Reassessment notice under Section 148 for 2013-14 held time-barred and jurisdictionless, assessment order void ab initio

The Bombay HC held that a reassessment notice issued under Section 148 for assessment year 2013-14 dated 25 July 2022 was time-barred and without jurisdiction. Following the Division Bench decision in Hexaware, the court found the notice illegal under the first proviso to Section 149. The subsequent assessment order dated 26 May 2023 was consequently rendered void ab initio as it was based on an inherently jurisdictionless notice. The court ruled that the assessing officer incorrectly applied amended provisions while overlooking expired limitation periods, making the entire proceedings illegal and incurable regardless of forum. The assessee's appeal was allowed.

---

---

Issues Involved:
1. Legality of the notice under Section 148 of the Income Tax Act, 1961.
2. Limitation period for issuing notice under Section 148.
3. Application of the first proviso to Section 149 of the Income Tax Act.
4. Jurisdiction of the assessing officer.
5. Relegation to alternate remedy of statutory appeal.

Detailed Analysis:

1. Legality of the notice under Section 148 of the Income Tax Act, 1961:

The petitioner challenged the legality of the notice issued under Section 148 of the Income Tax Act dated 25th July 2022, along with subsequent orders and notices. The petitioner argued that these notices and orders were beyond the prescribed period of limitation as per the first proviso to Section 149 of the Act, making them invalid and without jurisdiction.

2. Limitation period for issuing notice under Section 148:

The relevant assessment year in this case is 2015-16. The petitioner was initially issued a notice under Section 148 on 11th June 2021. This notice was deemed to be under Section 148A(b) following the Supreme Court's decision in Union of India v. Ashish Agarwal. The petitioner argued that the limitation period of six years for issuing a notice under Section 148 expired on 31st March 2022, as per the provisions of Section 149 before its amendment by the Finance Act, 2021.

3. Application of the first proviso to Section 149 of the Income Tax Act:

The petitioner contended that the issue was covered by the decision in Hexaware Technologies Ltd. v. Assistant Commissioner of Income-tax. The court in Hexaware held that for assessment years up to 2021-2022, the period of limitation as prescribed in the erstwhile provisions of Section 149 would apply. The notice under Section 148 issued on 27th August 2022 was beyond the six-year limitation period and hence barred by the first proviso to Section 149. The court emphasized that the proviso's purpose was to ensure that amendments were prospective, not retrospective.

4. Jurisdiction of the assessing officer:

The court found that the impugned notice under Section 148, dated 25th July 2022, was issued beyond the prescribed limitation period, rendering it illegal and without jurisdiction. Consequently, any assessment order based on such a notice was also without jurisdiction. The court referenced its decision in Bhoomi Viral Shah v. Income-tax Officer, where it was held that an order ab initio void cannot be saved by any subsequent proceedings.

5. Relegation to alternate remedy of statutory appeal:

The respondents argued that the petitioner should be relegated to an alternate remedy of a statutory appeal. However, the court held that since the impugned notice itself was time-barred and hence illegal, relegating the petitioner to an alternate remedy would serve no useful purpose. The court emphasized that an illegal and void order cannot be validated through subsequent procedural steps.

Conclusion:

The court allowed the petition, quashing the notice under Section 148 dated 25th July 2022, the order under Section 148A(d) dated 25th July 2022, the show-cause notice under Section 148A(b) dated 31st May 2022, the order passed under Section 147 read with Section 144 dated 31st March 2024, the notice of demand under Section 156 dated 31st March 2024, and the show-cause notice under Section 274 read with Section 271(1)(c) dated 31st March 2024. The rule was made absolute in these terms.

---