Revenue's reassessment notices under Section 148 quashed as time-barred despite TOLA extensions

ITAT Mumbai dismissed revenue's appeals and quashed reassessment notices u/s 148 for assessment years 2013-14, 2014-15, and 2015-16 as barred by limitation. The tribunal held that TOLA extended time limits only until 30/06/2021, but notices were issued in July 2022, well beyond the extended deadline. For AY 2015-16, the notice issued on 28/07/2022 was barred under new Section 149(1) provisions and not covered by TOLA. Revenue's contention that TOLA deemed notices as extended was rejected, following Supreme Court precedent in Union of India vs. Ashish Agarwal.

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Issues Involved:

1. Validity of notices issued under Section 148 of the Income Tax Act for Assessment Years 2013-14, 2014-15, and 2015-16.
2. Application of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) in extending the time limits for issuing reassessment notices.
3. Compliance with the procedural requirements under the new regime introduced by the Finance Act, 2021, including the necessity for obtaining prior approval from specified authorities under Section 151.

Detailed Analysis:

1. Validity of Notices Issued Under Section 148:

The primary issue in these appeals was the validity of notices issued under Section 148 for the Assessment Years (AY) 2013-14, 2014-15, and 2015-16. The Revenue challenged the quashing of these notices by the Commissioner of Income Tax (Appeals) [CIT(A)], who held that the notices were barred by limitation. The CIT(A) relied on judgments from the Bombay High Court, including Siemens Financial Services Pvt. Ltd. and Godrej Industries, which found that the notices were issued beyond the permissible time limits.

2. Application of TOLA:

The Revenue argued that the notices were within the time limit due to the extension provided by Section 3 of TOLA. TOLA was enacted to provide relief and relaxation during the COVID-19 pandemic, allowing for the extension of time limits for various actions under the Income Tax Act. The Revenue contended that the notices issued under the old regime between April 1, 2021, and June 30, 2021, were deemed to be show-cause notices under Section 148A(b) of the new regime, as per the Supreme Court's decision in Union of India vs. Ashish Agarwal. This decision allowed for the extension of time limits for issuing reassessment notices until June 30, 2021.

3. Compliance with Procedural Requirements:

The Supreme Court's judgment in Union of India vs. Rajeev Bansal further clarified the procedural requirements under the new regime. It emphasized the need for obtaining prior approval from specified authorities under Section 151 before issuing reassessment notices. The new regime, effective from April 1, 2021, introduced a higher level of authority for granting sanctions, which was considered beneficial to the assessee. The Court held that non-compliance with these procedural requirements affects the jurisdiction to issue a notice under Section 148.

Conclusion:

In light of the Supreme Court's rulings, the Tribunal found that the notices for AY 2013-14, 2014-15, and 2015-16 were issued beyond the extended time limits provided by TOLA. Specifically, the time limit for issuing notices for AY 2013-14 and 2014-15 expired on June 30, 2021, and the notices were issued in July 2022. For AY 2015-16, the Revenue conceded that all notices issued on or after April 1, 2021, must be dropped as they were not completed within the period prescribed under TOLA. Consequently, the Tribunal quashed all the notices as being barred by limitation, dismissing the Revenue's appeals. The decision was based on the principles established by the Supreme Court, ensuring compliance with the new procedural requirements and time limits.

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