2025 (11) TMI 1175 - HC - Income Tax

AY 2015-16 assessment reopening valid under s.149 proviso and s.148; ten-year limit under ss.153A/153C; escape below Rs.50 lakh rejected

Sachin Panchal Versus The Deputy Commissioner Of Income Tax, Central Circle-I, Rajasthan, Principle Commissioner Of Income Tax (Central), Jaipur, The Income Tax Officer, Ward 60 (1), Delhi, The Principal Chief Commissioner Of Income Tax, Delhi-4, The Central Board Of Direct Taxes.

HC upheld reopening of assessment for AY 2015-16 following a search on 19.05.2023, holding the First Proviso to s.149 (w.e.f. 01.04.2023) permits notices ... Validity of reopening of assessment - Time limit for notice u/s 149 - search conducted under Section 132 - whether the notice which has been issued to the petitioner on 23.08.2024 can be said to be beyond the jurisdiction and time barred in the facts and circumstances of the case? - HELD THAT:- We notice that the search was conducted of SKR Group on 19.05.2023 under Section 132 of the Act and documents were seized which reflected escaping of income for the AY 2015- 2016, while the proceedings under Section 153C of the act were, admittedly, not required to be conducted in relation to the search which was conducted after the cut off date (supra), we find that First Proviso to Section 149 allows notice to be issued for such escaping of income and reassessment can be done. As the Proviso allows notice under Section 148 in the amended provision to be issued if the same could have been issued under the old provision of Section 153A and 153C of the Act. Prior to the amendment, in case of search, the assessment relevant to previous year in which search was conducted would be treated as the relevant assessment year and proceedings as per Explanation-I to Section 153A of the Act could be conducted for six assessment years, but not later than ten assessment years from the relevant assessment year. Section 153C of the Act allows such assessment relating to third person and the assessment years would be the same as per explanation given under Section 153A of the Act. Thus, if we read all the provisions together including amended Section 149, it is apparent that the time limit for issuing notice under Section 148 as per amended provisions has to be the same as in cases which could have been initiated under Section 153C r.w. 153A of the Act. A simple reading of the provisions, therefore, in relation to search cases, would be that while time limitation would be the time as prescribed under Section 153A, reassessment has to be done in terms of Section 148, as amended, for any income found to have escaped assessment for last ten assessment years. The Assessing Officer was, therefore, justified in reopening the assessment of AY 2015-2016 of the assessee petitioner as it falls within ten years period. Thus, we held that the time limit for notice, as provided under Section 149 as amended w.e.f. 01.04.2023, would apply and as per Section 149(1)(b), re-assessment can be initiated to the maximum period upto ten years from the end of the relevant assessment year. With regard to the arguments advanced by the petitioner relating to the amount of Rs. 50 Lakhs, we find that the information and documents reveal an escape of amount and thus, it cannot be said that the said was below Rs. 50 Lakhs. On both counts the writ petition, therefore, fails. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice under Section 148 issued on 24/28.08.2024 for Assessment Year 2015-16 is time-barred. 2. Whether the amended Section 149 (w.e.f. 01.04.2021, as in force prior to substitution on 01.09.2024) and its provisos permit reopening in search-linked matters where the search occurred after 31.03.2021. 3. Whether the threshold of escaped income of Rs. 50 lakhs (for invoking the extended ten-year period under Section 149(1)(b) read with Explanation-I to Section 153A) is met on the material relied upon for reassessment. 4. Whether the writ petition is barred by delay and laches or is premature because proceedings are at the stage of issuance of notice under Section 148. 5. Ancillary: territorial jurisdictional objections raised by the revenue in respect of service and locus of issuing authority (not decided on merits by the Court). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Time-bar: applicability of Section 149 to notice dated 24/28.08.2024 for AY 2015-16 Legal framework: Section 149 prescribes the time-limit for issuing notices under Section 148/148A, including a three-year general bar and an extended period up to ten years where certain conditions (Section 149(1)(b)) are satisfied. Provisos to Section 149 preserve certain cases where notices could have been issued under the pre-amendment regime (notably in relation to Sections 153A/153C) and contain special deeming/exclusion provisions for searches/requisitions executed near financial-year ends. Precedent treatment: The petitioner relied on an earlier judicial view that, in assessment-only contexts, the post-01.04.2021 regime could not be used retrospectively to validate otherwise time-barred notices for AY 2015-16. The Court considered that line of authority but examined the specific statutory provisos dealing with search-related cases. Interpretation and reasoning: The Court analyzed the text of Section 149 and its provisos and held that where incriminating material emanates from a search under Section 132 (even if the search was conducted after 31.03.2021), the First Proviso to Section 149 permits issuance of notices under Section 148 to the extent they could have been issued under the old Sections 153A/153C regime. Prior to amendment, Section 153A (and Section 153C for third persons) allowed assessments/reassessments for up to ten assessment years from the relevant assessment year in search cases. Reading Section 149 together with the Explanation to Section 153A, the Court concluded that in search-linked matters the time limit for reopening under the amended Section 149 must be co-terminous with the period that could have been invoked under Section 153A/153C (i.e., up to ten years). The factual matrix showed a search of related group in May 2023 and seized material disclosing escapement for AY 2015-16; hence the notice falls within the extended ten-year window when read in light of the provisos and Explanation-I to Section 153A. Ratio vs. Obiter: Ratio - The Court's binding conclusion is that Section 149 (as in force prior to 01.09.2024), read with its provisos and Explanation-I to Section 153A, permits issuance of a Section 148 notice in search-linked cases within ten years where the conditions of Section 153A/153C would have allowed reopening; accordingly a notice dated 24/28.08.2024 for AY 2015-16 is not time-barred on those grounds. Obiter - observations comparing assessment-only contexts with search-linked contexts and distinguishing earlier decisions are illustrative but secondary to the holding. Conclusion: The notice is not time-barred insofar as the search-linked exceptions and provisos to Section 149 import the pre-amendment extended limitation available under Sections 153A/153C; reopening of AY 2015-16 by notice dated August 2024 is within jurisdiction on this ground. Issue 2 - Interplay of Section 149 provisos with Sections 153A/153C and searches after 31.03.2021 Legal framework: Provisos to Section 149 preserve cases where notices under Sections 153A/153C could have been issued under the earlier law; other provisos provide deeming dates and exclusions where searches or requisitions are initiated after 15 March of a financial year. Precedent treatment: The Court noted competing judicial approaches but placed primacy on statutory text and the specific carve-outs for search-related scenarios embedded in the provisos and explanations. Interpretation and reasoning: The Court held that the provisos expressly contemplate and save search-initiated cases by allowing issuance of Section 148 notices where the facts disclosed by search/seizure/documents would permit reopening under the pre-amendment Sections 153A/153C. The existence of seized material revealing escapement thus enables reliance on the extended ten-year period, even though the search occurred after the cut-off date, because the First Proviso and related provisos effectuate that preservation for search cases. The Court reconciled the scheme by treating Section 148 as the operative mechanism for reassessment but allowing the temporal window of Section 153A/153C to govern limitation in search contexts. Ratio vs. Obiter: Ratio - The provisos to Section 149 must be read to preserve the longer limitation period for search-linked cases by reference to the pre-amendment Section 153A/153C time limits; therefore the extended ten-year limitation applies where seized material reveals escapement. Obiter - broader policy remarks about prospective application of amendments to purely assessment-initiated proceedings. Conclusion: The amended Section 149, read with its provisos and Explanation-I to Section 153A, applies to search-linked matters so as to permit reopening up to ten years where the search/seizure material would have enabled initiation under Sections 153A/153C. Issue 3 - Threshold of Rs. 50 lakhs for invoking extended limitation Legal framework: Section 149(1)(b) and Explanation-I to Section 153A require that escapement represented in the form of asset/expenditure/entry amounts to or is likely to amount to Rs. 50 lakhs or more to justify reopening beyond three years. Precedent treatment: The petitioner contested the quantum attributable to the petitioner (claiming a 7.31% share and a determinable amount below Rs. 50 lakhs), while the revenue relied on seized records and valuation reported by the investigating officer indicating escaped income exceeding Rs. 50 lakhs. Interpretation and reasoning: On the seized material and the report of the assessing circle, the impugned material revealed escapement of Rs. 1,51,47,831/- for AY 2015-16 and the petitioner's assessed investment figure was quantified at Rs. 1,28,02,662/-. The Court accepted the material as disclosing escapement above the statutory threshold, rejecting the petitioner's contention that the petitioner's attributable share fell below Rs. 50 lakhs on the present record. Ratio vs. Obiter: Ratio - The factual finding that the escaped income exceeds Rs. 50 lakhs brings the case within Section 149(1)(b). Obiter - remarks on allocation of shares among co-participants are factual observations not prescribing a general rule. Conclusion: The material on record satisfies the Rs. 50 lakhs threshold; therefore the extended ten-year period is triggered in this case. Issue 4 - Delay, laches and prematurity of writ challenge to a show-cause notice Legal framework: Principles of writ jurisdiction caution against premature intervention where alternative statutory remedies (appeal, revision) exist and where proceedings are at the show-cause stage; delay and laches can bar equitable relief. Precedent treatment: The revenue raised objections of delay (petition filed over a year after notice) and prematurity (challenge to initiation of reassessment rather than final order). Interpretation and reasoning: The Court observed the contentions but, having examined merits and determined that the notice was within time and valid on the substantive statutory construction, did not rest its decision on delay or prematurity. The Court therefore did not decide the delay and laches objection against the petitioner, and treated the question of prematurity as immaterial in light of its merits determination. Ratio vs. Obiter: Obiter - The Court's non-reliance on delay/laches and prematurity reflects procedural discretion and does not lay down a binding principle on those defenses in all cases. Conclusion: Delay and prematurity objections were noted but not determinative; on the merits the petition failed and therefore those procedural objections were not adjudicated against the petitioner. Issue 5 - Territorial jurisdiction (ancillary and not adjudicated) Legal framework: Territorial competence and service of notice can raise forum objections, but the Court may decline to decide jurisdiction if merits dispose of the petition. Interpretation and reasoning: Although territorial objections were pleaded and the revenue relied upon them, the revenue did not press the jurisdictional point at hearing. Given that the search was conducted at Jaipur and the Court resolved the substantive limitation issue against the petitioner, the Court declined to determine the territorial jurisdiction question and cited a similar view adopted by another High Court as supportive. Ratio vs. Obiter: Obiter - The Court's refusal to decide the jurisdictional objection in these circumstances is a procedural disposition and not a conclusive statement on territorial competence principles. Conclusion: Territorial jurisdiction objection was not decided; the Court disposed of the petition on substantive limitation and threshold grounds.