2025 (6) TMI 83 - HC - Income Tax

Reassessment notice u/s 148 valid when dispatched within limitation period despite earlier digital signing date

Rajesh Chopra Versus Income Tax Officer, Ward 62 (1) Delhi

Delhi HC dismissed petitioner's challenge to reassessment notice u/s 148 for AY 2013-14. Though notice was digitally signed on 31.03.2021, it was actually ... Reopening of assessment u/s 147 - prescribed limitation period u/s 149(1) of the Act for initiating reassessment proceedings for AY 2013-14 - determination of date of issuance of the notice u/s 148 HELD THAT:- Notice had been signed digitally on the system on 31.03.2021 and was, thus, placed on the portal. However, the email was despatched to the petitioner on the morning of 01.04.2021 at 07:30:47 AM and was delivered at 7:30:48 AM. The notice was also despatched to the petitioner by speed post on 01.04.2021. It is material to note that it is not the petitioner’s case that he had, in fact, received the notice on 31.03.2021. Section 149 (1) of the Act proscribes issuance of notice beyond the period as stipulated in the said section. In Suman Jeet Agarwal [2022 (9) TMI 1384 - DELHI HIGH COURT] had considered the question regarding as to the date of issue of a notice under Section 148 of the Act for ascertaining the period of limitation for issuance of such a notice. It is material to note that a notice under Section 148 of the Act is a jurisdictional notice and issuance of such notice is necessary for the AO to assume jurisdiction to assess/re-assess the income under Section 147 of the Act. If the notice under Section 148 is found to be invalid, it would vitiate the proceedings commenced pursuant thereto. Thus, merely because the parties had laboured under a misconception at the initial stage that the initial notice issued under Section 148 of the Act was valid, would not invalidate the subsequent steps taken by the Revenue in conformity with the decision of the Supreme Court in Union of India and Ors. v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] as well as the decision of this Court in Suman Jeet Agarwal v. Income Tax Officer and Ors. (supra). Viewed from another perspective, if an adverse re-assessment order was passed pursuant to the notice dated 31.03.2021 (issued on 01.04.2021), the same would be vulnerable to a challenge by the Assessee on the ground that the proceedings were not in compliance with the directions issued by the Supreme Court in Union of India and Ors. v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] We find it difficult to sustain the petitioner’s challenge in the present petition. The petition is, accordingly, dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court include:(a) Whether the notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961 ('the Act') was validly issued within the prescribed limitation period under Section 149(1) of the Act for initiating reassessment proceedings for AY 2013-14.(b) Whether the date of issuance of the notice under Section 148 of the Act should be construed as the date on which the notice was digitally signed (31.03.2021) or the date on which the notice was actually dispatched and delivered to the petitioner (01.04.2021).(c) Whether the impugned notices issued under Sections 148A(b), 148A(d), and 148 of the Act after 01.04.2021 are to be treated as valid in light of the Supreme Court's directions in Union of India and Ors. v. Ashish Agarwal, which substituted the procedure for reassessment notices issued after 01.04.2021.(d) The applicability and effect of the Supreme Court's directions issued under Article 142 of the Constitution of India in Ashish Agarwal on reassessment proceedings initiated by notices issued under the unamended provisions of the Act post 01.04.2021.(e) The legal significance of the date and time of dispatch of notices via the Income Tax Business Application (ITBA) portal and email in determining the date of issuance of the notice under Section 148.(f) Whether the petitioner's challenge to the impugned notices and orders should be upheld or dismissed in light of the above issues.2. ISSUE-WISE DETAILED ANALYSISIssue (a) and (b): Validity and Date of Issuance of the Section 148 NoticeRelevant Legal Framework and Precedents: Section 149(1) of the Income Tax Act prescribes the limitation period for issuance of notice under Section 148 for reassessment. The date of issuance of the notice is critical to determine whether the notice is time-barred. The Court relied heavily on the decision in Suman Jeet Agarwal v. Income Tax Officer, where it was held that the date of issuance means the date on which the notice is dispatched to the assessee, not merely the date on which it is digitally generated or signed.Court's Interpretation and Reasoning: The Court examined the facts that the notice was digitally signed on 31.03.2021 at 7:44 PM but was dispatched and delivered electronically and by speed post only on 01.04.2021 at 7:30 AM. The Court emphasized that mere generation or digital signing of the notice does not constitute issuance. The issuance requires an overt act of dispatch to the addressee. The Court referred to the ITBA portal's email timestamp as determinative of dispatch and delivery.Key Evidence and Findings: The Revenue filed affidavits confirming the timestamps of dispatch and delivery as 01.04.2021. The petitioner did not dispute that they received the notice only on 01.04.2021. The Court also reviewed the ITBA system's automated process and the inability of the Revenue to control the exact timing of upload and dispatch.Application of Law to Facts: Applying the principle from Suman Jeet Agarwal, the Court held that the notice was 'issued' on 01.04.2021, the date of dispatch and delivery, not on the date of digital signing. Therefore, the limitation period under Section 149(1) runs from 01.04.2021.Treatment of Competing Arguments: The petitioner argued that the date on the notice (31.03.2021) and its digital signing date should govern. The Revenue contended that the actual dispatch date is decisive. The Court found the Revenue's position consistent with legal principles and instructions issued by the Directorate of Income-tax (Systems) distinguishing generation and issuance of notices.Conclusion: The notice under Section 148 was validly issued on 01.04.2021 and not on 31.03.2021.Issue (c) and (d): Applicability of Supreme Court Directions in Ashish Agarwal and Validity of Post-01.04.2021 NoticesRelevant Legal Framework and Precedents: The Supreme Court in Union of India and Ors. v. Ashish Agarwal exercised powers under Article 142 of the Constitution to clarify the procedural regime for reassessment notices issued after 01.04.2021 following amendments by the Finance Act, 2021 substituting Sections 147 to 151 of the Act and introducing Section 148A. The Court held that notices issued under the unamended Section 148 after 01.04.2021 should be deemed to have been issued under Section 148A(b) and treated as show-cause notices, with procedural safeguards and rights preserved for both Revenue and assessee.Court's Interpretation and Reasoning: The Court observed that the Supreme Court's directions were remedial and benevolent, intended to balance the rights of the Revenue and assessees and prevent the Revenue from being rendered remediless due to procedural lapses. The directions mandated that notices issued after 01.04.2021 under unamended provisions be construed as Section 148A(b) notices, with subsequent procedural compliance including furnishing of material relied upon and opportunity to reply.Key Evidence and Findings: The petitioner's notice being issued on 01.04.2021 falls squarely within the scope of these directions. The Court noted that the Revenue had complied with the procedural requirements post issuance of the notice under Section 148A(b) and Section 148A(d).Application of Law to Facts: Since the notice was issued on 01.04.2021, the reassessment proceedings are governed by the substituted provisions and the Supreme Court's directions. The petitioner's challenge that the notice was time-barred or invalid was therefore untenable.Treatment of Competing Arguments: The petitioner contended that the Ashish Agarwal judgment was not applicable as the notice bore the date 31.03.2021. The Court rejected this, emphasizing the actual dispatch date and the binding nature of the Supreme Court's PAN India directions.Conclusion: The impugned notices and proceedings are valid and governed by the substituted provisions and directions in Ashish Agarwal.Issue (e): Legal Significance of ITBA Portal Dispatch and Email TimestampRelevant Legal Framework and Precedents: The Court relied on the detailed analysis in Suman Jeet Agarwal and instructions issued by the Directorate of Income-tax (Systems) distinguishing generation, issuance, and dispatch of notices. The document identification number (DIN) system was also discussed to clarify that issuance requires dispatch, not merely generation or assignment of DIN.Court's Interpretation and Reasoning: The Court held that the date and time recorded on the ITBA portal for dispatch and email delivery are determinative of the date of issuance of the notice. The Court rejected the argument that digital signing or generation on the portal alone constitutes issuance.Key Evidence and Findings: The Revenue's affidavits and annexures confirmed the ITBA timestamps for email dispatch and delivery at 7:30 AM on 01.04.2021. The petitioner did not dispute actual receipt date.Application of Law to Facts: The Court applied these principles to hold that the notice was issued on 01.04.2021, the date of dispatch and delivery, notwithstanding the earlier digital signing.Treatment of Competing Arguments: The petitioner's reliance on the date on the notice and digital signature was rejected as inconsistent with legal and procedural requirements.Conclusion: The ITBA portal dispatch and email delivery timestamps govern the date of issuance of notices under Section 148.Issue (f): Disposition of the Petitioner's ChallengeRelevant Legal Framework and Precedents: The Court considered the entire procedural framework of reassessment notices, limitation under Section 149(1), and the Supreme Court's directions in Ashish Agarwal.Court's Interpretation and Reasoning: Since the notice was issued on 01.04.2021, the petitioner's challenge that the notice was time-barred as per Section 149(1) fails. The reassessment proceedings initiated under Sections 148A(b), 148A(d), and 148 are valid and in accordance with law.Key Evidence and Findings: The petitioner participated in the reassessment proceedings and filed returns and replies. The Revenue complied with procedural safeguards mandated by the Supreme Court.Application of Law to Facts: The Court applied the law strictly and found no merit in the petitioner's challenge.Treatment of Competing Arguments: The petitioner's reliance on the date on the notice and the original return filing date was rejected in light of the actual dispatch date and Supreme Court directions.Conclusion: The petition is dismissed.3. SIGNIFICANT HOLDINGS'The expression 'issue' in its common parlance and its legal interpretation means that the issuer of the notice must after drawing up the notice and signing the notice, make an overt act to ensure due despatch of the notice to the addressee. It is only upon due despatch, that the notice can be said to have been 'issued'.''Mere generation of notice on the Income Tax Business Application screen cannot in fact or in law constitute issue of notice, whether the notice is issued in paper form or electronic form.''The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A (b).''The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A (a) is hereby dispensed with as a one-time measure vis-a-vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts.''All defences which may be available to the assessee including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.''The date and time recorded on the ITBA portal for dispatch and delivery of the notice are determinative of the date of issuance of the notice under Section 148 of the Act.'Final determination: The notice dated 31.03.2021 digitally signed on that date, but dispatched and delivered on 01.04.2021, is deemed to have been issued on 01.04.2021. Consequently, the reassessment proceedings initiated under Sections 148A(b), 148A(d), and 148 of the Act are valid and in accordance with the Supreme Court's directions in Ashish Agarwal. The petitioner's challenge to the limitation and validity of the notice is rejected, and the petition is dismissed.