2025 (11) TMI 1068 - AT - Income Tax

Notice under s.148 and order under s.148A(d) issued 28.06.2022 held time-barred as beyond s.149 cutoff 29.05.2022

ITAT DELHI - AT held that notice under s.148 and order under s.148A(d) issued on 28.06.2022 were time-barred in view of SC rulings fixing 29.05.2022 as ... Validity of reopening of assessment u/s 147 - notice beyond period of limitation - Notice under section 148A(b) of New Law as amended by Finance Act, 2021 - scope of TOLA - New regime v/s old regime - HELD THAT:-Explanation made by the assessee as above taking into consideration the judgment passed by the Hon’ble Supreme Court dated 4.5.2022 in the case of Union of India v. Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] and the order passed in the case of Union of India v. Rajeev Bansa [2024 (10) TMI 264 - SUPREME COURT (LB)] the time limit to issue notice under Section 148 in terms of amended provision of Section 149 as amended by the Finance Act, 2021, has become 29.5.2022, whereas the impugned notice under Section 148 along with order under Section 148A(d) of the Act admittedly issued on 28.06.2022 which is found to be barred by limitation and, therefore, the entire proceedings are vitiated and thus quashed. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the notice under Section 148 read with Section 148A/149 of the Income Tax Act for reopening the assessment for the relevant assessment year was issued within the period of limitation or was time-barred in view of statutory extensions, TOLA, and the Supreme Court rulings construing the 'surviving period' (notably the principles in Ashish Agarwal and Rajeev Bansal). 2. Whether the reassessment additions made by the Assessing Officer treating undisclosed import value as unexplained purchases/income under Section 69C read with Section 115BBE were sustainable where the reopening stemmed from a Show-Cause Notice issued by the Directorate of Revenue Intelligence (DRI) and the Customs proceedings were stayed. 3. Incidental: Whether the First Appellate Authority correctly directed the Assessing Officer to obtain relevant details from Customs and to take further action despite deleting the additions. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity and limitation of reassessment notice under Section 148/148A/149 Legal framework: Reopening of assessment requires compliance with Sections 147-149 and the amended procedure under Section 148A (as introduced by Finance Act, 2021). Time limits under the pre-amendment law, statutory extensions by TOLA, and exclusion rules under the provisos to Section 149(1) (as interpreted by the Supreme Court in Ashish Agarwal and subsequently Rajeev Bansal) govern the permissible period for issuing a Section 148 notice. Notices issued prior to the Supreme Court decision in Ashish Agarwal are to be treated as deemed show-cause notices under Section 148A(b) and the period between issuance and supply of material/response is to be excluded when computing limitation. Precedent treatment: The Tribunal applied the principles from the Supreme Court decisions (Ashish Agarwal and Rajeev Bansal) on (a) deeming pre-amendment Section 148 notices to be Section 148A(b) show-cause notices and (b) computing the 'surviving period' by excluding periods mandated by the third proviso to Section 149(1). The First Appellate Authority and the Tribunal relied on these authorities in determining the outer limit for issuance of the final Section 148 notice/order under the amended regime. Interpretation and reasoning: The Tribunal analysed the timeline: original last date under old law (six years), TOLA extensions to 30.06.2021, the issuance of an erstwhile Section 148 notice on 28.06.2021, the Supreme Court decision on 04.05.2022 (Ashish Agarwal) and consequent notices under Section 148A(b) u/s 148A process; the period from the deemed show-cause notice until supply of material and time allowed to reply is to be excluded. Applying Rajeev Bansal's delineation of 'surviving period,' the Tribunal computed that the Assessing Officer had only a short residual window (two-nine days as per the facts) to issue a valid Section 148 notice under the amended timeline. The actual Section 148 notice together with the Section 148A(d) order was issued on 28/29.06.2022, beyond the computed cutoff (notably beyond 05.06.2022 as per the assessee's chart and Tribunal's discussion), rendering the notice time-barred. Ratio vs. Obiter: Ratio - The Tribunal's holding that the reassessment notice issued on the impugned date was barred by limitation, applying the exclusions and 'surviving period' approach from Ashish Agarwal and Rajeev Bansal, is treated as the binding reasoning for quashing the proceedings. Obiter - Observations on the precise counting of days, or alternative hypotheticals regarding earlier or later communications, are incidental and not essential to the decision. Conclusions: The Tribunal concluded that the impugned Section 148 notice (with accompanying Section 148A(d) order) was beyond the permissible period after applying the exclusions mandated by the Supreme Court decisions and statutory provisions; consequently, the reassessment proceedings were vitiated by limitation and were quashed. Issue 2: Validity of additions under Section 69C read with Section 115BBE where reopening was based on DRI Show-Cause Notice / Customs proceedings Legal framework: Additions under Section 69C treat unexplained investments/purchases (including undisclosed import value) as income from other sources; Section 115BBE may apply to certain incomes. Reopening must be predicated upon valid cause (and validly initiated reassessment) to permit such additions. Administrative action by DRI/Customs (including Show-Cause Notices) may supply information, but the legal validity and standing of such Show-Cause Notices may affect the correctness of reliance. Precedent treatment: The First Appellate Authority relied on a judicial pronouncement holding DRI Show-Cause Notice proceedings invalid (Canon India principle) and noted that Customs had put the DRI SCN in abeyance; on that basis the First Appellate Authority deleted the addition, observing that the AO's reliance on an invalid DRI show-cause was improper. The Tribunal did not decide the addition on merits because it quashed the entire reassessment on limitation grounds. Interpretation and reasoning: The First Appellate Authority found that the DRI Show-Cause Notice was stayed/without authority and that the AO's action in reopening solely on the basis of that Show-Cause Notice rendered the reassessment premature. In consequence, the addition under Section 69C was deleted. The Tribunal, while recording the First Appellate Authority's reasoning and deletion, declined to adjudicate the substantive correctness of the addition because the foundational reassessment was quashed for being time-barred. Ratio vs. Obiter: Ratio - The Tribunal's operative holding is limited to limitation; thus any definitive pronouncement on the correctness of the Section 69C addition is not ratio of the Tribunal. The First Appellate Authority's deletion of the addition based on invalidity/stay of Customs/DRI proceedings constitutes a ratio at that level but is not adopted as the Tribunal's primary ground for quashing. Obiter - Detailed reflections on the DRI/Customs competence and the interplay with income-tax reassessment are incidental to the Tribunal's ultimate conclusion and thus obiter in the Tribunal's order. Conclusions: Because the reassessment proceedings were quashed on limitation grounds, the Tribunal did not adjudicate the substantive addition made under Section 69C read with Section 115BBE. The First Appellate Authority's deletion of the addition (based on the invalidity/stay of the DRI Show-Cause Notice) stood at the appellate level, but the Tribunal's dismissal of the Revenue appeal rendered adjudication on merits unnecessary and the Revenue's appeal was held to be infructuous. Issue 3 (Incidental): Direction to obtain Customs records and further action Legal framework & reasoning: The First Appellate Authority, after deleting the addition, directed the Assessing Officer to obtain relevant details of the Customs proceedings and take action as per law. Such a direction is procedural and forward-looking where the administrative or departmental record may impact future proceedings, subject to limitation and legal prerequisites. Precedent treatment & conclusion: The Tribunal did not disturb the appellate direction to obtain Customs details but found the reassessment void for limitation; therefore, any further departmental action would have to conform to law and limitation constraints. The Revenue's appeal being dismissed as infructuous leaves the Tribunal's quashing operative; the procedural direction remains a matter for the Assessing Officer within lawful limits. Overall Disposition and Cross-References The Tribunal quashed the reassessment proceedings as time-barred applying the exclusion principles and 'surviving period' approach from Ashish Agarwal and Rajeev Bansal; consequently, the assessee's appeal was allowed and the Revenue's appeal was dismissed as infructuous. Cross-reference: although the First Appellate Authority deleted the Section 69C addition on the ground that the reopening was founded on an invalid/stayed DRI Show-Cause Notice, the Tribunal's decisive ground for disposal was limitation, and therefore no adjudication on the substantive addition was necessary at the Tribunal level.