Reopening notice under Section 148 quashed as time-barred when dispatched after midnight deadline

ITAT Kolkata allowed the assessee's appeal and quashed the reopening of assessment under Section 147. The notice under Section 148 was issued on 31.03.2021 but dispatched on 01.04.2021 at 3:28 AM, making it time-barred. For AY 2015-16, extended period under TOLA was not available from 01.04.2021. Additionally, reopening after four years from assessment under Section 143(3) violated the first proviso to Section 147, as no failure to disclose material information was established by the AO in recorded reasons.

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ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the notice issued under Section 148 of the Income Tax Act was barred by limitation due to its dispatch and service beyond the prescribed time limit.
• Whether the reassessment for the Assessment Year (AY) 2015-16 was permissible under the extended period as per The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions Act) (TOLA) 2021.
• Whether the reopening of assessment was valid given it was initiated after four years from the end of the relevant assessment year without satisfying the conditions stipulated in the proviso to Section 147 of the Act.

ISSUE-WISE DETAILED ANALYSIS

1. Limitation on Notice Issuance under Section 148

The relevant legal framework involves Section 148 of the Income Tax Act, which requires notices to be issued and served within specified time limits. The Court noted that the notice in question was issued on March 31, 2021, but dispatched on April 1, 2021, at 3:28 AM. The Court referenced the decision in Marudhar Vintrade Private Limited vs. Union of India & Ors., where a similar issue led to the quashing of proceedings due to the notice being communicated after the deadline.

The Court concluded that the notice was indeed barred by limitation as it was not dispatched within the required timeframe, rendering subsequent proceedings unsustainable.

2. Reassessment Permissibility under TOLA 2021

The second issue concerned whether the reassessment for AY 2015-16 was permissible under the extended period provided by TOLA 2021. The Court examined the decision in Union of India & Ors. Vs. Rajeev Bansal, which held that reopening for AY 2015-16 was not permissible after April 1, 2021, under TOLA. The Court also considered the Delhi High Court's decision in Ibibo Group Pvt Ltd. Vs ACIT, which supported this view.

Based on these precedents, the Court found that the reassessment proceedings for AY 2015-16 were barred by limitation and thus quashed the assessment.

3. Reopening of Assessment Beyond Four Years

The third issue involved the validity of reopening the assessment after four years from the end of the relevant assessment year without meeting the conditions in the proviso to Section 147. The Court noted that the original assessment was completed under Section 143(3) on December 26, 2017, and the reopening was initiated without demonstrating any failure by the assessee to disclose material facts.

The Court referenced the decision in ACIT Vs. CEAT Ltd., which established that reopening beyond four years requires proof of such failure. Since no such failure was reported, the Court concluded that the reopening was invalid.

SIGNIFICANT HOLDINGS

The Court made the following significant holdings:

• The notice issued under Section 148 was barred by limitation as it was dispatched after the prescribed deadline. The Court stated, "the notice is barred by limitation," aligning with the precedent set in Marudhar Vintrade Private Limited vs. Union of India & Ors.
• The reassessment for AY 2015-16 was not permissible under the extended period provided by TOLA 2021, as supported by the decision in Union of India & Ors. Vs. Rajeev Bansal.
• The reopening of the assessment was invalid due to non-compliance with the proviso to Section 147, as there was no failure by the assessee to disclose material facts. The Court cited ACIT Vs. CEAT Ltd. to support this conclusion.

The appeal of the assessee was allowed, and the assessment proceedings were quashed based on these findings.

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