2025 (11) TMI 561 - AT - Income Tax

Notices under s.148 for AY 2012-13 and AY 2013-14 were barred by limitation under s.149(1)(b); assessments quashed

ITAT held that notices under s.148 for AY 2012-13 and AY 2013-14 were barred by limitation under s.149(1)(b) as they related to periods beyond ten ... Validity of reopening of assessment - Period of limitation - HELD THAT:- As the notice issued u/s 148 for AY 2013-14 as well as AY 2012- 13 in the instant case, is beyond the period of ten assessment years as prescribed under the provisions of section 149(1)(b) and is therefore barred by limitation. Our view is fortified by the decision of Jasjit Singh.[2023 (10) TMI 572 - SUPREME COURT] and Ojjus Medicare Pvt Ltd & Others [2024 (4) TMI 268 - DELHI HIGH COURT]. We therefore have no hesitation in quashing the notices u/s 148 for AY 2012- 13 and AY 2013-14. In light of the above, we also quash the assessment order emanating out of such notice u/s 148 of the Act. Since the notice u/s 148 is quashed, no separate adjudication is made on other jurisdictional ground. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Assessing Officer's issuance of notice under section 148 of the Income-tax Act for assessment years 2012-13 and 2013-14 (following a search) is legally permissible under the amended law and within the temporal limit prescribed by section 149(1)(b) and the proviso to section 149. 2. Whether a notice under section 148 issued on 30.03.2023 can validly reach back to assessment years outside the ten-assessment-year block computed with reference to the relevant assessment year (AY 2023-24) as contemplated by the pre-amendment scheme of section 153A/153C and the proviso to section 149. 3. Consequence of invalidity of section 148 notice: whether the assessment order passed pursuant to such notice must be quashed and whether other substantive grounds need adjudication. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of notice under section 148 for AYs 2012-13 and 2013-14 Legal framework: Section 148 empowers reopening of assessment by issuance of notice where income has escaped assessment. Section 149(1)(b) (as amended and read with its proviso) and the time limits in the pre-Finance Act, 2021 scheme for section 153A/153C together govern the permissible temporal reach for issuing notices in cases connected to searches and requisitioned proceedings. The proviso to section 149 restricts issuance of a section 148 notice for assessment years beginning on or before 1 April 2021 where, 'at that time,' a notice under section 148/153A/153C could not have been issued because it would have been beyond the time limit that existed immediately before the commencement of the Finance Act, 2021. Precedent treatment: The Court relied on the principle and reasoning in decisions of higher courts addressing the retrospective temporal computation of the ten-year block for section 153A (including authority cited: Jasjit Singh (SC) and a jurisdictional High Court decision interpreting computation under pre-amendment section 153A). The Tribunal followed the High Court's approach in computing the ten-year block with reference to the date the notice under section 148 was actually issued (30.03.2023) and the relevant assessment year (AY 2023-24). Interpretation and reasoning: The Tribunal accepted that the relevant date for reckoning the ten-assessment-year block is the date on which the section 148 notice was issued (30.03.2023) because the proviso to section 149 refers to the state of affairs 'at that time.' Using AY 2023-24 as the relevant assessment year, the ten-year block under the pre-amendment section 153A computation runs from AY 2023-24 backwards to AY 2014-15. Assessment year 2013-14 therefore falls outside the ten-year block and cannot be validly reopened by notice issued on 30.03.2023. For AY 2012-13 the Tribunal likewise found the notice to be beyond the ten-year period prescribed by section 149(1)(b) when the proviso and pre-amendment time limits are applied. Ratio vs. Obiter: Ratio - the operative holding is that a section 148 notice issued on 30.03.2023 for assessment years prior to the tenth year computed with reference to AY 2023-24 (i.e., earlier than AY 2014-15) is barred by limitation under section 149(1)(b) read with the proviso referring to the position as it stood immediately before the Finance Act, 2021. The reasoning that the date of issuance governs the computation is treated as the binding ratio in this decision. Discussion of specific higher court authorities is employed as supporting precedent rather than as obiter. Conclusions: The Tribunal concluded that the notices under section 148 for AY 2013-14 and AY 2012-13 issued on 30.03.2023 are beyond the permissible ten-assessment-year period and therefore barred by limitation; such notices are invalid. Issue 2 - Application of proviso to section 149 and computation of ten-year block with reference to pre-amendment section 153A time limits Legal framework: The proviso to section 149 requires reference to whether a notice under section 148/153A/153C 'could not have been issued at that time' due to being beyond the time limit specified under clause (b) of sub-section (1) as it stood immediately before the Finance Act, 2021. Pre-amendment section 153A permitted notice for a block of ten assessment years from the end of the relevant assessment year. Precedent treatment: The Tribunal followed the jurisprudence of the jurisdictional High Court (Pr. CIT v. Ojjus Medicare Pvt. Ltd.) and the Supreme Court (CIT v. Jasjit Singh) in applying the pre-amendment computation and recognizing the proviso's temporal reference to the state of law immediately before the 2021 amendment. Interpretation and reasoning: The Tribunal interpreted 'at that time' in the proviso to mean the time when the section 148 notice is issued; consequently a determination whether issuance was barred must be made by computing the ten-year block as it would have been under pre-amendment section 153A on that date. Applying that computation to the notice date 30.03.2023, the ten-year block covers AYs 2014-15 through 2023-24; AYs earlier than 2014-15 are excluded. Ratio vs. Obiter: Ratio - the proper method of applying the proviso to section 149 is to compute the ten-year block with reference to the date the section 148 notice is issued, using the pre-amendment section 153A time limits; if the assessment year falls outside that block, a section 148 notice is barred. Observation regarding alternative readings or policy considerations is obiter. Conclusions: The proviso to section 149 precludes issuance of a section 148 notice in respect of assessment years earlier than the tenth year computed from the relevant assessment year as determined on the date of issuance; applying this, AY 2013-14 and AY 2012-13 were excluded. Issue 3 - Consequence of invalid section 148 notice and adjudication on merits Legal framework: If a notice under section 148 is quashed as time-barred, consequential assessments and additions made pursuant to that notice lack jurisdictional foundation; courts routinely quash resulting assessment orders and decline to adjudicate merits which become academic. Precedent treatment: The Tribunal invoked settled practice and precedent that where jurisdictional defect (invalid notice) is established, substantive adjudication becomes infructuous absent a valid notice; the Tribunal cited higher court authority supporting quashing of assessments founded on invalid notices. Interpretation and reasoning: The Tribunal held that because notices under section 148 for the two contested assessment years are invalid for being beyond limitation, the assessment orders passed pursuant to those notices must be quashed. Having quashed the notices and assessments on jurisdictional grounds, there remains no live assessment proceeding on which to decide substantive additions or other jurisdictional grounds; such issues are therefore academic. Ratio vs. Obiter: Ratio - quashing of assessment orders is the necessary consequence of quashing the foundational section 148 notices; declinature to decide substantive grounds in such circumstances is part of the binding outcome of the decision. Any commentary on what might have been decided on merits had the notices been valid is obiter. Conclusions: The assessment orders emanating from the invalid section 148 notices are quashed; the appeals against assessment on substantive grounds are dismissed as academic and infructuous in absence of valid notices. Cross-references and final operative conclusion Computation of the ten-year block under pre-amendment section 153A with reference to the date the section 148 notice was issued (30.03.2023) renders AYs prior to AY 2014-15 outside the permissible scope; accordingly, notices and assessments for AY 2013-14 and AY 2012-13 are barred by limitation under section 149(1)(b) read with its proviso and are quashed, with all substantive challenges rendered academic.