2025 (5) TMI 369 - HC - Income Tax

Tax Reassessment Notice for 2015-16 Invalidated: Section 148 Challenge Succeeds on Limitation Grounds

The HC quashed a reassessment notice dated 23.07.2022 under Section 148 for AY 2015-16, finding it invalid. Relying on SC precedents in Rajeev Bansal and ... Validity of reopening of assessment u/s 147 - period of limitation - petitioner contends that the proceedings initiated pursuant to the impugned notice are required to be set aside in view of the concession made by the Revenue before the Supreme Court in Union of India and Ors. v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] HELD THAT:- The notice dated 23.07.2022 issued under Section 148 of the Act stands quashed and set aside. Concededly, the controversy is covered in favour of the petitioner by the decision of this court in Makemytrip India Pvt. Ltd [2025 (4) TMI 46 - DELHI HIGH COURT] wherein the impugned notice was issued on 27.07.2022, which was admittedly beyond the period of limitation as prescribed under Section 149 (1). Since TOLA was not applicable in respect of the said notices u/s 148 of the Act for AY 2015-16 as conceded by the Revenue in the case of Union of India v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)], thus the impugned notice is liable to be set aside. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court are:Whether the notice dated 23.07.2022 issued under Section 148 of the Income Tax Act, 1961 (the Act) for reopening assessment of AY 2015-16 is valid and sustainable in law.Whether the procedure prescribed under Section 148A of the Act was mandatorily required to be followed in issuing the reassessment notice dated 05.04.2021, and its impact on subsequent proceedings.Whether the concession made by the Revenue before the Supreme Court in Union of India and Ors. v. Rajeev Bansal (2024) applies to the present case, mandating dropping of notices issued on or after 1 April 2021 for AY 2015-16.Whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) applies to the limitation period for issuance of reassessment notices for AY 2015-16.The effect of the Supreme Court's decision in Deepak Steel and Power Ltd. v. Central Board of Direct Taxes (2025) on the validity of reassessment notices issued post 1 April 2021 for AY 2015-16.2. ISSUE-WISE DETAILED ANALYSISValidity of the reassessment notice dated 23.07.2022 under Section 148 for AY 2015-16Relevant legal framework and precedents: Section 148 of the Income Tax Act empowers the Assessing Officer (AO) to reopen an assessment if income has escaped assessment. The procedure was amended by the Finance Act 2021, introducing Section 148A, which prescribes mandatory preliminary enquiry and opportunity before issuing a notice under Section 148. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) further affects limitation periods for reassessment notices.Court's interpretation and reasoning: The AO issued a notice under Section 148 on 05.04.2021 but did not follow the procedure prescribed under Section 148A, as the notice was based on pre-31.03.2021 provisions. Subsequently, the AO issued another notice dated 23.07.2022 under Section 148 after passing an order under Section 148A(d). However, the Supreme Court's decision in Union of India and Ors. v. Rajeev Bansal clarified that for AY 2015-16, notices issued on or after 1 April 2021 fall outside the permissible period under TOLA and must be dropped.Key evidence and findings: The petitioner's return was filed on 23.09.2015 declaring income of Rs. 13,63,47,964/-. The AO's initial notice was issued after 31.03.2021 without following Section 148A procedure. The subsequent notice dated 23.07.2022 was issued after the Supreme Court's decision in Ashish Agarwal but before the concession in Rajeev Bansal.Application of law to facts: The Court found that the reassessment notices issued on or after 1 April 2021 for AY 2015-16 are not valid as per the limitation period read with TOLA, and the concession made by the Revenue before the Supreme Court in Rajeev Bansal applies directly to the present case.Treatment of competing arguments: The Revenue initially relied on the pre-31.03.2021 provisions and the Supreme Court's decision in Ashish Agarwal to justify the notices. However, the petitioner relied on the subsequent Supreme Court concession in Rajeev Bansal and the decision in Deepak Steel and Power Ltd., which favored dropping such notices.Conclusions: The Court held that the notice dated 23.07.2022 under Section 148 is liable to be quashed and set aside as it is barred by limitation and contrary to the concession made by the Revenue before the Supreme Court.Applicability of TOLA and the concession in Union of India and Ors. v. Rajeev Bansal to AY 2015-16 reassessment noticesRelevant legal framework and precedents: The Finance Act 2021 introduced a new reassessment regime, and TOLA applies to extend or modify limitation periods. The Supreme Court in Rajeev Bansal (2024) clarified the applicability of TOLA and the limitation periods for notices issued for various assessment years including 2015-16.Court's interpretation and reasoning: Paragraphs 19(e) and 19(f) of Rajeev Bansal were pivotal. The Court emphasized the Revenue's concession that for AY 2015-16, all notices issued on or after 1 April 2021 must be dropped as they do not fall within the period prescribed under TOLA.Key evidence and findings: The tabulation in Rajeev Bansal showed that TOLA was not applicable for AY 2015-16 beyond 31.03.2022, and notices issued after 1 April 2021 would not be valid. The Revenue conceded this point before the Supreme Court.Application of law to facts: The impugned notice dated 23.07.2022 was issued after 1 April 2021 and thus falls within the category of notices that must be dropped as per the concession and legal framework established in Rajeev Bansal.Treatment of competing arguments: The Revenue's earlier reliance on the Ashish Agarwal decision was superseded by its own concession in Rajeev Bansal and the Supreme Court's subsequent ruling in Deepak Steel and Power Ltd.Conclusions: The Court held that the reassessment notice for AY 2015-16 issued post 1 April 2021 is barred by limitation under TOLA and must be quashed.Effect of Supreme Court decision in Deepak Steel and Power Ltd. on reassessment notices for AY 2015-16Relevant legal framework and precedents: The Supreme Court decision in Deepak Steel and Power Ltd. (2025) arose from petitions challenging reassessment notices issued after 1 April 2021. The Supreme Court, relying on the concession in Rajeev Bansal, allowed the appeals and quashed such notices.Court's interpretation and reasoning: The Court noted the Supreme Court's reliance on the Revenue's concession and its clear direction that reassessment notices issued on or after 1 April 2021 for AY 2015-16 are invalid.Key evidence and findings: The Supreme Court's order explicitly referred to paragraph 19(f) of Rajeev Bansal and confirmed that notices issued after 1 April 2021 must be dropped.Application of law to facts: The present case's impugned notice dated 23.07.2022 falls squarely within the category of notices invalidated by the Supreme Court's ruling in Deepak Steel and Power Ltd.Treatment of competing arguments: The Court rejected any argument supporting the validity of the impugned notice based on procedural or substantive grounds, as the limitation bar and Supreme Court rulings take precedence.Conclusions: The Court held that the impugned notice and all proceedings pursuant thereto are liable to be set aside in light of the Supreme Court's decision.3. SIGNIFICANT HOLDINGS'The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.' (Union of India and Ors. v. Rajeev Bansal, para 19(f))'In view of the aforesaid, in such circumstances referred to above the original writ petitions filed before the High Court of Orissa stand allowed.' (Deepak Steel and Power Ltd. v. Central Board of Direct Taxes, para 6)The Court conclusively held that the impugned notice dated 23.07.2022 under Section 148 of the Income Tax Act for AY 2015-16 is barred by limitation and must be quashed and set aside.The Court reaffirmed that the procedure under Section 148A must be followed for reassessment notices issued after 31.03.2021, and failure to do so renders the notice invalid.The Court applied the Supreme Court's authoritative rulings and the Revenue's own concession to conclude that reassessment notices issued on or after 1 April 2021 for AY 2015-16 cannot be sustained.Consequently, all proceedings initiated pursuant to the impugned notice are set aside.