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of <h1>Reopening of assessment under sections 147/148 upheld as period excluded under section 149 prevents notice being time-barred</h1> <h3>Healing Touch Hospital Versus Principal Chief Commissioner of Income Tax Patna, Director General of Income Tax (Inv.), Principal Commissioner of Income Tax, Dy. Commissioner of Income Tax, Central Circle, Asst. Commissioner of Income Tax, Central Circle, Patna.</h3> Healing Touch Hospital Versus Principal Chief Commissioner of Income Tax Patna, Director General of Income Tax (Inv.), Principal Commissioner of Income ... 1. ISSUES PRESENTED and CONSIDERED 1. Whether the notice issued under Section 148 of the Income Tax Act, 1961 after three years from the end of the relevant assessment year without sanction from the specified authority under Section 151 is valid. 2. Whether the order passed under Section 148A(d) without sanction from the specified authority and beyond the prescribed time limit under Section 148A(d) is valid. 3. Interpretation and application of the limitation period for issuance of notice under Section 148 read with Sections 148A and 149, including the effect of exclusion of certain periods (e.g., Covid-19 lockdown period) on limitation. 4. Whether the Assessing Officer is obliged to pass the order under Section 148A(d) within one month from the end of the month in which the reply under Section 148A(c) is received, and the effect of granting personal hearing beyond this period. 5. The scope and requirement of sanction under Section 151 for issuance of notice under Section 148 and passing order under Section 148A(d), particularly regarding which specified authority is competent depending on the period elapsed since the end of the relevant assessment year. 6. Whether the Assessing Officer is required to conduct enquiry with prior approval under Section 148A(a) before issuing notice under Section 148, and the significance of the phrase 'if required' in this context. 7. The adequacy and sufficiency of information and material supplied to the assessee in response to the show cause notice under Section 148A(b), and the assessee's right to receive supporting documents and details. 8. The interpretation of the amended provisions of Sections 147 to 151 and 148A post Finance Act, 2021 and 2022 amendments, including procedural safeguards and requirements for reassessment proceedings. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 5: Validity of Notice under Section 148 Without Proper Sanction Under Section 151 Legal Framework and Precedents: Section 148 mandates issuance of notice before reassessment, subject to prior approval of the specified authority under Section 151 if more than three years have elapsed from the end of the relevant assessment year. Section 151 defines the competent authority for sanction: Principal Commissioner or Commissioner if within three years; Principal Chief Commissioner or Director General if beyond three years. Court's Reasoning: The notice under Section 148 was issued after three years from the end of Assessment Year 2020-21. The petitioner contended that sanction was obtained from Principal Commissioner, Patna, which is incompetent for cases beyond three years. The Department contended sanction was granted by the Principal Commissioner within the three-year period as the notice under Section 148A(b) was issued within three years (29.03.2024), and the order under Section 148A(d) and Section 148 notice were issued on 25.09.2024. The Court examined Section 149 (time limit for notice) and found that the period of limitation includes exclusions such as the Covid-19 lockdown period (16.03.2020 to 20.03.2022) based on Supreme Court and High Court precedents. Excluding this period, the notice issued on 25.09.2024 was within the limitation period. Therefore, sanction by the Principal Commissioner was valid as the relevant stage of issuance of notice under Section 148A(b) was within three years. The Court rejected the petitioner's contention that sanction was required from higher authority beyond three years. Conclusion: The notice under Section 148 issued after three years but within the extended limitation period (accounting for exclusions) with sanction from the Principal Commissioner is valid and not vitiated for lack of proper sanction. Issue 2 & 4: Validity of Order under Section 148A(d) Passed Beyond Prescribed Time Limit and Without Sanction Legal Framework: Section 148A(d) requires the Assessing Officer to decide whether it is a fit case to issue notice under Section 148 within one month from the end of the month in which the reply under Section 148A(c) is received, or if no reply, within one month from expiry of time allowed under Section 148A(b). This order requires prior approval of specified authority. Court's Reasoning: The petitioner submitted reply on 03.06.2024 and contended that the order under Section 148A(d) should have been passed by 31.07.2024. The Department fixed a personal hearing on 06.08.2024 after accepting petitioner's request for hearing, and passed the order on 25.09.2024. The Court held that the prayer for personal hearing amounted to an extension under Section 148A(b). Granting personal hearing before expiry of one month from end of June was within the statutory scheme and did not violate limitation. The Assessing Officer's conduct in providing opportunity for effective hearing was not objectionable and did not render the order illegal. Regarding sanction, the Court found sanction was obtained from the competent authority for the order under Section 148A(d) on 25.09.2024, despite typographical errors in the approval document. The Court accepted the Department's explanation that sanction was valid and prior to issuance of notice under Section 148. Conclusion: The order under Section 148A(d) passed beyond one month from receipt of reply was valid due to extension by personal hearing request. Sanction from specified authority was obtained and the order is not without jurisdiction. Issue 3 & 8: Interpretation of Limitation Period and Effect of Covid-19 Period on Limitation Legal Framework: Section 149 prescribes time limits for issuance of notice under Section 148. The Finance Act, 2021 and 2022 amendments introduced provisos excluding certain periods from limitation calculation, including time allowed to assessee under Section 148A(b) show cause notice and periods of stay by courts. Supreme Court's Suo Motu Writ Petition (Civil) No. 03 of 2020 held that limitation was extended during Covid-19 lockdown period. Court's Reasoning: The Court held that the period from 16.03.2020 to 20.03.2022 is excluded from limitation calculation, applying the Supreme Court and Division Bench High Court rulings. Therefore, the notice issued on 25.09.2024 is within limitation. The Court also noted that time or extended time allowed to assessee under Section 148A(b) is excluded from limitation under Section 149. Conclusion: The notice under Section 148 is not barred by limitation due to statutory exclusions including Covid-19 period and time allowed under Section 148A(b). Issue 6: Requirement of Enquiry and Sanction Under Section 148A(a) Before Issuance of Notice Legal Framework: Section 148A(a) mandates that the Assessing Officer shall conduct enquiry, if required, with prior approval of specified authority before issuing notice under Section 148. Court's Reasoning: The Court emphasized the phrase 'if required' in Section 148A(a), holding that conducting enquiry is not mandatory before issuance of notice. The Assessing Officer may proceed based on information suggesting escaped income without enquiry if not necessary. Sanction for enquiry is required only if enquiry is conducted. Conclusion: Conducting enquiry with sanction under Section 148A(a) is conditional and not mandatory before issuing notice under Section 148. Issue 7: Adequacy of Information and Materials Supplied to Assessee in Show Cause Notice Legal Framework: Section 148A(b) requires serving notice to show cause with information suggesting escaped income and results of enquiry, if any. The assessee is entitled to receive relevant documents and materials to effectively respond. Court's Reasoning: The petitioner repeatedly requested details and supporting documents after initial notice lacked enclosures. The Department subsequently provided detailed information and documents by letters dated 08.04.2024 and 27.05.2024. The Court found that the Department complied with the obligation to provide relevant materials enabling the petitioner to respond. Conclusion: The Department fulfilled its duty to supply relevant information and materials to the assessee in response to show cause notice under Section 148A(b). Issue 1, 5 & 8: Interpretation of Sections 147 to 151 and Procedural Safeguards Post Amendments Legal Framework: Sections 147 to 151, as amended by Finance Acts 2021 and 2022, provide a detailed scheme for reassessment proceedings including conditions precedent, limitation, enquiry, show cause notice, consideration of reply, requirement of sanction by specified authority, and issuance of notice under Section 148. Court's Reasoning: The Court analyzed the statutory scheme emphasizing the safeguards introduced by Section 148A, which require opportunity of hearing, consideration of replies, and sanction before issuance of notice. The Court held that these provisions must be strictly complied with but also interpreted them in a manner that does not frustrate the Department's power to reassess where there is tangible material suggesting escaped income. The Court noted that sanction under Section 151 is a jurisdictional condition and must be obtained from the competent authority depending on the time elapsed. The Court also held that the Assessing Officer's discretion to conduct enquiry is subject to prior approval only if enquiry is conducted, and that issuing show cause notice under Section 148A(b) can be based on information available without enquiry. Conclusion: The reassessment provisions post-amendment require compliance with procedural safeguards including sanction and opportunity of hearing, but do not impose absolute bar on reassessment where material exists. The statutory scheme balances assessee's rights and Department's powers.
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