TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Reopening notice for AY 2014-15 quashed: notice under Section 148A(b) lacked foundation and proceedings time-barred under Section 149</h1> <h3>Sooriya Hospital Rep. by its Partner, Dr. C.P. Sreekumar Versus Deputy Commissioner of Income Tax Non-Corporate Circle 8 (1), Chennai</h3> HC quashed the reopening notice and consequent proceedings for the assessment year 2014-15, holding that the Department relied on return information from ... Reopening of assessment u/s 147 - beyond the period of limitation - Reasons to believe - HELD THAT:- Reading of the Return of Income filed for the Assessment Year 2013- 14 and Assessment Order dated 09.12.2016 makes it clear that the information for the Assessment Year 2013-2014 has been relied by the Respondent from the information relevant for reopening the assessment for the Assessment Year 2014-2015. The impugned notice pertains to the Assessment Year 2014-15 (Previous year 2013-14). The impugned notice, however, relies upon the Return of Income dated 05.09.2013 filed for the Assessment Year 2013-14 (Previous year 2012-13). The information that has been relied upon by the Department / respondents for issuing the impugned notice under Section 148A(b) of the Income Tax Act, 1961 for the Assessment Year 2014-15 is based on the information for the Assessment Year 2013-14 (previous year 2012-13). Thus, there are no foundational fact available with the Department to issue the impugned notice or to pass the impugned order. Even otherwise, the impugned proceedings initiated by the jurisdictional assessing officer was beyond the period of limitation and contrary to Section 149 of the Act as amended with effect from 01.04.2021. Show Cause Notice dated 23.05.2022 itself is not based on any information available with the Department for the Assessment Year 2014-15. The impugned proceedings are therefore liable to be quashed on this ground as well. Accordingly, they are quashed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice issued under Section 148A(b) (and/or deemed Section 148) for Assessment Year 2014-15 is valid where the material relied upon by the Department pertains to Assessment Year 2013-14. 2. Whether reassessment proceedings initiated after April 1, 2021 and specifically the show-cause notice dated 23.05.2022 comply with the limitation regime post-amendment (as effected by the Finance Act, 2021) read with the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (the Relief Act), and relevant Supreme Court directions. 3. Whether the assessing officer possessed foundational facts/information relevant to the year under reassessment such that issuance of a Section 148A(b)/Section 148 notice was justified. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of a Section 148A(b)/Section 148 notice when the material relied upon pertains to a different assessment year Legal framework: Section 148A(b) requires that the assessing officer provide information/material relied upon to invoke reassessment powers; reassessment must be based on material relevant to the year sought to be reopened. The substituted regime (post-April 1, 2021) and related procedures govern reassessment notices issued after that date. Precedent treatment: The Court applied the Supreme Court's directions (as modified in the referred decisions) which require assessing officers to provide material and permit response; however, foundational material must pertain to the assessment year proposed for reopening. Interpretation and reasoning: The impugned notice for AY 2014-15 relied upon the return and P&L details for AY 2013-14 (previous year 2012-13). The Court finds that such reliance imports material that is not foundationally connected to the AY sought to be reopened. The notice itself acknowledges reliance on bad-debt entries from year ending 31-03-2013 which were allowed by the AO in that earlier assessment without details being furnished - but that pertains to a different assessment year. Ratio vs. Obiter: Ratio - reassessment (or show-cause) notices must be founded on information relevant to the assessment year sought to be reopened; material limited to another year cannot supply the requisite foundation. Obiter - procedural steps under Section 148A(b) described in higher court directions (supply of materials and time to reply) apply generally but do not cure lack of year-specific foundational facts. Conclusion: The notice is invalid insofar as it is based on material exclusively referring to AY 2013-14 and not to AY 2014-15; there are no foundational facts available to justify reopening AY 2014-15 on the basis relied upon. Issue 2: Compliance with limitation and the amended reassessment regime (Finance Act, 2021) read with the Relief Act and Supreme Court directions Legal framework: The Finance Act, 2021 substituted provisions governing reassessment (including Sections 148A and related provisions). The Relief Act (Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020) extended certain timelines falling between March 20, 2020 and March 31, 2021. Supreme Court directions in the cited authorities prescribed treatment of notices issued under the unamended regime during the transitional window, including deeming such notices to be Section 148A show-cause notices, mandating supply of material and allowing time to respond, and dispensing with prior approval requirements as a one-time measure for that cohort. Precedent treatment: The Court applied the Supreme Court's clarifying guidance (including the subsequent clarification) that after April 1, 2021 the Income-tax Act is to be read with substituted provisions, the Relief Act applies where timelines fall within the specified window, and notices issued under the old regime between April 1, 2021 and June 30, 2021 are to be treated in accordance with those directions. The Court also cited the principle that reassessment notices issued beyond the surviving limitation period are time-barred. Interpretation and reasoning: The impugned show-cause notice was issued on 23.05.2022 (post-amendment). The Court examined whether limitation under Section 149 (as amended) and the Relief Act would allow initiation of proceedings. Independent of the transitional directions, the Court concluded that the impugned proceedings were beyond the period of limitation applicable after the amendments, and therefore contrary to Section 149 as amended effective 01.04.2021. Ratio vs. Obiter: Ratio - where reassessment proceedings are initiated beyond the surviving limitation period under the amended statute (taking into account the Relief Act where applicable), such proceedings are time-barred and liable to be quashed. Obiter - commentary that higher court directions concerning conversion of old notices into Section 148A show-cause notices and dispensation of prior approval apply to the specified cohort; those directions do not validate time-barred notices. Conclusion: The reassessment proceedings (show-cause notice dated 23.05.2022) were beyond the period of limitation under the amended regime and Section 149, and are therefore liable to be quashed on limitation grounds. Issue 3: Existence of foundational facts/information with the assessing officer to justify initiation of reassessment under Section 148A(b) Legal framework: Reassessment (or issuance of a show-cause/reopening notice) must be grounded on tangible information/evidence indicating escapement of income for the relevant assessment year. Section 148A(b) contemplates the AO furnishing the information/material relied upon to the assessee so as to enable a meaningful response. Precedent treatment: The Court relied on the established requirement that foundational facts must exist in relation to the year under consideration and that mere reference to material from other years or general suspicion is insufficient. Interpretation and reasoning: The impugned notice did not originate from any information specific to AY 2014-15; rather it imported facts relating to AY 2013-14 (including allowed bad-debt claims and absence of details during scrutiny). The Court held that the Department had no foundational fact specific to AY 2014-15 to commence reassessment; accordingly, the procedural protections under Section 148A(b) could not be meaningfully exercised because the underlying premise for reopening the year was absent. Ratio vs. Obiter: Ratio - absence of year-specific foundational information renders issuance of a Section 148A(b)/Section 148 notice invalid. Obiter - the procedural directions to share material and allow response do not validate notices lacking any foundational facts. Conclusion: The assessing officer lacked foundational, year-specific information to issue the impugned notice; therefore the proceedings are unsustainable and liable to be quashed. Overall Disposition Combining the above, the Court concluded that (i) the impugned proceedings were based on material relating to a different assessment year and lacked foundational facts for the year sought to be reopened, and (ii) the proceedings were beyond the surviving limitation under the amended statutory regime; accordingly, the reassessment notices/proceedings were quashed. The Court applied the relevant Supreme Court directives regarding the substituted regime and the Relief Act where pertinent, but held that those directives do not cure the dual defects of lack of year-specific foundational material and expiration of limitation.
TaxTMI 
TaxTMI 
