Petition allowed; section 148 notice for AY 2015-16 quashed as invalid for lack of section 148A(b) compliance during TOLA extension

The HC allowed the petition and quashed the section 148 notice for AY 2015-16 as invalid. The court found the notice was issued during the TOLA extension period (01.04.2021-30.06.2021) when notices under the old regime required compliance with the procedural safeguards introduced from 01.04.2021, including issuance under section 148A(b); absence of those procedures rendered the reopening ineffective.

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ISSUES PRESENTED AND CONSIDERED

1. Whether notices issued under section 148 of the Income Tax Act for Assessment Year 2015-2016 during the period 01.04.2021 to 30.06.2021 (extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Ordinance, 2020 ("TOLA")) are valid where no notice under section 148A(b) was issued as required by the amended procedure effective 01.04.2021.

2. Whether notices issued on or after 01.04.2021 for Assessment Year 2015-2016 can be sustained in view of the time-bar provisions of section 149 (as in force from 01.04.2021) and subsequent judicial pronouncements, including concessions made by Revenue before the Supreme Court.

ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity of s.148 notices issued during 01.04.2021-30.06.2021 without s.148A(b) compliance

Legal framework: Section 148 empowers issuance of notice of income escaping assessment; with effect from 01.04.2021 procedural safeguards were introduced (notably section 148A(b)) requiring issuance of a notice and opportunity to respond before the reopening is confirmed. TOLA (Ordinance) temporarily extended time limits permitting issuance of notices until 30.06.2021 where otherwise barred.

Precedent treatment: The Supreme Court in the line of decisions culminating in Ashish Agarwal and later authorities addressed the requirement of following the amended s.148A procedure for notices issued after 01.04.2021; departmental practice issuing s.148 notices between 01.04.2021 and 30.06.2021 under TOLA was questioned. Subsequent decisions (including decisions following the concession by Revenue) treated such notices as falling afoul of the amended procedure and/or time limits.

Interpretation and reasoning: The Court examined the temporal interaction between the TOLA extension and the statutory procedural changes which came into force 01.04.2021. A notice served under s.148 during the TOLA-extended window cannot be insulated from the statutory requirement of s.148A(b) where the procedural amendment is in force; moreover, where the departmental practice treated such notices as deemed s.148A(b) notices only after later judicial directions, failure of actual service and of the s.148A(b) procedure renders the earlier s.148 notice defective. The Court accepted that notices issued in that window and not subjected to the s.148A(b) process are procedurally invalid.

Ratio vs. Obiter: Ratio - notices under s.148 issued during 01.04.2021-30.06.2021 without adherence to the s.148A(b) procedure (and without actual service/compliance) are invalid. Obiter - observations regarding departmental attempts to "deem" prior s.148 notices to be s.148A(b) notices after judicial intervention are critical but ancillary to the ratio.

Conclusion: Notices issued under s.148 during the TOLA-extended period which did not comply with the s.148A(b) requirements (and especially where such subsequent s.148A(b) notices were not served) are invalid.

ISSUE-WISE DETAILED ANALYSIS - Issue 2: Effect of section 149 time limits and Supreme Court concessions on notices for AY 2015-2016

Legal framework: Section 149 prescribes the time limit for completion of reassessment proceedings; as amended and in force from 01.04.2021 it alters the temporal window within which notices must be issued and proceedings completed. TOLA temporarily extended certain time limits, but the interplay of dates determines whether a notice could validly fall within the extended completion window for a particular assessment year.

Precedent treatment: The Supreme Court in a three-judge bench decision addressing identical issues accepted a concession by Revenue that for Assessment Year 2015-2016 all notices issued on or after 01.04.2021 must be dropped because they would not fall for completion within the period prescribed under TOLA. Subsequent Supreme Court decisions and several High Court orders followed the concession and quashed notices issued after 31.03.2021 for AY 2015-2016.

Interpretation and reasoning: The Court analysed the chronological facts: for AY 2015-2016 the three-year period prescribed under section 149 expired on 31.03.2019 (prior to TOLA) while the six-year period expired on 31.03.2022 (after operation of TOLA). Revenue conceded that notices issued on or after 01.04.2021 could not validly be completed within the period envisaged by TOLA for AY 2015-2016. Given that concession and consistent Supreme Court rulings, notices issued after 31.03.2021 for AY 2015-2016 are void/invalid; later attempts to cure defects by issuing fresh s.148A(b) notices after judicial decisions did not revive invalid notices issued in the TOLA window when completion could not lawfully occur.

Ratio vs. Obiter: Ratio - where the statutory time limits (section 149) and the temporal effect of TOLA make it impossible for notices issued on or after 01.04.2021 to be completed lawfully for AY 2015-2016, those notices must be quashed; concessions by Revenue recorded by the Supreme Court bind and lead to quashing. Obiter - general remarks on departmental practice and other assessment years, which may have different chronological consequences, are not part of the binding ratio for AY 2015-2016.

Conclusion: In light of the statutory time limits, TOLA's operation, and the Supreme Court's acceptance of Revenue's concession, all notices issued on or after 01.04.2021 for AY 2015-2016 are invalid and are to be quashed.

INTERPLAY BETWEEN THE TWO ISSUES (CROSS-REFERENCE)

Both issues converge on the temporal and procedural legality of reopening for AY 2015-2016: (a) procedural non-compliance with s.148A(b) for notices issued during the TOLA window renders such notices defective; and (b) independently, the time-bar analysis under s.149 and the recorded concession before the Supreme Court require dropping all notices issued on or after 01.04.2021 for AY 2015-2016. The combined effect is that such notices cannot be sustained.

FINAL CONCLUSION

The impugned notice issued under section 148 for Assessment Year 2015-2016 during the extended period under TOLA (01.04.2021-30.06.2021), without compliance with section 148A(b) and in circumstances where section 149 timing/ Supreme Court concessions render completion impossible, is invalid and is quashed.

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