2025 (8) TMI 57 - HC - Income Tax

Notices under Section 148A(b) issued Apr-June 2021 found time-barred per SC's Rajeev Bansal ruling

Sandeep Singh Saluja, M/s Space Enclave Private Limited Through Its Director Shri Rajeev Shrivastava Versus Income Tax Department And Others And Ramesh Chandra Jain, Nirmal Kumar Rawal Versus Revenue Department And Others And Vishal Sahu, Moshin Ali Merchant, Late Smt Manorama Holkar Thr. Lrs. Shri Tansen Holkar, Gopal Gupta, M/s Shree Naivedya Fincom Private Limited Through Director Jitendra Kumar Jain Versus Central Board Of Direct Taxes And Others Sng Global Private Limited Through Director Shri Manish Agrawal Versus Income Tax Officer 5 (1), Indore And Others

The HC held that reopening notices issued under section 148 between 01.04.2021 and 30.06.2021, treated as deemed notices under section 148A(b), followed ... Reopening of assessment u/s 147 - period of limitation - scope of new regime - TOLA was enacted to extend limitation periods during the COVID-19 pandemic under the old law -HELD THAT:- Notices u/s148 (unamended) were issued between 01.04.2021 and 30.06.2021. The said notices were treated as deemed notices u/s 148A (b) pursuant to the directions in Ashish Agrawal [2022 (5) TMI 240 - SUPREME COURT] After issuing show-cause notices under Section 148A (b), reply /objection were filed by the assessee’s, orders u/s 148A (d) were passed and fresh reassessment notices u/s 148 (as amended) were issued most of which are dated post- July 2022. All the above listed petitions are covered by the decision given by the Hon’ble Apex Court in Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] We find that the impugned notices in all the above listed petitions were issued beyond prescribed time and thus are held as time barred. The impugned notices in the petitions listed above are quashed. Assessee appeal allowed. ISSUES: Whether reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, post-April 1, 2021, are barred by limitation under the amended provisions of Section 149 as inserted by the Finance Act, 2021.Whether notices issued under the erstwhile Section 148 between April 1, 2021, and June 30, 2021, relying on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), can be validly treated as notices under Section 148A(b) of the Income Tax Act.Whether the extended limitation period under TOLA applies to reassessment proceedings initiated under the amended regime post-April 1, 2021.Whether administrative instructions, such as CBDT Instruction No. 1/2022, can override the statutory limitation framework prescribed under the amended Income Tax Act.What is the correct method to compute the limitation period for issuance of reassessment notices under the new regime, including the effect of the legal fiction created by the Supreme Court in Union of India v. Ashish Agrawal.Whether reassessment notices issued beyond the surviving limitation period under the amended Section 149 are liable to be quashed. RULINGS / HOLDINGS: Reassessment notices issued under the old Section 148 between April 1, 2021, and June 30, 2021, are to be treated as deemed notices under Section 148A(b), but must comply with the amended provisions of the Income Tax Act, 1961, as brought into force by the Finance Act, 2021.The reassessment proceedings are barred by limitation unless the notice under Section 148 is issued within three years under Section 149(1)(a), or within ten years where the Assessing Officer possesses evidence showing escaped income exceeding fifty lakh rupees as per Section 149(1)(b).The benefit of the TOLA Act cannot extend the limitation period under the amended reassessment regime; thus, administrative instructions like CBDT Instruction No. 1/2022 cannot override the statutory framework.The limitation period calculation must exclude the period during which show-cause notices were pending and the two-week period allowed for response, with the clock starting only after the Assessing Officer receives the assessee's reply, as per the formula in Paragraph 112 of Rajeev Bansal.Notices under Section 148 issued beyond the surviving limitation period under the amended Section 149 are time-barred and liable to be quashed. RATIONALE: The Court applied the amended reassessment regime under Sections 147 to 151 of the Income Tax Act, 1961, effective from April 1, 2021, as introduced by the Finance Act, 2021, which prescribes strict limitation periods under Section 149 for issuance of reassessment notices.The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), enacted to extend limitation during the COVID-19 pandemic, applies only to proceedings under the unamended Income Tax Act prior to April 1, 2021, and does not extend limitation under the new regime.The Supreme Court's decision in Union of India v. Ashish Agrawal created a legal fiction treating old regime notices issued between April 1, 2021, and June 30, 2021, as deemed notices under Section 148A(b), preserving all statutory defences including limitation under Section 149.The Supreme Court's subsequent ruling in Rajeev Bansal clarified the interplay between the legal fiction, TOLA, and the amended limitation provisions, holding that reassessment notices must comply with the surviving limitation period under the new regime and cannot rely on TOLA to extend limitation.The Court rejected the validity of administrative instructions that conflict with the statutory limitation framework, emphasizing that limitation is a statutory bar that cannot be overridden by executive directions.The limitation calculation methodology was reaffirmed, including exclusion of the period during show-cause notice consideration and the assessee's response time, with the Assessing Officer's time to issue a reassessment notice commencing only after receipt of the assessee's reply.The decision aligns with the principle that jurisdictional preconditions, including limitation compliance and prior approval under Section 151, are mandatory, and failure to comply renders reassessment notices invalid.