Section 148 notice for AY 2015-16 quashed as time-barred under Section 149(1) limitation period

Delhi HC quashed Section 148 notice for assessment year 2015-16, holding it was issued beyond the limitation period prescribed under Section 149(1). The court followed its precedent in Makemytrip India Pvt. Ltd., where a similar notice dated 27.07.2022 was deemed time-barred. Revenue conceded that Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA) was not applicable to such notices for AY 2015-16, as established in Union of India v. Rajeev Bansal by SC. The reopening assessment notice was consequently set aside for being issued outside statutory limitation period.

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1. ISSUES PRESENTED and CONSIDERED

- Whether the notice dated 30.08.2022 issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment year 2015-16 is valid and sustainable in law.

- Whether the reassessment proceedings initiated pursuant to the impugned notice comply with the procedural requirements introduced by the Finance Act, 2021, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [TOLA].

- Whether the reopening notice issued after 01.04.2021 but following the pre-31.03.2021 regime of reassessment is liable to be quashed.

- The applicability and effect of the Supreme Court's decision in Union of India & Ors. v. Ashish Agarwal and Union of India & Ors. v. Rajeev Bansal on the reassessment proceedings.

- Whether the Assessing Officer (AO) possessed any new material or information justifying reopening of the assessment for AY 2015-16.

2. ISSUE-WISE DETAILED ANALYSIS

Validity of the Notice Issued under Section 148 for AY 2015-16

The legal framework governing reassessment notices underwent significant changes with the Finance Act, 2021, which substituted the old reassessment regime with a new procedural regime, including the introduction of Section 148A. Prior to 31.03.2021, notices under Section 148 could be issued without the procedural safeguards now mandated. The petitioner challenged the notice dated 30.08.2022 on the ground that it was issued under the old regime post 31.03.2021 and hence was unsustainable.

The Court examined the procedural history and noted that the AO had initially completed the assessment for AY 2015-16 on 09.10.2017, after scrutiny proceedings. Subsequent notices issued in 2021 sought to verify certain bank account transactions, to which the Assessee responded that all such transactions were duly reflected in the books of accounts and that the AO had already allowed exemption under Section 13A.

Precedents including the decision of this Court in Mon Mohan Kohli v. Assistant Commissioner of Income and Anr. were considered, where notices issued after 31.03.2021 without following Section 148A were set aside. Various High Courts had expressed similar views, emphasizing adherence to the new procedural safeguards.

The Court further noted that the Supreme Court in Union of India & Ors. v. Ashish Agarwal had directed that notices issued between 01.04.2021 and 30.06.2021 under the old regime be treated as notices under Section 148A(b), granting time to the AO to furnish material justifying reassessment.

Applicability of TOLA and Concession by Revenue Regarding Limitation

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) extended limitation periods for issuance of reassessment notices due to the COVID-19 pandemic. The Court scrutinized the interplay between TOLA and the new reassessment regime, particularly Section 149 of the Income Tax Act.

The Supreme Court's decision in Union of India & Ors. v. Rajeev Bansal was pivotal. The Court reproduced paragraphs 19(e) and 19(f) wherein the Revenue conceded that for AY 2015-16, all notices issued on or after 01.04.2021 must be dropped as they do not fall within the extended limitation period prescribed under TOLA.

The Court analyzed the tabulation provided by the Supreme Court, which clarified that for AY 2015-16, the limitation for reassessment under the old regime expired on 31.03.2022 and TOLA was not applicable to extend this period beyond that date. Since the impugned notice was issued on 30.08.2022, it was beyond the permissible period.

Whether AO Possessed Any New Material Justifying Reopening

The Assessee contended that the AO did not have any new material or information suggesting escapement of income beyond what was already examined during the original assessment. The deposits in the two bank accounts were from donations and coupon receipts, which were fully disclosed and scrutinized. The AO had allowed a deduction of over Rs. 67 crores under Section 13A after due verification.

The Court observed that the AO's notices seeking verification of bank transactions were responded to by the Assessee with full disclosure and explanations. The AO's subsequent issuance of the reassessment notice without any fresh material was therefore not justified.

Treatment of Competing Arguments and Precedents

The Revenue's position was undermined by its own concession before the Supreme Court in Rajeev Bansal and the directions in Ashish Agarwal. The Court also relied on the Supreme Court's decision in Deepak Steel and Power Ltd. v. Central Board of Direct Taxes, where the concession was reiterated and notices issued post 01.04.2021 for AY 2015-16 were quashed.

The Court noted that the controversy was squarely covered in favor of the Assessee by the decision in Makemytrip India Pvt. Ltd. v. Deputy Commissioner of Income Tax Circle 16 (1) Delhi & Anr., which held that notices issued beyond the limitation period and without compliance with new procedural safeguards are liable to be set aside.

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 & Ors. v. Rajeev Bansal, para 19(f))

"The notice dated 30.08.2022 issued under Section 148 of the Act stands quashed and set aside."

Core principles established include:

• Reassessment notices issued post 31.03.2021 must comply with the procedural safeguards under the new regime introduced by the Finance Act, 2021, including Section 148A.
• The extended limitation periods under TOLA apply selectively and do not extend limitation for AY 2015-16 beyond 31.03.2022.
• Notices issued beyond the prescribed limitation period and without fresh material justifying reassessment are liable to be quashed.
• Revenue's concession before the Supreme Court is binding and decisive in determining the validity of reassessment notices.

Final determinations:

• The impugned notice dated 30.08.2022 under Section 148 for reopening AY 2015-16 is invalid and unsustainable.
• All proceedings initiated pursuant to the impugned notice are set aside.
• The Assessee's claim of exemption under Section 13A and disclosure of income and transactions in the original assessment remain undisturbed.

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