Reassessment notice under section 148 for AY 2015-16 held time-barred as TOLA extension not applicable

ITAT Ahmedabad held that reopening of assessment for AY 2015-16 was barred by limitation. Relying on SC in Union of India v. Rajeev Bansal, it held that TOLA extended time limits only for actions falling between 20.03.2020 and 31.03.2021 and that for AY 2015-16 any notice issued on or after 01.04.2021 must be dropped. The initial notice under section 148 dated 20.04.2021 was therefore time-barred and without jurisdiction. All consequential proceedings, including notices under sections 148A(b), 148A(d), 148 and assessment under section 147, were quashed and the assessee's appeal allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reassessment proceedings for A.Y. 2015-16 initiated by notice under section 148 dated 20.04.2021, and continued through notices and orders under sections 148A(b), 148A(d) and 147 read with section 144B, were barred by limitation and void ab initio in light of the law declared in relation to TOLA and section 149.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and limitation of reassessment proceedings for A.Y. 2015-16 initiated on and after 20.04.2021

Legal framework (as discussed in the judgment)

2.1 The Court examined the effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) on limitation for issuance of notices under section 148 and the interplay with the statutory limitation under section 149.

2.2 The Court relied on the decisions in Union of India v. Rajeev Bansal, Union of India v. Ashish Agarwal, Deepak Steel and Power Ltd. v. CBDT, and the judgment of the jurisdictional High Court in Narendra Maganlal Purohit v. DCIT, as well as other High Court decisions following the same principle.

Interpretation and reasoning

2.3 The assessee had originally filed its return for A.Y. 2015-16 on 30.09.2015. The first notice under section 148 was issued on 20.04.2021, followed by a subsequent notice under section 148A(b) dated 27.05.2022, an order under section 148A(d) dated 29.08.2022, and a reassessment order under section 147 read with section 144B dated 30.05.2023.

2.4 The Court noted that, as per Union of India v. Rajeev Bansal, TOLA merely relaxes time limits for actions falling for completion between 20.03.2020 and 31.03.2021. It further recorded that, in Rajeev Bansal, the Revenue had categorically conceded that for A.Y. 2015-16 all reassessment notices issued on or after 01.04.2021 must be dropped because that assessment year does not fall within the TOLA relaxation window.

2.5 The Court observed that this concession and ratio were applied by the Supreme Court in Deepak Steel and Power Ltd. v. CBDT, wherein a notice dated 25.06.2021 issued for A.Y. 2015-16 was quashed as invalid.

2.6 The Court also referred to consistent decisions of the Delhi and Bombay High Courts (H.A. Share and Brokers (P.) Ltd. v. ITO and Cherian Nallathu Abraham Annamma v. ITO) holding that any notice issued under section 148 or deemed to be a notice under section 148A(b) for A.Y. 2015-16 after 01.04.2021 is void ab initio.

2.7 The jurisdictional High Court in Narendra Maganlal Purohit v. DCIT was noted to have followed Rajeev Bansal and held that such notices for A.Y. 2015-16 issued on or after 01.04.2021 are without authority of law.

2.8 The Court held that the deeming fiction created in Union of India v. Ashish Agarwal (treating old section 148 notices as notices under section 148A(b)) cannot be construed to extend or revive the limitation prescribed under section 149 and cannot validate a notice that was already time-barred and invalid at its inception.

2.9 Applying these principles to the assessee's case, the Court held that the initial notice under section 148 dated 20.04.2021 for A.Y. 2015-16 was issued after 01.04.2021 and therefore fell within the category of notices that, as per the binding judicial pronouncements and Revenue's own concession, are required to be dropped as time-barred and without jurisdiction.

2.10 Since all subsequent actions under section 148A(b), section 148A(d), and section 147 read with section 144B were founded on this initial invalid notice, the Court reasoned that they could not independently survive once the foundational notice was held to be void ab initio.

Conclusions

2.11 The notice under section 148 dated 20.04.2021 for A.Y. 2015-16 was held to be time-barred and without jurisdiction in view of the law declared in Rajeev Bansal and followed in Deepak Steel and Power Ltd., as well as the consistent view of the Delhi, Bombay and Gujarat High Courts.

2.12 Consequently, all subsequent proceedings, including the notice under section 148A(b) dated 27.05.2022, the order under section 148A(d) dated 29.08.2022, the further notice under section 148, and the reassessment order under section 147 read with section 144B dated 30.05.2023, were held to be invalid and unsustainable in law.

2.13 On this jurisdictional ground alone, the reassessment was quashed and the appeal of the assessee was allowed, rendering it unnecessary to adjudicate upon the remaining grounds on merits or on alleged violation of principles of natural justice.

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