2025 (4) TMI 295 - HC - Income Tax

Reassessment proceedings under Section 148 held invalid for exceeding seven-day limitation period after assessee's response

Pratishtha Garg Versus Assistant Commissioner Of Income Tax Central Circle 25 Delhi

Delhi HC held that reassessment proceedings under Section 148 were invalid due to limitation period expiry. The first Section 148 notice was issued on ... Validity of reassessment proceedings - parallel assessment proceedings u/s 153C with 147 - Period of limitation - as argued second section 148 notice should be considered as non est as it was issued after the notice u/s 153C - HELD THAT:- Considering the definite stand taken on behalf of the Revenue is that the period of limitation for issuance of notice under Section 148 of the Act in the present case is four years from the end of the relevant assessment year, that is AY 2016-17, we find that the second section 148 notice has been issued beyond the period of limitation. Thus, without going into the question whether the second section 148 notice is invalid as it was issued when the proceedings for reassessment of income for the relevant assessment year had commenced pursuant to the notice issued under Section 153C of the Act, all proceedings continued pursuant thereto are required to be set aside. We say this for the reason that the first section 148 notice – which was directed to be considered as a notice under Section 148A (b) of the Act in terms of the decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] was issued on 23.06.2021 as the last date for issuing a notice under Section 148 of the Act in this case had expired on 31.03.2021. However, the period of limitation was extended by virtue of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [TOLA] and the time period for issuance of such notice was extended till 30.06.2021. In the present case, the first section 148 notice was issued on 23.06.2021, which is six days prior to the expiry of the period of limitation. The time period for issuing a notice under Section 148 of the Act was extended by following the directions issued by the Supreme Court in Union of India & Ors. v. Ashish Agarwal (supra) and as explained by the Supreme Court in the latter decision in Union of India & Others v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] As noted above, the Assessee had responded to the first section 148 notice (which was required to be construed as a notice under Section 148A (b) of the Act) on 07.06.2022 and therefore the order under Section 148A (d) of the Act and the second notice under Section 148A of the Act was required to be issued within the period of seven days thereafter. In the present case the second 148 notice was issued beyond the period of limitation. The said issue is squarely covered by the decision of this Court in Ram Balram Buildhome Pvt. Ltd. [2025 (2) TMI 55 - DELHI HIGH COURT] We do not consider it apposite to examine the question as to whether the notice issued has been approved by the competent authority as stipulated under Section 151 of the Act or whether the second section 148 notice was valid. 1. ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this judgment revolve around the validity of reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, and the subsequent notices issued under Sections 148A and 153C. The core legal questions include:Whether the second notice under Section 148 was issued within the statutory period of limitation.Whether the initiation of parallel assessment proceedings is permissible under the Income Tax Act.Whether the notices were validly issued with the requisite approval of the competent authority under Section 151 of the Act.Whether the reassessment proceedings initiated under Section 153C were valid, given the quashing of notices for certain assessment years.2. ISSUE-WISE DETAILED ANALYSISValidity of the Second Section 148 NoticeLegal Framework and Precedents: Section 148 of the Income Tax Act empowers the Assessing Officer to issue notices for reassessment of income. The period of limitation for issuing such notices is generally four years from the end of the relevant assessment year, unless extended by specific provisions or judicial directions.Court's Interpretation and Reasoning: The Court examined whether the second notice issued under Section 148 was within the period of limitation. The Revenue initially argued for a six-year period, but later conceded to a four-year limitation period applicable prior to 31.03.2021. The Court found that the second notice was issued beyond this period.Key Evidence and Findings: The first Section 148 notice was issued on 23.06.2021, within the extended period under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), but the second notice was not timely.Application of Law to Facts: The Court held that the second notice was issued beyond the statutory period of limitation as the relevant period was four years, not six.Treatment of Competing Arguments: The Court rejected the Revenue's alternative argument for a six-year limitation, emphasizing consistency in legal positions.Conclusions: The second Section 148 notice was deemed invalid due to being issued beyond the statutory period of limitation.Parallel Assessment ProceedingsLegal Framework and Precedents: The initiation of parallel assessment proceedings is generally impermissible under the Income Tax Act. Section 153A and 153C provide for specific circumstances under which reassessment can occur.Court's Interpretation and Reasoning: The Court noted that the initiation of proceedings under Section 153C rendered the second Section 148 notice redundant and impermissible as it would lead to parallel assessments for the same assessment year.Key Evidence and Findings: The Court observed that the proceedings under Section 153C had commenced prior to the second Section 148 notice, thus abating the latter.Application of Law to Facts: The Court applied the principle that abated proceedings cannot be revived if they lead to parallel assessments.Treatment of Competing Arguments: The Court dismissed the Revenue's inconsistent stance on the continuation of proceedings under the second Section 148 notice.Conclusions: The proceedings under the second Section 148 notice were set aside as they constituted impermissible parallel assessments.Approval by Competent AuthorityLegal Framework and Precedents: Section 151 of the Income Tax Act requires that notices under Section 148 be issued with the approval of the competent authority.Court's Interpretation and Reasoning: The Court did not find it necessary to delve into whether the requisite approval was obtained, given the determination on the limitation issue.Key Evidence and Findings: The Court acknowledged the Assessee's contention regarding lack of approval but focused on the limitation period for its decision.Application of Law to Facts: The Court refrained from addressing this issue in detail, given the overriding limitation issue.Conclusions: The question of approval was rendered moot by the finding on the limitation period.3. SIGNIFICANT HOLDINGSThe Court held that the second Section 148 notice was invalid as it was issued beyond the statutory period of limitation, which was four years from the end of the relevant assessment year. The initiation of parallel assessment proceedings was deemed impermissible, leading to the setting aside of the proceedings under the second Section 148 notice. The Court did not address the issue of approval under Section 151, given the decisive finding on the limitation period.Core Principles Established: The judgment reinforces the principle that reassessment notices must be issued within the statutory period of limitation and that parallel assessment proceedings are not permissible under the Income Tax Act.Final Determinations on Each Issue: The proceedings initiated under the second Section 148 notice were set aside, and the petition was allowed in these terms.