2025 (2) TMI 891 - AT - Income Tax

Assessment quashed due to section 148 notice issued beyond limitation period rendering jurisdiction invalid

Deputy Commissioner of Income Tax-1 (1), Raipur Versus Shri Vinay Agrawal And (Vice-Versa)

Deputy Commissioner of Income Tax-1 (1), Raipur Versus Shri Vinay Agrawal And (Vice-Versa) - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:Whether the reassessment notice under Section 148 of the Income Tax Act was issued within the permissible time limits as per the amended legal framework and relevant judicial pronouncements.Whether the additions made by the Assessing Officer (AO) on account of alleged bogus purchases were justified.Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in restricting or deleting the additions made by the AO based on the gross profit (GP) rate applied to the alleged bogus purchases.2. ISSUE-WISE DETAILED ANALYSISValidity of Reassessment Notice under Section 148Relevant Legal Framework and Precedents: The Finance Act, 2021, amended the reassessment procedure under Sections 147 to 151 of the Income Tax Act, effective from April 1, 2021. The amendments require the AO to issue reassessment notices based on prior information with the approval of a specified authority. The time limit for issuing such notices was reduced, and specific procedures under Section 148A must be followed. The Supreme Court's decisions in Union of India & Ors Vs. Ashish Agrawal and Union of India & Ors Vs. Rajeev Bansal provided further clarity on the application of these amendments.Court's Interpretation and Reasoning: The Tribunal examined the timeline of the issuance of notices and found that the notice under Section 148 was issued beyond the permissible time limit. The Tribunal relied on the Supreme Court's judgments, which clarified that notices issued under the old regime after April 1, 2021, should be treated as show-cause notices under the new regime.Key Evidence and Findings: The Tribunal considered the dates of the notices issued and the relevant provisions of the Finance Act, 2021. The Tribunal found that the notice was issued after the expiration of the limitation period, as extended by the Supreme Court's directives.Application of Law to Facts: The Tribunal applied the amended provisions and the Supreme Court's guidance to determine that the notice was time-barred. This rendered the subsequent assessment order invalid.Treatment of Competing Arguments: The Tribunal considered the Department's argument that the AO had validly assumed jurisdiction but found it unpersuasive in light of the Supreme Court's decisions.Conclusions: The Tribunal concluded that the reassessment notice was invalid due to being issued beyond the permissible time limit, leading to the quashing of the assessment order.Justification of Additions on Account of Alleged Bogus PurchasesRelevant Legal Framework and Precedents: The AO made additions based on alleged bogus purchases, which were challenged by the assessee. The CIT(A) applied a GP rate to determine the profit from these purchases, relying on past decisions like M/s Gopal Rice Industries vs. ITO.Court's Interpretation and Reasoning: The Tribunal did not delve into the merits of the additions due to the quashing of the assessment order on jurisdictional grounds.Key Evidence and Findings: The Tribunal acknowledged the CIT(A)'s approach of applying a GP rate but did not evaluate its correctness due to the primary issue of jurisdiction.Application of Law to Facts: Since the assessment order was quashed, the Tribunal did not need to apply the law to the facts of the alleged bogus purchases.Treatment of Competing Arguments: The Tribunal did not address competing arguments regarding the merits of the additions due to the jurisdictional issue.Conclusions: The Tribunal left the issue of the merits of the additions open, as the assessment was quashed on jurisdictional grounds.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'As the notice u/s. 148 of the Act, dated 25.07.2022, was issued beyond the surviving/balance period that was available with the A.O, therefore, the same was barred by limitation.'Core Principles Established: The Tribunal reaffirmed the principle that reassessment notices must comply with the amended legal framework and time limits as clarified by the Supreme Court. Notices issued beyond these limits are invalid.Final Determinations on Each Issue: The Tribunal quashed the assessment orders for both assessment years due to the invalidity of the reassessment notices. Consequently, the appeals by the Revenue were dismissed, and the cross-objections by the assessee were allowed.