Reopening Tax Assessments Beyond Section 149 Limit Period After 2021 Amendment Is Invalid

The HC held that the reopening of assessment beyond the limitation period prescribed under section 149, as amended by the Finance Act, 2021, is invalid. The impugned order under section 148A(d), assessment order under sections 147 read with 144B, and notice under section 156, all issued post 01.04.2021, were set aside for being time-barred. The court relied on the SC ruling in Union of India v. Rajeev Bansal and followed the precedent in Mectech Knitfabs Pvt. Ltd. Consequently, the impugned notice and assessment order were quashed.

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ISSUES:

Whether the notices and orders issued under Sections 148, 148A(b), 148A(d), 147 read with 144B, and 156 of the Income Tax Act, 1961 ("the Act") for the assessment year 2015-16 are valid if issued after 01.04.2021, considering the limitation period prescribed under Section 149 of the Act as amended by the Finance Act, 2021.Whether the limitation period under the amended Section 149 of the Act applies retrospectively to notices and assessments issued post 01.04.2021 for assessment years prior to 2021-22.Whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ("TOLA") applies to the limitation period under Section 149 of the Act.

RULINGS / HOLDINGS:

The impugned notices and orders issued under Sections 148, 148A(b), 148A(d), 147 read with 144B, and 156 of the Act for AY 2015-16 post 01.04.2021 are "bad in law" and are quashed as they are beyond the limitation period prescribed under Section 149 as amended by the Finance Act, 2021.The limitation period under the amended Section 149, when read with Section 3 of TOLA, applies to all notices issued after 01.04.2021, and such notices for AY 2015-16 do not fall within the prescribed period for completion and must be dropped.The concession made on behalf of the Revenue in Union of India and Ors. v. Rajeev Bansal confirms 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 TOLA."The impugned assessment proceedings and notices issued post 01.04.2021 for AY 2015-16 are accordingly set aside.

RATIONALE:

The Court applied the amended limitation provisions under Section 149 of the Income Tax Act, 1961, as substituted by the Finance Act, 2021 effective from 01.04.2021, which introduced a new regime for reassessment limitation.The Court relied on the Supreme Court's decision in Union of India and Ors. v. Rajeev Bansal, which included a concession by the Revenue regarding the limitation period and the applicability of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ("TOLA"), which applies to the entire Income Tax Act including Sections 149 and 151.The Court also referred to the Supreme Court's decision in Deepak Steel and Power Ltd. v. Central Board of Direct Taxes, which upheld the concession and allowed appeals on similar limitation grounds.The Court recognized the binding effect of these precedents and the Revenue's concession, resulting in the quashing of notices and assessments issued beyond the prescribed limitation period.No dissent or doctrinal shift was indicated; the Court followed established precedent and the Revenue's concession.

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