Section 148 reassessment notices quashed as time-barred beyond ten-year block period under Section 153C

Delhi HC quashed Section 148 notices for reassessment of AYs 2012-13 and 2013-14. Following a search operation on a third party in February 2022, notices were served in March 2023. The court held that reassessment proceedings for AYs prior to April 2021 must comply with pre-Finance Act 2021 timeframes under Sections 149(1)(b), 153A, or 153C. The impugned assessment years fell beyond the permissible ten-year block period under Section 153C read with Section 153A, making the notices time-barred and unsustainable. Assessee's writ petitions were allowed.

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Issues:
Reassessment notices for Assessment Years 2012-13 and 2013-14 under Section 148 of the Income Tax Act, 1961; Applicability of the amended regime of reassessment from 01 April 2021; Compliance with timeframes specified under Section 149 (1) (b), Section 153A or Section 153C; Validity of reassessment actions based on Proviso to Section 149 (1); Impact of search and seizure operation on the reassessment timeline; Interpretation of the relevant assessment year for computation purposes.

Analysis:
The High Court judgment dealt with the challenge to reassessment notices for Assessment Years 2012-13 and 2013-14 issued under Section 148 of the Income Tax Act, 1961. The court noted that the amended regime of reassessment from 01 April 2021 would apply to the case, requiring compliance with the provisions of the First Proviso to Section 149(1) of the Act. The court emphasized that any action for reassessment before 01 April 2021 must adhere to the timeframes specified under Section 149(1)(b), Section 153A, or Section 153C as they existed prior to the Finance Act 2021. It concluded that the assessment for the mentioned years could not have been reopened based on these provisions.

The judgment highlighted that the reassessment actions were initiated following a search and seizure operation involving a third party, where the notices under Section 148 were served on the petitioner. Considering the Proviso to Section 149(1), the court determined that the reassessment could have been initiated only up to Assessment Year 2014-15. Citing previous decisions, the court clarified the computation of the relevant assessment year and the limitation period under Section 149(1)(b) and Explanation 1 to Section 153A. It emphasized that the impugned notice issued under Section 148 could not be sustained based on these legal principles.

Further, the court computed the ten-year block period from the date of the impugned Section 148 notice to establish that Assessment Years 2012-13 and 2013-14 fell beyond this period as outlined in Section 153C read with Section 153A of the Act. Consequently, the court found the reassessment notices unsustainable and quashed them. In conclusion, the court allowed the writ petitions and invalidated the notices dated 30 March 2023 under Section 148 of the Act, based on the statutory limitations and legal interpretations provided in the judgment.

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