petitioners argue that the reassessment action is invalid due to the statutory limitation period prescribed under the Act. The notice represents the third attempt by the respondents to initiate reassessment proceedings, following previous annulments by the court.

2. Applicability of the Proviso to Section 149 (1):
The petitioners contend that under the Proviso to Section 149 (1), the reassessment action is time-barred. The Proviso mandates that no notice under Section 148 shall be issued for any assessment year prior to 01 April 2021 if the time limit for issuing such notice, as per the provisions before the Finance Act, 2021, has expired. This provision essentially requires a retrospective examination of whether the reassessment notice could have been issued within the original statutory time frame.

3. Compliance with Procedural Requirements Post-01 April 2021 Amendments:
The procedural requirements for reassessment underwent significant changes with the Finance Act, 2021. The Supreme Court, in Union of India vs. Ashish Agarwal (2023) 1 SCC 617, provided directions to treat notices issued under the unamended Section 148 as show-cause notices under the new Section 148-A. Despite these directions, the respondents issued fresh notices, which led to further litigation. The court had previously quashed similar notices in Mon Mohan Kohli v. Assistant Commissioner of Income-tax and Another 2021 SCC OnLine Del 5250, emphasizing that reassessment must comply with the new procedural requirements.

4. Interpretation of Previous Court Decisions:
The court in Twylight Infrastructure (P) Ltd. v. CIT 2024 SCC OnLine Del 330 and subsequent decisions had quashed reassessment notices due to non-compliance with the procedural requirements. The Supreme Court's decision in Ashish Agarwal aimed to harmonize the conflicting directions from various High Courts and provided a framework for reassessment notices issued post-01 April 2021. However, the court reiterated that any reassessment action must still comply with the statutory limitations and procedural requirements.

Conclusion:
The court concluded that the reassessment notice dated 29 April 2024 is invalid as it does not comply with the statutory limitation period prescribed under the pre-amendment Section 149 (1) (b). The six-year period for issuing such a notice for AY 2016-17 ended on 31 March 2023. The court also found that the respondents did not attempt to justify the reassessment action under any other statutory provision that could extend the time limit. Consequently, the court quashed the impugned order under Section 148A (d) dated 29 April 2024 and the consequential notice under Section 148 of the same date.

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