2025 (9) TMI 1187 - AT - Income Tax

Extended due date for issuing notice under s.148 expired on 7 June 2022; notices dated 20-21 July void

ITAT DELHI - AT held that the extended due date for issuing a notice under s.148 expired on 07-06-2022; notices issued on 20/21-07-2022 were therefore ... Reassessment proceedings as barred by limitation - extended due date for issuance of notice u/s 148 - notices issued under the old regime - HELD THAT:- In view of the observation of the Hon’ble Supreme Court in the case of Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] the extended due date for issuance of notice u/s 148 of the Act expired on 07-06-2022 and since, the notice is u/s 148 of the Act is issued on 21- 07-2022, the said notice is to be treated as time barred by limitation and consequentially reassessment proceedings would be liable to be quashed as void ab initio. Respectfully following the decision of the Hon’ble Supreme Court, we hold that the notice issued u/s 148 of the Act on 20-07-2022 is time barred by limitation. Accordingly the legal issue raised by the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the reassessment notice issued under section 148 after reopening pursuant to section 148A(d) is barred by limitation where a prior notice under the pre-amendment regime had been issued before 1-4-2021 and the assessing officer re-issued the notice after directions of the Supreme Court regarding deemed show-cause notices and exclusions of time. 2. Whether, if the section 148 notice is time-barred, the consequent reassessment proceedings are void ab initio and must be quashed. ISSUE-WISE DETAILED ANALYSIS Issue 1: Limitation for issuance of section 148 notice after deemed show-cause procedure and exclusions Legal framework: The assessment and reassessment limitation scheme under the Income-tax Act requires issuance of a notice under section 148 within the period prescribed by section 149 read with temporal extension provisions (including Technology of Limitation Act/TOLA adjustments and the third proviso to section 149 which allows time for reply to show-cause). Amendments to section 148 by the Finance Act, 2021 (effective 01-04-2021) changed the regime for issuance of notices; notices issued under the old regime before that date have been treated as deemed show-cause notices for purposes of time computation pursuant to higher court directions. The sequence required after a deemed show-cause is: (i) supply of relevant information/material by the assessing officer to the assessee, (ii) assessee's reply within the statutory period, (iii) consideration of the reply by the assessing officer under section 148A/C and decision under section 148A(d), and (iv) issuance of a fresh section 148 notice (new regime) if within the surviving time limit. Precedent treatment: The Court follows the law laid down by the Supreme Court (as summarized in the judgment under consideration) establishing that the period between issuance of the deemed notice and supply of material must be excluded; the two-week reply period (or other prescribed reply period) is to be excluded under the third proviso to section 149; and the limitation clock for revenue starts running only after receipt of the assessee's reply. The Tribunal explicitly follows that line of authority and the illustrative computation given by the Supreme Court concerning surviving time limits available to the assessing officer to issue notice under the new regime. Interpretation and reasoning: Applying the stated legal framework to the facts, the Tribunal computed the surviving time limit available to the assessing officer. A notice under the old regime had been issued before 1-4-2021; after the higher court directions, a show-cause notice under section 148A(b) was issued, the assessee filed reply within time, and the assessing officer passed an order under section 148A(d) and thereafter issued a section 148 notice on a date beyond the computed surviving limit. Relying on the exclusion rules and the requirement that the assessing officer complete the prescribed steps within the surviving period calculated from the date the assessing officer received the response, the Tribunal concluded the fresh section 148 notice was issued after the surviving time limit had expired. Ratio vs. Obiter: Ratio - The conclusion that the reassessment notice issued after the expired surviving time limit (calculated in accordance with the exclusion principles and the Supreme Court's illustrative computation) is time-barred. Obiter - Any general observations about other factual permutations or reference to other bench decisions without application to the facts are not essential to the holding. Conclusions: The section 148 notice issued after the surviving period expired is time-barred by limitation and therefore invalid. The Tribunal expressly follows the controlling higher court reasoning on exclusion of time and computation of the surviving time limit for issuance of a fresh section 148 notice. Issue 2: Effect of time-barred section 148 notice on reassessment proceedings Legal framework: If a notice under section 148 is invalid for being barred by limitation, the reassessment proceedings initiated pursuant to that notice lack the necessary jurisdictional foundation; statutes of limitation are jurisdictional safeguards and failure to comply renders subsequent proceedings void, unless saved by statute or valid curative provisions. Precedent treatment: The Tribunal relied on the higher court's legal construction that where the reassessment notice is not issued within the surviving period (after applying legal-fiction exclusions and the reply period), the notice must be treated as beyond limitation. The Tribunal notes concession (by revenue in similar contexts) that notices issued on or after the critical date may have to be dropped where they cannot be completed within the period prescribed under limitation rules and TOLA. Interpretation and reasoning: Given the holding on limitation (Issue 1), the Tribunal reasoned that a time-barred notice cannot confer jurisdiction to proceed with reassessment; consequently, steps taken under the invalid notice are consequentially void. The Tribunal regarded the reassessment proceedings as liable to be quashed as void ab initio because the foundational notice under section 148 was issued after the surviving limitation period had expired. Ratio vs. Obiter: Ratio - A notice under section 148 issued beyond the surviving limitation period (computed as per the higher court's exclusions and the reply commencement rule) renders reassessment proceedings void ab initio and liable to be quashed. Obiter - Any ancillary remarks about academic nature of other grounds or potential relief in different factual matrices. Conclusions: The reassessment proceedings founded on the time-barred section 148 notice are void ab initio and are to be quashed; the appeal on this legal ground is allowed. Other grounds become academic and are left open for adjudication if necessary in a different factual posture.