Assessee wins: pre-2021 Section 149(1)(b) bars Section 148 notices after six-year terminal point; reassessment quashed

HC allowed the petition and set aside the reassessment proceedings. Relying on higher court and earlier HC precedents, the court held that under Section 149(1)(b) as it existed before the 2021 Finance Act, notices under Section 148 could not be issued after the six-year terminal point from the end of the relevant AY; therefore the impugned order under Section 148A(d) and the Section 148 notice were quashed. Decision in favour of the assessee.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a notice under Section 148 and an order under Section 148A(d) of the Income Tax Act, 1961 initiating reassessment proceedings for an assessment year prior to 01 April 2021 is barred by the Proviso to Section 149 read with the time-limits as they stood immediately prior to the Finance Act, 2021 amendments.

2. Whether, in light of binding higher-court authority on the temporal operation of Section 149, the Revenue may proceed with reassessment for an assessment year whose pre-amendment limitation period has expired.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Applicability of Proviso to Section 149 and pre-amendment limitation periods

Legal framework: The Proviso to Section 149 restricts issuance of a notice under Section 148 in respect of an assessment year prior to 01 April 2021 if the period within which such notice could have been issued "as they stood immediately prior to the commencement of the Finance Act, 2021" had expired. Prior to Finance Act, 2021, Section 149(1)(b) operated with a four-to-six year window such that reassessment beyond six years from the end of the relevant assessment year was impermissible.

Precedent treatment: The Court applies the doctrine that Proviso to Section 149 requires retrospective reference to the earlier statutory time-limits and treats pre-amendment limitation as the controlling constraint for AYs before 01 April 2021. The Court relies on higher-court authority confirming that reassessment for a year prior to 01 April 2021 must satisfy pre-amendment limitation periods.

Interpretation and reasoning: The Proviso embodies a negative command preventing issuance of a Section 148 notice where the earlier time-bar had already expired. Interpreting the phrase "as they stood immediately prior to the commencement of the Finance Act, 2021" obliges the authority to test the validity of reassessment initiation against the earlier statutory scheme. Hence, where six years from the end of the assessment year had elapsed before the notice was issued, the reassessment cannot be sustained. The Court finds that for the relevant assessment year the six-year terminal point had passed prior to issuance of the impugned notice, rendering the initiation impermissible.

Ratio vs. Obiter: The holding that the Proviso to Section 149 requires reference to pre-amendment limitation periods and thereby bars notices issued after the earlier six-year terminal point is ratio decidendi for the decision on validity of the impugned notice and order.

Conclusions: The impugned order under Section 148A(d) and the consequential Section 148 notice are invalid because they were issued after the pre-amendment limitation period had expired; therefore reassessment could not lawfully be initiated.

Issue 2 - Effect of binding precedent and permissibility of continuing proceedings pending departmental review

Legal framework: Where higher-court decisions have construed the temporal operation of statutory amendments and limitation provisions, administrative action must conform to those judicial pronouncements. The administrative decision to continue proceedings despite a directly relevant High Court pronouncement raises questions of jurisdiction and finality.

Precedent treatment: The Court treats the relevant higher-court decision as controlling and notes the absence of any successful challenge to that decision. The Court rejects the departmental rationale that proceedings should be continued pending internal consideration of whether to file further appeals, when the judicial pronouncement clearly prohibits issuance of the notice in the circumstances.

Interpretation and reasoning: The departmental note which justified continuation of proceedings on the ground that the decision was "very recent" and under departmental consideration was considered legally insufficient to override the negative command of Section 149's Proviso as interpreted by binding judicial authority. Allowing reopening on the premise of administrative reassessment of judicial precedent would render the statutory protection nugatory. The Court emphasizes that if a legal bar operates (i.e., the limitation had already expired), administrative convenience or the department's intention to consider appeals cannot validate initiation of reassessment.

Ratio vs. Obiter: The conclusion that administrative inaction or internal review cannot justify continuation of proceedings contrary to an applicable judicial interpretation of statutory time-bars is a ratio applied to invalidate the impugned action. Any observations about departmental practice are ancillary but necessary to the decision.

Conclusions: Reliance on internal departmental review or potential filing of leave petitions does not cure jurisdictional infirmity where reassessment is barred by the Proviso to Section 149 as read with pre-amendment time-limits. The proceedings and notice issued in such circumstances must be set aside.

Cross-reference and application

Where a binding judicial construction establishes that pre-amendment limitation periods govern reassessment for years before 01 April 2021, similarly situated reassessment actions falling beyond the earlier six-year terminal point must be quashed. The Court applies that principle to the present facts and sets aside the order under Section 148A(d) and the Section 148 notice issued thereafter.

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