Reassessment Notice Under Section 148 for AY 2015-16 Held Time-Barred; TOLA Not Extending Limitation Under Section 149

The ITAT Dehradun allowed the assessee's appeal, holding the reassessment for AY 2015-16 to be time-barred and void ab initio. Relying on SC and coordinate bench precedent, it held that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) did not extend limitation for AY 2015-16 and that, under the unamended section 149, the notice under section 148 issued in July 2022 was beyond the prescribed period. Consequently, the reassessment framed pursuant to the invalid notice under section 148 was declared bad in law and quashed, with all consequential proceedings set aside in favour of the assessee.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reassessment proceedings for Assessment Year 2015-16 initiated by notice under section 148 issued on 28.06.2021 (later deemed and re-issued under the post-Finance Act 2021 regime) were legally valid in view of the limitation prescribed under section 149 and the inapplicability of TOLA to Assessment Year 2015-16 as clarified by the Supreme Court.

1.2 Consequentially, whether the assessment order passed under section 147 read with section 144B and the additions made thereunder could survive once the notice under section 148 was held invalid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of reassessment proceedings for AY 2015-16 initiated by notice under section 148

Legal framework (as discussed)

2.1 The Court examined the reassessment regime under sections 147-149 of the Act as amended by the Finance Act, 2021, in conjunction with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and the effect of the Supreme Court's decisions in Union of India & Ors. v. Ashish Agarwal and Union of India & Ors. v. Rajiv Bansal.

2.2 Particular reliance was placed on the Supreme Court's recording of the Revenue's concession in Rajiv Bansal that, for Assessment Year 2015-16, all notices issued on or after 01.04.2021 would have to be dropped as they would not fall for completion during the period prescribed under TOLA, and on the holding that TOLA does not apply for Assessment Year 2015-16.

2.3 The Tribunal also relied on coordinate bench decisions which had, on similar facts for Assessment Year 2015-16, quashed reassessment notices issued under section 148 in July 2022, applying the Supreme Court's pronouncements in Rajiv Bansal and subsequent Supreme Court and High Court rulings.

Interpretation and reasoning

2.4 The assessee's case pertained to Assessment Year 2015-16. An initial notice under section 148 was issued on 28.06.2021; pursuant to Ashish Agarwal, this was treated as a notice under section 148A(b), followed by an order under section 148A(d) dated 29.07.2022 and a fresh notice under section 148 issued on 29.07.2022 under the new regime, after approval under section 151.

2.5 The Tribunal noted that, as per the Supreme Court in Rajiv Bansal, TOLA would not apply for Assessment Year 2015-16 and the Revenue had expressly conceded that for that year, all notices issued on or after 01.04.2021 must be dropped. Consequently, any notice under section 148 pertaining to Assessment Year 2015-16 issued on or after 01.04.2021 was unsustainable.

2.6 The coordinate bench decision in Sunita Salhotra was cited and extracted, where, for Assessment Year 2015-16, notices under section 148 issued on 30.06.2021 and 25.07.2022 were quashed on the basis that: (i) both dates fell on or after 01.04.2021 and therefore, by the Revenue's concession before the Supreme Court, such notices had to be dropped; and (ii) even under the old section 149 (without applying TOLA), the outer six-year limitation for Assessment Year 2015-16 expired on 31.03.2022, rendering a notice dated 25.07.2022 time-barred.

2.7 The Tribunal further referred to another coordinate bench order in Guru Charan Singh, which in turn followed earlier tribunal and High Court decisions and Supreme Court rulings (including Deepak Steels & Power Ltd. and Make My Trip (India) Pvt. Ltd.) to hold that notices under section 148 issued on or after 01.04.2021 for Assessment Year 2015-16 are barred by limitation and that reassessments based on such notices are void.

2.8 Applying these principles "mutatis mutandis" to the present case, the Tribunal found the facts identical: the year involved was 2015-16, and the operative notice under section 148 was issued after 01.04.2021, i.e., on 28.06.2021 (subsequently treated and followed by a notice under the new regime). In view of the Supreme Court's observations in Rajiv Bansal and the Revenue's admission recorded therein, the notice issued under section 148 for Assessment Year 2015-16 was held to be bad in law.

Conclusions

2.9 The Tribunal held that, for Assessment Year 2015-16, in light of the Supreme Court's decision in Rajiv Bansal and the Revenue's concession recorded therein, TOLA does not extend the limitation, and all notices under section 148 issued on or after 01.04.2021 are invalid.

2.10 The notice under section 148 dated 28.06.2021 (and consequent proceedings under section 148A and the subsequent notice under section 148) pertaining to Assessment Year 2015-16 were quashed as being bad in law and barred by limitation. Additional grounds 2 and 2.1 were allowed.

Issue 2: Survival of the reassessment order and additions once the notice under section 148 is quashed

Interpretation and reasoning

2.11 The Tribunal observed that the assessment under section 147 read with section 144B, including additions under sections 68 and 69C, had been framed solely pursuant to the impugned notice under section 148. Once the foundational jurisdictional notice was held invalid, the reassessment order could not stand.

2.12 Following the coordinate bench approach in similar matters, the Tribunal treated all other grounds on merits-including those relating to the nature of unsecured loans, alleged accommodation entries and commission, and alleged denial of opportunity-as rendered academic.

Conclusions

2.13 The reassessment order passed under section 147 read with section 144B, and the additions made thereunder, were held to be void and non est, being founded on an invalid notice under section 148.

2.14 The remaining grounds of appeal challenging the additions and factual aspects were not adjudicated, having become academic due to the quashing of the reassessment proceedings. The appeal was allowed on the jurisdictional ground alone.

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