2025 (4) TMI 923 - HC - Income Tax

Assessment notices under old Section 148 and new Section 148A regimes held valid within limitation periods

Ramadoss Srikanthi Versus The Assistant Commissioner of Income Tax, Circle 2 (1), Cuddalore

The HC upheld the validity of reopening assessment notices issued under both old and new tax regimes. The court ruled that a notice dated 31.03.2021 under ... Reopening of assessment u/s 147 - period of limitation - notice issued under the old regime - scope of new regime u/s 148A - normal period of limitation of 4 years u/s 149 - HELD THAT:- As per decision of the Hon’ble Supreme Court in Rajeev Bansal’s case [2024 (10) TMI 264 - SUPREME COURT (LB)] the period from the date of issuance of deemed notice dated 31.03.2021 till the supply of relevant material / information by the Assessing Officer to assess the income in terms of the directions of the Hon’ble Supreme Court in Ashish Agarwal’s case [2022 (5) TMI 240 - SUPREME COURT] has to be excluded for the purpose of computation of period of limitation. Only requirement to be followed is u/s 153(2) of the Income Tax Act, 1961 as in force with effect from 01.04.2021. Thus, an Assessment Order has been passed within a period of 9 months from the end of the Financial Year in which the Notice was under Section 148 of the Income Tax Act, 1961 as in force with effect from 01.04.2021. The Impugned Notice dated 31.03.2021 for the Assessment Year 2015-2016 under Section 148 of the Income Tax Act, 1961 as it stood till 31.03.2021 was issued within the extended period of limitation, as 5 years had already expired from the end of the said Assessment Year. If the said notice is pigeonholed as a notice under Section 149(1)(a) of the Income Tax Act, 1961 as in force with effect from 01.04.2021, for the purpose of computation of period of limitation, the entire proceedings initiated under Section 148 as it stood till 31.03.2021 for the purpose of Section 148 as in force with effect from 01.04.2021 will be a still-born i.e., at the time of its issuance. This is not what was intended by either of the decision of the Hon’ble Supreme Court. Therefore, it has to be held that a Notice under Section 148 of the Income Tax Act, 1961 as in force with effect from 01.04.2021 was issued within the extended period of limitation prescribed u/s 149(1)(b) after the said Notice dated 31.03.2021 issued u/s 148 as it stood till 31.03.2021 transformed itself into a Notice u/s 148-A(b) of the Income Tax Act, 1961 under the new regime as in force with effect from 01.04.2021 in the light of the decision of the Hon’ble Supreme Court in Ashish Agarwal’s Case [2022 (5) TMI 240 - SUPREME COURT] Therefore, computation of limitation for issuance of a Notice under Section 148 of the Income Tax Act, 1961 under the new regime with effect from 01.04.2021, the period of limitation up to 02.06.2022 being the date of issuance of the Show Cause Notice and Reply dated 11.06.2022 of the petitioner, assessment has to be excluded even if it has to be construed that the case falls under Clause (a) to Section 149(1) of the Income Tax Act, 1961. However, the present case falls under Clause (b) to Section 149(1) of the Income Tax Act, 1961 as in force with effect from 01.04.2021. If the aforesaid period is excluded as per the decision of the Hon'ble Supreme Court, conclusion in Paragraph 114(g) in Rajeev Bansal's case (cited supra), read with 1stProviso and 3rdProviso to Section 149(1) of the Income Tax Act, 1961 as amended, it has to be necessarily concluded that the Impugned Notice issued on 30.07.2022 is in time. Only if the Impugned Notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961 as it stood till the said date was already time barred under the old regime as it stood till 31.03.2021, it can be said that the Notice was time barred. Since there were ingredients for invoking the extended period of limitation under the Proviso to Section 147 of the Income Tax Act, 1961 as it stood till 31.03.2021, it cannot be said that the Impugned Notice dated 30.07.2022 is time barred. Therefore, there is no merits in the challenge to the Impugned Notice issued to the petitioner on 31.03.2021 under the old regime or the Impugned Order passed by the respondent under Section 148-A(d) of the Income Tax Act, 1961 on 30.07.2022 or the Impugned Notice issued under Section 148 of the Income Tax Act, 1961 on 30.07.2022 under the new regime. ISSUES PRESENTED and CONSIDEREDThe primary legal issues considered in this judgment revolve around the validity and timeliness of reassessment notices issued under Section 148 of the Income Tax Act, 1961, particularly in light of amendments introduced by the Finance Act, 2021. The specific questions include:Whether the reassessment notices issued under the old regime (pre-01.04.2021) and subsequently treated under the new regime (post-01.04.2021) were valid and within the prescribed limitation period.The applicability of the Supreme Court's decision in 'Union of India vs. Ashish Agarwal' and its impact on the reassessment proceedings.The interpretation of the limitation provisions under Section 149 of the Income Tax Act, 1961, as amended by the Finance Act, 2021, and how they interact with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).The jurisdictional validity of the orders and notices issued under the amended provisions, considering the procedural requirements and limitations.ISSUE-WISE DETAILED ANALYSISValidity of Reassessment Notices under the Amended RegimeThe Court examined whether the reassessment notices issued under the old regime could be treated as valid under the new regime following the amendments effective from 01.04.2021. The Supreme Court's decision in 'Union of India vs. Ashish Agarwal' was pivotal, as it allowed notices issued under the old regime to be deemed as notices under Section 148A of the new regime. This decision was intended to balance the rights of the Revenue and the assessees, acknowledging the bona fide belief of Revenue officers regarding the applicability of amendments.The Court noted that the notices issued prior to 01.04.2021 were deemed to be issued under the amended provisions, thereby extending their validity. The procedural requirements under Section 148A, such as providing material and information to assessees, were to be followed subsequently.Limitation and Jurisdictional ValidityA critical issue was whether the notices and orders issued were within the limitation period prescribed under Section 149 of the Income Tax Act, 1961, as amended. The Court referred to the Supreme Court's clarification in 'Union of India vs. Rajeev Bansal,' which outlined that the time during which show-cause notices were deemed stayed (from issuance to supply of information) should be excluded from the limitation period calculation.The Court also considered the impact of TOLA, which extended certain timelines due to the COVID-19 pandemic. It was concluded that the reassessment notices were issued within the extended limitation period, considering the exclusions and extensions permitted under the amended provisions and TOLA.Competing Arguments and Court's ReasoningThe petitioner argued that the reassessment proceedings were time-barred and lacked jurisdiction, citing the Supreme Court's observations regarding jurisdictional preconditions. The respondent contended that the proceedings were valid, relying on the exclusions and extensions provided by the Supreme Court's decisions and the amended provisions.The Court reasoned that the procedural and substantive requirements were met, and the reassessment notices were within the permissible time frame. The Court emphasized the importance of considering the exclusions and extensions in the context of the amendments and the Supreme Court's directions.ConclusionsThe Court concluded that the reassessment notices and orders were valid and within the prescribed limitation period. The procedural requirements under the new regime were satisfied, and the exclusions and extensions under TOLA and the Supreme Court's directions were applicable. Consequently, the petition challenging the reassessment proceedings was dismissed.SIGNIFICANT HOLDINGSThe Court upheld the validity of reassessment notices issued under the old regime and treated under the new regime, following the Supreme Court's decision in 'Union of India vs. Ashish Agarwal.' The Court emphasized the balance struck by the Supreme Court between the rights of the Revenue and the assessees, allowing for procedural compliance under the new regime.Key principles established include:The applicability of the Supreme Court's directions to reassessment notices issued during the transition from the old to the new regime.The interpretation of limitation provisions under Section 149, considering exclusions and extensions due to the COVID-19 pandemic and the Supreme Court's directions.The jurisdictional validity of reassessment proceedings when procedural requirements under the new regime are met.The Court's final determination was that the reassessment proceedings were valid, and the petition was dismissed, affirming the procedural and jurisdictional compliance of the notices and orders under the amended provisions.