2025 (12) TMI 198 - HC - Income Tax

Reassessment notice under old s.148 deemed stayed, making delayed new s.148 notice time-barred for AY 2016-17

HC held that for AY 2016-17, where alleged escaped income was below Rs.50 lakh, the reassessment notice under s.148 (old regime) had to be issued by ... Reopening of assessment u/s 147 - limitation for issuance of Notice u/s 148 prescribed under Section 149 of the Act read with Section 151 - 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:- A Notice under Section 148 of the Act was required to be issued for reassessment within the time limit surviving under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) [TOLA] Act, 2020. For the Assessment Year 2016-2017, since the income escaping assessment is less than Rs.50,00,000/-, the Notice under Section 148 of the Act ought to have been issued on 31.03.2020. However, by virtue of TOLA extensions, the said date has been extended up to 30.06.2021. In the light of the ratio in Ashish Agarwal case [2022 (5) TMI 240 - SUPREME COURT] and Rajeev Bansal case [2024 (10) TMI 264 - SUPREME COURT (LB)] the Notice issued under Section 148 of the Act under the old regime on 30.06.2021 is deemed to have been stayed for thirty days for the Income Tax Department to provide to the respective assessee’s information and material relied upon and two weeks thereafter for the assessee’s to reply to the Show Cause Notices. In the present case, Notice under Section 148 of the Act under the old regime itself was issued on the last date of limitation viz., 30.06.2021, after the exclusions i.e., excluding the thirty days and fourteen days time period granted by the Hon’ble Supreme Court in Ashish Agarwal case (cited supra) there is no further time available for the Assessing Officer to issue Notice under Section 148 of the Act under the new regime barring the seven days as provided under the fourth Proviso to Section 149 of the Act as amended with effect from 01.04.2021. This is evident from the illustration in Paragraph No.112 of Rajeev Bansal case (cited supra). Therefore, after accounting for all the exclusions, the Assessing Officer in the present case had no time left for issuance of Notice under Section 148 of the Act under the new regime. However, applying the fourth Proviso to Section 149 of the Act as amended with effect from 01.04.2021, the Assessing Officer had seven days to issue a Notice under Section 148 of the Act under the new regime. Notice under Section 148 of the Act ought to have been issued within seven days from the date of reply given by the Petitioner on 03.06.2022. In other words, the Notice ought to have been issued on or before 10.06.2022. In the present case, the Notice under Section 148 of the Act under the new regime was issued only on 28.07.2022. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the earlier order dismissing the writ petition required recall in view of the subsequent authoritative exposition of law in the decisions interpreting reassessment notices issued under the unamended and amended provisions of the Income-tax Act, 1961. 1.2 Whether the notice issued on 30.06.2021 under section 148 of the Income-tax Act, 1961 (old regime) for Assessment Year 2016-2017, and the consequential proceedings under sections 148A(d) and 148 (new regime), were barred by limitation under section 149 read with section 151 of the Act and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Recall of earlier dismissal order in light of subsequent Supreme Court decisions Legal framework 2.1 The Court considered paragraph 28 of the decision in Union of India v. Ashish Agarwal and paragraphs 112 and 114 of the decision in Union of India v. Rajeev Bansal, which re-examined and clarified the legal position concerning reassessment notices issued under the old and new regimes of sections 147-151 of the Income-tax Act, 1961 and the effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Interpretation and reasoning 2.2 The Court noted that the earlier dismissal order dated 04.11.2025 had been passed before closely examining the above authoritative pronouncements and, upon reconsideration of the relevant passages, a doubt arose regarding the correctness of the earlier conclusion. 2.3 Having perused the documents, list of dates and events, and the binding ratio of the Supreme Court in the above decisions, the Court found it necessary, for fair adjudication, to recall the earlier order and decide the writ petition afresh in accordance with the clarified legal position. Conclusions 2.4 The order dated 04.11.2025 dismissing the case was recalled to enable a fresh decision in conformity with the law laid down in Ashish Agarwal and Rajeev Bansal. Issue 2 - Limitation and validity of reassessment proceedings under sections 148, 148A, 149, 151 and TOLA Legal framework 2.5 The Court applied the ratio of paragraph 28 of Ashish Agarwal, under which all notices issued under unamended section 148 between 01.04.2021 and 30.06.2021 are deemed to be notices under section 148A(b) of the Act (new regime), and the Assessing Officer is required within thirty days to provide information and material relied upon, giving two weeks to the assessee to respond. 2.6 The Court relied on paragraph 114 of Rajeev Bansal which, inter alia, held that: (a) after 01.04.2021, the Act must be read with the substituted provisions; (b) TOLA continues to apply where relevant time limits fall between 20.03.2020 and 31.03.2021; (c) section 3(1) of TOLA overrides section 149 only to relax the time limit for issuing notices under section 148; (f) directions in Ashish Agarwal extend to all reassessment notices issued under the old regime between 01.04.2021 and 30.06.2021; (g) the period from issuance of such deemed show-cause notices till supply of information and two weeks for reply is to be excluded; and (h) reassessment notices under the new regime must be issued within the surviving limitation under the Act read with TOLA, and any notice beyond such period is time barred. 2.7 The Court further relied on the illustration at paragraph 112 of Rajeev Bansal explaining computation of the surviving period under section 149 after giving effect to the exclusions and deeming fiction introduced through Ashish Agarwal and TOLA. 2.8 The Court also took note of the fourth proviso to section 149 of the Act (as amended with effect from 01.04.2021), which allowed a maximum of seven days beyond the surviving period in a specified situation. Interpretation and reasoning 2.9 For Assessment Year 2016-2017, as the alleged income escaping assessment was less than Rs. 50,00,000/-, the outer time limit under section 149 of the Act to issue a notice under section 148 (old regime) would have expired on 31.03.2020. By virtue of TOLA extensions, this date stood extended up to 30.06.2021. 2.10 In the present case, the notice under section 148 (old regime) was in fact issued on 30.06.2021, the last date of limitation as extended by TOLA. 2.11 Applying the deeming fiction in Ashish Agarwal, this notice dated 30.06.2021 under the old regime had to be treated as a notice under section 148A(b) under the new regime. Consequently, by virtue of paragraph 28 of Ashish Agarwal and paragraph 114(g) of Rajeev Bansal, the period from issuance of such deemed show-cause notice until (i) supply of information and material by the Assessing Officer and (ii) the further two-week period granted to the assessee to respond stood excluded, during which time the notices were deemed to be stayed. 2.12 The relevant chronology showed that: (i) the old-regime notice under section 148 was issued on 30.06.2021; (ii) the Supreme Court rendered its decision in Ashish Agarwal on 04.05.2022; (iii) notice under section 148A(b) was issued on 20.05.2022; (iv) reply by the assessee was given on 03.06.2022; and (v) order under section 148A(d) and fresh notice under section 148 (new regime) were issued on 28.07.2022. 2.13 Since the original old-regime notice was itself issued on the last possible extended date, 30.06.2021, the Court held that, after excluding the thirty days allowed to the Department to furnish material and the further two weeks allowed to the assessee to respond, there was no residual time left under section 149 read with TOLA for issuance of a fresh notice under section 148 of the new regime, save and except the seven days contemplated by the fourth proviso to section 149. 2.14 On this basis, the Court reasoned that, in the facts of the present case, the Assessing Officer had, at best, only seven days from the date of receipt of the assessee's reply on 03.06.2022 to issue a valid reassessment notice under the new regime. Therefore, any notice under section 148 (new regime) ought to have been issued on or before 10.06.2022. 2.15 As the notice under section 148 (new regime) was actually issued only on 28.07.2022, the Court held that it was beyond the surviving limitation period as computed in terms of section 149 read with TOLA and the binding interpretations in Ashish Agarwal and Rajeev Bansal. Conclusions 2.16 The Court concluded that the notice dated 30.06.2021 issued under section 148 (old regime) is to be treated as a deemed notice under section 148A(b) in the new regime, but that, after giving effect to all statutory and judicially mandated exclusions and the fourth proviso to section 149, there was no valid time left beyond seven days from 03.06.2022 to issue a notice under section 148 (new regime). 2.17 As the notice under section 148 (new regime) and the order under section 148A(d), both dated 28.07.2022, were issued beyond the permissible limitation, they were held to be time barred and liable to be set aside. 2.18 Consequently, the entire reassessment proceedings initiated by the notice dated 30.06.2021, continued by the notice under section 148A(b) dated 20.05.2022, and culminating in the order under section 148A(d) and notice under section 148 dated 28.07.2022, were quashed as being beyond time, and the writ petition challenging these proceedings was allowed.