2025 (9) TMI 613 - AT - Income Tax

Reassessment under s.147 read with s.144 and s.144B quashed as s.148 notice dated 25 July 2022 time-barred

Sainik Co-operative House Building Society Ltd. Versus ITO, Ward-1, (1), Jammu.

ITAT AMRITSAR held the reassessment invalid and quashed proceedings under s.147 r/w s.144 (with s.144B), finding the s.148 notice issued on 25 July 2022 ... Reopening of assessment u/s 147 - period of limitation - Period of limitation under new tax regime - validity of the notice issued under TOLA between 31.3.2021 and 30.6.2021 - 'surviving period’ for determining the validity of notices issued under Section 148 HELD THAT:- As we find that in compliance with the directions issued by the Supreme Court in the case of Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] AO provided information and material to the Assessee on 20.05.2022. Assessee was granted two weeks' time to respond to the said notice i.e. by 02.06.2022. According to section 149 of the Income Tax Act, 1961, Period of six years from the end of relevant assessment year i.e. from 2013-14, got expired on 31.03.2020 and further time period was extended by the Taxation and Other Law Act, 2020 (TOLA) till 30.06.2021. The next round of litigation arose before the Hon’ble Supreme Court, and in the landmark judgment of Union of India v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] it was held that notices issued under the erstwhile Section 148 for Assessment Years 2013-14 and 2014-15 shall be deemed to be valid, provided they fall within the permissible time frame(surviving period) as preserved under the directions laid down in the said judgment. The Hon’ble Supreme Court, in the case of Rajeev Bansal, has elaborated upon the concept of the ‘surviving period’ for determining the validity of notices issued under Section 148 after the pronouncement of the judgment in Union of India v. Ashish Aggarwal. This interpretation is specifically discussed in para no. 108 and 112 of the judgment. The period from the date of the issuance of the erstwhile notice till 04.05.2022, the date on which the Supreme Court had rendered the decision in Ashish Agarwal (supra) is required to be excluded. Additionally, the time provided till the date of providing the material, which should have accompanied a notice under Section 148A(b) of the Act, as well as the time available to the assessee to respond to the said notice was also required to be excluded. The ‘surviving period’ is required to be computed and separately added to determine the validity of the notice issued under Section 148. The surviving period is calculated by taking into account the number of days between the original date of issuance of the deemed notice under Section 148 and 30th June 2021, as clarified in judicial pronouncements following the judgment in Ashish Agarwal and considering the entire facts of the case and the law laid down by the Hon’ble Apex court in the case of UOI v Rajeev Bansal dated 03/10/2024 ( supra ), we are of the opinion that in the instant case the surviving period was of twenty four days and the revised timeline for issue of notice u/s 148( under the new regime ) expired on 26th June, 2022 and the notice issued in the instant case on 25th July, 2022, is clearly barred by limitation and the impugned reassessment proceedings dated 23rd May, 2023, passed u/s 147 rws 144 ( with 144B ) of the Act 61, is not legally valid and the same is quashed. Assessee appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a reassessment notice issued under the post-amendment procedure (section 148 of the new regime) dated 25.07.2022 is time-barred where an earlier notice under the pre-amendment regime was issued during the period extended by statute and subsequent communications under the new statutory scheme occurred. 2. How the 'surviving period' (the balance of time preserved by statutory extension and judicial directions) is to be computed and applied to the timeline for issuing a reassessment notice under the new regime after the assessee was supplied materials and given time to respond under the new procedure. 3. Whether, if the reassessment notice is held time-barred, the entire reassessment order is to be quashed as void ab initio, or the matter should be remitted to the assessing officer to proceed afresh. 4. Whether appellate dismissal in limine for non-appearance/non-submission requires separate adjudication on merits where legality of the initiating notice is contested on limitation grounds (issue preserved but not pursued on merits after withdrawal). 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reassessment notice issued under post-amendment procedure (limitation challenge) Legal framework: Section 149 prescribes the outer time limit for issuance of reassessment notices; a statutory instrument extended limitation dates for notices issued within a specified period. The new procedural provisions introduce an interim show-cause/communication stage (provisions corresponding to section 148A(b)-(d) under the new regime) which must be complied with before issuance of a fresh section 148 notice under the new regime. Precedent treatment: Judicial authorities have interpreted the transitional interplay between the erstwhile and amended regimes, recognizing that notices issued under the old regime during the extended period may be treated as deemed communications under the new procedure and that a 'surviving period' (the balance of time available as a result of the statutory extension) may be added to the response period to compute the final outer date for issuing a section 148 notice under the new regime. Several tribunals and High Courts have quashed notices issued after that computed outer date. Interpretation and reasoning: The Tribunal applied the principle that the days between the date of the original pre-amendment notice and the statutory cutoff (30.06.2021) constitute a surviving period to be preserved and added to the time granted to the assessee to respond under the new procedure. Where materials were provided on 20.05.2022 and the assessee's response period under the new procedure expired on 02.06.2022, the preserved surviving period (computed as 24 days for the factual matrix before the Tribunal) must be added to extend the final date for issuance of the section 148 notice to 26.06.2022. The notice actually issued on 25.07.2022 fell beyond that computed outer date and was therefore time-barred. Ratio vs. Obiter: Ratio - where an original notice under the pre-amendment regime was issued within the period preserved by statutory extension, the surviving days must be added to the assessee's response period under the new procedure to compute the outer limit for issuance of a fresh section 148 notice; a notice issued after that composite period is invalid for being time-barred. Observations applying this reasoning to particular factual dates are factual application of the ratio. Conclusion: The reassessment notice dated 25.07.2022 is invalid as issued beyond the preserved surviving period plus the assessee's statutory response time under the new procedure; therefore the notice is barred by limitation. Issue 2 - Computation and application of the 'surviving period' Legal framework: Transitional directions and judicial interpretations require exclusion of the period from issuance of the original pre-amendment notice to the date of the judicial pronouncement that required treating those notices as deemed communications; additionally, the time during which materials are provided to the assessee and the assessee's allotted time to respond must be accounted for when computing time available to the Revenue to issue a fresh notice under the new regime. Precedent treatment: Higher court directions and subsequent judicial decisions provide the methodology for computing the surviving period and its addition to the assessee's response time; tribunals and High Courts have applied illustrative computations to determine expiry dates for issuance of section 148 notices under the new regime. Interpretation and reasoning: The Tribunal followed the established methodology: (a) calculate the number of days from the date of the original pre-amendment notice to the statutory cutoff (the surviving period); (b) exclude prescribed periods as directed by judicial pronouncements; (c) add the surviving period to the deadline given to the assessee to respond under the new procedure; and (d) determine the last permissible date for the Revenue to issue the section 148 notice. Applying this to the record before the Tribunal produced an outer date of 26.06.2022, rendering a notice dated 25.07.2022 beyond limitation. Ratio vs. Obiter: Ratio - the surviving period must be computed and added to the assessee's response timeline to arrive at the last permissible date for issuance of a fresh section 148 notice under the new regime; failure to issue within that composite timeline renders the notice invalid. The Tribunal's numeric computation is an application of this ratio to the facts. Conclusion: The surviving period, properly computed and added to the response deadline, extinguished the Revenue's power to issue the challenged notice on 25.07.2022. Issue 3 - Consequence of a time-barred notice and scope for remand to the assessing officer Legal framework: If a statutory reassessment notice is invalid for being time-barred, the validity of consequential assessment proceedings depends on whether the initiating action is void ab initio; jurisprudence recognizes that where jurisdictional foundation is vitiated the subsequent order cannot stand, while in some procedural defects the matter may be remitted for fresh compliance from the stage of illegality. Precedent treatment: Authorities cited by Revenue emphasize that proceedings affected by a procedural illegality may be continued from the stage at which illegality occurred rather than being treated as non-existent; other decisions treat a time-barred initiating notice as void thereby invalidating ensuing assessment actions. Interpretation and reasoning: The Tribunal concluded that the initiating reassessment notice itself was legally invalid because it exceeded the preserved limitation period; in consequence, the reassessment order founded upon that notice could not be sustained and was quashed. The Tribunal did not remit the matter to the assessing officer for fresh action because the fundamental jurisdictional precondition (a valid notice within the prescribed composite timeline) was not met; remand would permit the Revenue to attempt issuance beyond the preserved time available in the facts before the Tribunal. Ratio vs. Obiter: Ratio - where a reassessment notice is held time-barred under the applicable transitional calculation of surviving period, the consequent assessment founded on that notice is invalid and liable to be quashed. Observations regarding alternative remedial remand were considered but not adopted on the facts (practical application rather than binding ratio). Conclusion: The reassessment order based on the time-barred notice is void and was quashed; the Tribunal allowed the appeal on this legal ground rather than remitting the matter to the assessing officer. Issue 4 - Appellate dismissal in limine and interplay with limitation challenge Legal framework: Appellate authorities may decide appeals in limine in the absence of submissions, but jurisdictional and limitation challenges can be raised before higher fora even if not fully developed below; appellate adjudication ordinarily requires opportunity to be heard but lack of prosecution may justify disposal on available record. Precedent treatment: Courts recognize that legal questions, especially jurisdictional and limitation issues, can be adjudicated on the record even where the appellant did not press merits below; relief may be granted if the legal flaw is apparent from documentary record. Interpretation and reasoning: The Tribunal noted that the assessee raised a pure legal limitation challenge and furnished documentary record relating to dates of notices and communications; the Tribunal addressed that legal question on merits notwithstanding the first appellate authority's in-limine dismissal for non-submission and non-appearance. Because the limitation defect was determinable from the record, the Tribunal accepted the legal argument and allowed the appeal on that ground; merits grounds were withdrawn and therefore left unadjudicated. Ratio vs. Obiter: Ratio - where a limitation or jurisdictional flaw is demonstrable from the record, a higher forum may entertain and decide that legal challenge even if primary appellate authority dismissed the appeal in limine for absence of submissions. Observations about appellate conduct are incidental to the main legal determination. Conclusion: The Tribunal entertained and decided the limitation challenge on the record, quashed the reassessment proceedings, and did not adjudicate merit grounds withdrawn by the appellant.