2025 (9) TMI 240 - AT - Income Tax

Section 148 notice issued 26.07.2022 held time-barred; reassessment under Sections 147/148 invalid due to expired surviving time

ITAT KOLKATA - AT held the section 148 notice dated 26.07.2022 was time-barred and reassessment under section 147/148 was invalid. Applying ... Reopening of assessment u/s 147 - period of limitation - HELD THAT:- As relying on ADM AGRO INDUSTRIES LATUR AND VIZAG PRIVATE LIMITED [2025 (5) TMI 1182 - DELHI HIGH COURT] reopening of assessment is barred by limitation. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice issued under section 148 of the Income-tax Act on 26.07.2022 is barred by limitation where an earlier notice under section 148 was issued on 30.06.2021 (under the old regime), a show-cause notice under section 148A(b) was issued on 25.05.2022, and the time available for issuance of a fresh section 148 notice ('surviving time') expired on 08.06.2022. 2. How the post-31.03.2021 amended reassessment regime (including sections 148A and provisos to section 149(1)), the Supreme Court directions treating certain section 148 notices as section 148A(b) show-cause notices, and statutory time extensions (TOLA) interact in computing the period of limitation for issuing a section 148 notice. 3. Whether the line of decisions by higher courts (as applied in the impugned order) requires setting aside reassessment proceedings where the section 148 notice is issued after the computed period of limitation expires. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Limitation for issuance of notice under section 148 when prior actions include an initial section 148 (old regime) and a subsequent section 148A(b) show-cause notice Legal framework: The period for issuing a notice under section 148 is governed by section 149(1) and its provisos; after the statutory amendments effective post-31.03.2021, procedure under section 148A (including 148A(b) and 148A(d)) must be followed. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA) extended limitation periods for acts falling within specified pandemic dates. Supreme Court directions treated certain section 148 notices issued between 01.04.2021 and 04.05.2022 as show-cause notices under section 148A(b), with directions to provide material and afford time to respond. Precedent Treatment: The Tribunal applied the reasoning of higher court decisions construing the effect of the Supreme Court's directions and interpretation of provisos to section 149(1) (including the decisions that excluded the period between issuance of informal/invalid notices and the Supreme Court's remedial directions, and decisions requiring exclusion of the time given to the assessee to respond). The decision followed earlier judgments which held that where no 'surviving time' remained for the AO to issue a fresh section 148 notice after excluding periods mandated by the provisos, issuance thereafter is time-barred. Interpretation and reasoning: The Court reconstructed the chronology: initial section 148 notice dated 30.06.2021 (old regime); on Supreme Court directions those notices were to be treated as section 148A(b) notices with material provided on 25.05.2022; the assessee's time to reply (14 days under the applicable proviso) expired on 08.06.2022; hence the 'surviving time' for the AO to issue a fresh section 148 notice expired on 08.06.2022. The actual section 148 notice was issued on 26.07.2022. Applying the exclusion rules in the provisos to section 149(1) and the requirement that an AO must have at least seven days (or as mandated) to pass an order under section 148A(d), the Tribunal concluded the AO lacked jurisdiction to issue the impugned section 148 notice after the survival period had expired. Ratio vs. Obiter: Ratio - where, after excluding periods required by the statutory provisos and judicial directions, no limitation period remains (or the surviving time expired) when a section 148 notice is issued, the notice is time-barred and reassessment cannot be validly initiated. Obiter - illustrative discussion of how the seven-day/one-month mechanics operate in varied factual permutations. Conclusions: The section 148 notice dated 26.07.2022 was barred by limitation because the surviving time expired on 08.06.2022; therefore reopening under section 147 read with section 148 was invalid. Issue 2 - Application of higher court directions and statutory provisos (including TOLA effects) in calculating period of limitation and the consequence of non-compliance Legal framework: The Supreme Court's directions converting certain post-amendment section 148 notices into section 148A(b) show-cause notices and the provisos to section 149(1) require exclusion of specified periods (period between issuance and decision, time given to the assessee to respond, and period to provide material) in computing limitation. TOLA extended limitation timelines for specified pandemic dates, affecting the baseline expiry date. Precedent Treatment: The Tribunal expressly followed and applied ratios from authoritative decisions adopting the exclusion principle and holding that AOs must have sufficient residual time to pass orders under section 148A(d) and issue section 148 notices; failure to respect these timelines renders notices invalid. The decision relied on those precedents without distinguishing. Interpretation and reasoning: The Tribunal applied the exclusionary computations: (i) TOLA-adjusted limit placed the last permissible date for initial action at 30.06.2021; (ii) the period between issuance and the Supreme Court decision and between that decision and the provision of material was excluded; (iii) the time given to the assessee to reply to section 148A(b) was excluded; and (iv) after exclusion, the AO had no surviving period (or insufficient time) and the eventual issuance on 26.07.2022 fell outside the permissible window. The Tribunal also endorsed the reasoning that the proviso effectively grants the AO a minimum period to act and where that cannot be accommodated within the statutory limitation, jurisdiction to issue the notice ceases. Ratio vs. Obiter: Ratio - statutory and judicially mandated exclusions must be applied in computing limitation and where after such exclusions the AO lacks requisite residual time, subsequent issue of section 148 notice is without jurisdiction and void. Obiter - commentary on interplay of time extensions and procedural steps in hypothetical permutations. Conclusions: Applying the statutory provisos, TOLA extensions, and controlling judicial directions, the reassessment proceedings initiated by the impugned section 148 notice are barred by limitation; thus all proceedings founded on that notice are set aside. Cross-reference: conclusion on Issue 1 is informed and confirmed by the analysis under Issue 2.