2025 (11) TMI 168 - HC - Income Tax

Section 148 notice dated 5 Apr 2022 for AY 2015-16 held time-barred; reassessment order dated 3 Mar 2025 quashed

HC held the s.148 notice dated 5 Apr 2022 for A.Y. 2015-16 was time-barred and the subsequent reassessment order dated 3 Mar 2025 was bad in law. Applying ... Reopening of assessment - Time limit for notice - period of limitation to issue notice - validity of a notice issued u/s 148/148A - scope of Taxation and other laws (Relaxation and Amendment of certain provisions) Act, 2020 (TOLA) application - provisions of the new reassessment law introduced by the Finance Act, 2021 - Extended Period of Limitation as per IT Act read with TOLA - HELD THAT:- Both the parties agree that in view of the decision of this Court in Hexaware [2024 (5) TMI 302 - BOMBAY HIGH COURT] the Assessment Order dated 3rd March 2025 is bad in law. This leave us with a limited question as to whether, in facts of the present case, the re-assessment order passed on 3rd March 2025 under Section 147 of the Income tax Act 1961 is bad in law even as per the Order of the Hon’ble Apex Court in Rajeev Bansal (supra). As mentioned earlier, the Assessment Year involved is A.Y. 2015-16 and the Notice under Section 148 is undisputedly issued on 5th April 2022, which is after 1st April 2021. Therefore, the said re-assessment proceedings ought to have been dropped in view of the concession made by the Ld. Additional Solicitor General of India before the Hon’ble Supreme Court as recorded in paragraph 19(f) of the decision rendered in Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] This has clearly been missed by the Assessing Officer in the Assessment Order dated 3rd March 2025. Accordingly, we hold that the Notice under Section 148 for A.Y. 2015-16 issued on 5th April 2022 was barred by limitation and ought to have been dropped pursuant to the decision of Hon’ble Supreme Court in the case of UOI v. Rajeev Bansal (supra). We also agree with the submission of both the parties, that the Notice issued on 5th April 2022 under Section 148 is also bad in law in view of the decision of this Court in Hexaware (supra). Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice under Section 148 of the Income-tax Act, 1961 issued on or after 1 April 2021 in respect of Assessment Year 2015-16 is barred by limitation and must be dropped in view of the concession recorded by the Supreme Court in the lead consolidated appeal. 2. Whether re-assessment proceedings and any consequent re-assessment order, demand notices and penalty proposals premised on a Section 148 notice so issued can be sustained where this Court had earlier quashed that Section 148 notice on the additional ground that Section 151A precluded issuance of such notice. 3. Whether a subsequent re-assessment order passed by the Assessing Officer relying on the Supreme Court's operative order in the lead consolidated appeal (but overlooking the recorded concession in respect of AY 2015-16 and this Court's earlier ruling on Section 151A) can cure the illegality of the notice and proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Limitation: Effect of Revenue's recorded concession in the lead Supreme Court decision that notices issued on or after 1 April 2021 for AY 2015-16 must be dropped Legal framework: The time-bar/limitation for issuance and completion of reassessment proceedings is governed by statutory timelines and the extension/relaxation provisions enacted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Notices under Section 148 issued after prescribed dates may not fall within the period available for completion and thus may be liable to be dropped. Precedent treatment: The Supreme Court in the consolidated lead appeal recorded the Revenue's concession that, for AY 2015-16, all notices issued on or after 1 April 2021 would have to be dropped as they would not fall for completion within the period prescribed under TOLA. Subsequent Supreme Court orders and dismissals of SLPs in other matters have applied or accepted that concession in disposing petitions. Interpretation and reasoning: Where the Supreme Court's order records a clear concession by the Revenue that notices issued on or after 1 April 2021 for AY 2015-16 must be dropped, such recorded concession is binding on the Revenue in proceedings arising from the same facts and assessment year. A Section 148 notice dated 5 April 2022 (i.e. after 1 April 2021) for AY 2015-16 therefore falls squarely within the concession and is liable to be treated as time-barred and required to be dropped. Ratio v. Obiter: The holding that notices issued on or after 1 April 2021 for AY 2015-16 must be dropped follows from the Supreme Court's recorded concession as applied to the facts; this is treated as a binding conclusion for the purposes of the present proceedings (ratio in context of concession-based application), not mere obiter. Conclusion: The Section 148 notice issued on 5 April 2022 for AY 2015-16 was barred by limitation and ought to have been dropped in view of the recorded concession in the lead Supreme Court order and subsequent applications of that concession. Issue 2 - Effect of this Court's prior decision holding Section 151A precludes issuance of the impugned Section 148 notice Legal framework: Section 151A and related jurisdictional provisions limit the Assessing Officer's power to issue notices under Section 148; where statutory prerequisites are not satisfied, notices can be quashed as invalid. Precedent treatment: This Court earlier held, in a decision applicable to the petitioner's facts, that the jurisdictional Assessing Officer could not issue a Section 148 notice in light of Section 151A; that decision was not disturbed by the Supreme Court. Interpretation and reasoning: The Writ Petition before this Court was allowed on the ground that the matter fell within this Court's prior ruling on the Section 151A issue; the Section 148 notice was quashed and any consequent reassessment or notices were directed to stand quashed. The Assessing Officer's subsequent continuation of proceedings ignored that binding ruling. Ratio v. Obiter: The quashing of the Section 148 notice on the ground of non-compliance with Section 151A constitutes a ratio decidendi applicable to like facts and remains binding unless set aside or modified by a superior court. Conclusion: Independently of the concession recorded in the Supreme Court's lead matter, this Court's prior decision on Section 151A rendered the impugned Section 148 notice invalid and required discharge of the reassessment proceedings; the Assessing Officer could not lawfully continue proceedings in face of that order. Issue 3 - Validity of subsequent re-assessment order and consequential notices where Assessing Officer relied on the Supreme Court's operative order but overlooked (a) the recorded concession for AY 2015-16 and (b) this Court's ruling on Section 151A Legal framework: A valid reassessment order under Section 147 must be predicated on a valid and subsisting notice under Section 148 and compliance with jurisdictional requirements. Procedural irregularity or limitation defects in the foundational notice render subsequent orders void. Precedent treatment: Decisions of the Supreme Court and High Courts have given effect to the Revenue's concession in the lead matter by dismissing or disposing matters where notices fell within the concession period; other High Courts have applied the concession to quash notices issued on or after the relevant date. Interpretation and reasoning: The Assessing Officer's rationale for continuing proceedings was that the lead Supreme Court decision applied generally; however, the Assessing Officer failed to note two decisive points: (i) the Supreme Court had recorded a concession specific to AY 2015-16 that notices on or after 1 April 2021 must be dropped; and (ii) this Court had already quashed the Section 148 notice on the alternative ground of Section 151A non-compliance. Since the foundational notice was invalid on both grounds, any reassessment order, demand notice and penalty proposals based on it are invalid. The Court relied on subsequent Supreme Court orders applying the concession to similar facts to reinforce this conclusion. Ratio v. Obiter: The holding that the reassessment order, demand notice and penalty proposals are void is ratio decidendi as applied to the facts-derived from the combination of the Supreme Court's recorded concession and this Court's prior ruling on Section 151A. Conclusion: The reassessment order dated 3 March 2025 (and the related demand and penalty notices) premised on the Section 148 notice dated 5 April 2022 are quashed and set aside as being bad in law; the Assessing Officer's reliance on the lead Supreme Court operative order did not cure the fatal defects where the concession and this Court's prior decision were overlooked. Ancillary procedural/consequential conclusions Where a High Court order had already quashed the relevant Section 148 notice, subsequent orders premised on that notice are to be treated as without lawful foundation; accordingly, all consequent demand and penalty notices emanating from such reassessment must be quashed. No costs ordered.