Reassessment notice dated 29.07.2022 for AY 2015-16 held time-barred under six-year limitation; assessment quashed, appeal allowed

ITAT held that reassessment notice issued on 29.07.2022 for AY 2015-16 was barred by the six-year limitation under the old regime, as TOLA did not extend limitation for AYs 2013-14 to 2015-16; period expired on 31.03.2022. Relying on the precedent conceded by Revenue, the proceedings were held void ab initio and the impugned assessment order was quashed, appeal of the assessee allowed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the reopening of assessment under Section 147 read with Section 144B (and notice under Section 148) for the assessment year in question is barred by limitation.

2. Whether the post-1 April 2021 "new regime" of Section 147 (as substituted by Finance Act, 2021) or the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance/measure (TOLA/TOLA-related relief) extends the limitation period so as to permit reassessment notices issued after the six-year period prescribed under the "old regime".

3. Whether an assessment order reopened by notice issued after the expiry of the applicable limitation period is void ab initio.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Applicability of six-year limitation to the assessment year under consideration

Legal framework: Prior to 1 April 2021 the law provided a six-year limitation for reopening assessments in specified circumstances; Finance Act, 2021 substituted a new regime for reassessment with altered timelines and provisions. TOLA/TOLA-related instruments provided specified temporal relaxations during the COVID period.

Precedent treatment: The Tribunal applied the binding ratio of the Supreme Court decision addressing the interaction between TOLA, the old and new reassessment regimes, and the validity of notices issued around the relevant period.

Interpretation and reasoning: The Court relied on the Supreme Court's acceptance (including concession by the Revenue's senior counsel) that for assessment years up to and including the year at issue the six-year limitation under the old regime continued to apply and that TOLA did not extend the six-year limitation for those years. The Tribunal examined the chronological facts (return filed 29.09.2015; original assessment order and Section 148 notice dated 29.07.2022) and concluded that the notice was issued after the expiry of six years from the end of the relevant assessment year.

Ratio vs. Obiter: The holding that the six-year limitation applies to the assessment year in question (and that TOLA does not extend that limitation for that year) is treated as ratio by the Tribunal to decide the validity of the reopening.

Conclusion: The six-year limitation governed reopening for the assessment year; the Section 148 notice issued on 29.07.2022 was beyond that period and therefore time-barred.

Issue 2 - Effect of the new Section 147 regime (Finance Act, 2021) and TOLA on limitation for reassessment notices issued post 1 April 2021

Legal framework: Finance Act, 2021 substituted the reassessment provisions creating a new regime; TOLA/TOLA-related relaxation provided limited extensions/reliefs and contains non obstante language applying to specified Acts.

Precedent treatment: The Tribunal followed the Supreme Court's analysis which considered (a) whether TOLA applies to notices issued under the new regime after 1 April 2021 and (b) whether notices issued in the July-September 2022 window under the new regime are valid for earlier assessment years. The Tribunal also noted coordinate bench decisions adopting a similar approach.

Interpretation and reasoning: The Supreme Court's reasoning - including the Revenue's concession - was read to mean that TOLA does not resurrect or extend the old regime's limitation beyond six years for assessment years covered by the old regime; consequently, the new regime's extended timelines (arguably up to ten years) cannot be applied to defeat the six-year bar where the Supreme Court found TOLA inapplicable to extend limitation for the assessment years under consideration. The Tribunal applied that reasoning factually: the assessment year under appeal fell within the category where six years governs and TOLA does not extend it.

Ratio vs. Obiter: The application of the Supreme Court's determination (that the six-year limitation remains applicable and TOLA does not extend it for the relevant assessment years) is treated as binding ratio for the present question.

Conclusion: The new Section 147 regime and TOLA cannot be invoked to validate a reassessment notice issued after the six-year limitation period for the assessment year in question; the Department's contention that the AO could reopen within ten years under the new regime was rejected.

Issue 3 - Legal effect of issuance of notice after expiry of limitation and consequent validity of assessment order

Legal framework: Reopening statutes are time-bound; a notice issued outside statutory limitation is jurisdictionally invalid.

Precedent treatment: The Tribunal followed established principles and the Supreme Court's ruling that notices issued beyond the applicable statutory period are void; the Tribunal also referenced coordinate benches reaching similar conclusions.

Interpretation and reasoning: Having concluded the Section 148 notice was issued after expiry of the applicable limitation, the Tribunal held the proceedings to be barred by limitation and therefore void ab initio. On that legal basis the impugned assessment order was quashed.

Ratio vs. Obiter: The finding that a time-barred notice renders subsequent proceedings void ab initio is treated as the operative ratio for quashing the assessment in the facts of the case.

Conclusion: The assessment passed pursuant to the time-barred reopening is void ab initio; the impugned assessment order was quashed and the appellate order under challenge set aside. Other grounds raised became academic and were not adjudicated.

Cross-References

Refer to Issue 1 and Issue 2 for the interlinked analysis on application of TOLA and the new Section 147 regime; the conclusion on Issue 3 directly follows from the conclusions in Issues 1 and 2.

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