Reopening of Assessment Under Section 148 Barred by Limitation as per Section 149; Invalid Notices Without Approval Quashed

The HC held that reopening of assessment under section 148 is barred by limitation as prescribed under section 149. Notices issued under section 148 before 01.04.2021 but after that date are to be treated as notices under section 148A(b). The notice issued without mandatory approval was invalid, and the time spent by the assessee in challenging the notice cannot be excluded or extend the limitation period. The Revenue must initiate proceedings within the prescribed limitation period following proper legal steps. Absence of court orders restraining the Revenue does not justify extending limitation. The HC rejected the Revenue's contention that limitation was extended due to earlier proceedings and quashed the reassessment order and notices, ruling in favor of the assessee.

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The Court considered several issues in this case, primarily revolving around the validity of notices issued under the Income Tax Act, 1961, specifically under Sections 148 and 148A, and the application of limitation periods under Section 149. The petitioner challenged the notices and orders issued by the Assessing Officer (AO) on the grounds of being time-barred and lacking mandatory approvals.

Issues Presented and Considered:

The core legal questions considered were:

• Whether the notice dated 24.04.2024 issued under Section 148 of the Act was barred by the period of limitation as prescribed under Section 149.
• Whether the AO followed the mandatory requirement of obtaining approval from the specified authority before issuing the notice under Section 148.
• Whether the period during which the petitioner was pursuing legal challenges could be excluded from the limitation period.

Issue-wise Detailed Analysis:

1. Limitation Period under Section 149:

• Legal Framework and Precedents: The Court referred to the decision in Manju Somani v. Income Tax Officer and the Supreme Court's ruling in Union of India & Ors. v. Rajeev Bansal, which clarified that a notice under Section 148 cannot be issued if the period of six years from the end of the relevant assessment year has expired.
• Court's Interpretation and Reasoning: The Court emphasized that the notice for AY 2016-17 was issued beyond the permissible six-year period, which expired on 31.03.2023. The Court rejected the Revenue's argument that the limitation period was extended due to a stay order in a related case.
• Key Evidence and Findings: The AO had issued a notice under the old regime, which was subsequently deemed under Section 148A(b) by the Supreme Court's directive. However, the notice was still time-barred.
• Application of Law to Facts: The Court held that the limitation period was not extended by the proceedings in W.P.(C) 1006/2023, as there was no court order preventing the issuance of a valid notice within the limitation period.
• Conclusions: The notice dated 24.04.2024 was set aside as it was issued beyond the limitation period.

2. Mandatory Approval Requirement:

• Legal Framework and Precedents: The Court analyzed the provisions of Sections 148, 149, and 151, both before and after the Finance Act 2021 amendments. It referred to the decision in Twylight Infrastructure Pvt. Ltd. v. Income Tax Officer, which highlighted the necessity of obtaining approval from the specified authority.
• Court's Interpretation and Reasoning: The Court found that the AO failed to obtain the necessary approval from the competent authority as required under the amended Section 151.
• Key Evidence and Findings: The AO issued the notice without the approval of the specified authority, which was mandatory under the amended provisions.
• Application of Law to Facts: The Court held that the lack of approval rendered the notice invalid, and the Revenue's argument that approval was not mandatory was untenable.
• Conclusions: The notices and orders were quashed due to the absence of the required approval.

Significant Holdings:

• The Court reaffirmed the principle that the limitation period for issuing notices under Section 148 is strictly governed by Section 149, and any deviation without a valid legal basis renders the notice invalid.
• The mandatory requirement of obtaining approval from the specified authority before issuing a notice under Section 148 was emphasized, reinforcing the procedural safeguards for taxpayers.
• The Court concluded that the period during which the petitioner pursued legal challenges could not be excluded from the limitation period, nor could it extend the limitation period.
• The Court set aside the impugned notices and orders, allowing the petition in favor of the petitioner.

The judgment underscores the importance of adhering to statutory requirements and procedural safeguards in tax assessment proceedings, ensuring that taxpayers' rights are protected against retrospective and unauthorized actions by tax authorities.

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