Reassessment Notice Under Old Section 148 Served Late Held Invalid; New 148A Regime Mandatory, Section 292BB Inapplicable

ITAT Delhi held that reassessment proceedings were invalid as the notice under s.148 (old law) dated 31.03.2021 was actually served on the assessee on 20.04.2021, after substitution of ss.148, 148A and 149 by the Finance Act 2021 w.e.f. 01.04.2021. Since the AO did not comply with the mandatory new regime for issuance and service of notice, there was a jurisdictional defect, not a mere irregularity. S.292BB could not cure the complete absence of a valid notice. Consequently, the reassessment order was quashed and the assessee's appeal allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a notice under the un-amended Section 148 of the Income-tax Act, 1961, dated prior to 01.04.2021 but actually served on the assessee after 01.04.2021, is valid in law in view of the substituted provisions of Sections 148, 148A and 149 introduced by the Finance Act, 2021.

1.2 Whether Section 292BB can cure the defect arising from non-compliance with the mandatory procedure prescribed under the substituted Sections 148, 148A and 149 when the notice itself is issued/served contrary to the amended legal regime.

1.3 Consequentially, whether the reassessment order passed under Section 147 on the basis of such notice is sustainable in law.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Validity of notice under un-amended Section 148 served after 01.04.2021

(a) Legal framework as discussed

2.1.1 The Tribunal noted that by Finance Act, 2021, with effect from 01.04.2021, the earlier Section 148 was substituted and new Sections 148, 148A and 149 were introduced, laying down a fresh mandatory procedure for reopening of assessment.

2.1.2 The Tribunal relied on the decision of the jurisdictional High Court interpreting the term "issued" in the context of Section 149 and the transition to the new regime, wherein it was held that: (i) "issue" requires an overt act of due despatch of the notice to the assessee; (ii) mere generation or signing of a notice on the ITBA portal does not amount to issuance; (iii) for electronic communication, despatch of the e-mail on or before the cut-off date is necessary; and (iv) notices dated 31.03.2021 but despatched on or after 01.04.2021 do not meet the test of "issued" under Section 149 and are time-barred unless specifically saved.

2.1.3 The Tribunal also noted the High Court's holding that despatch in terms of Section 13 of the Information Technology Act, 2000 is sine qua non for issuance of notice by e-mail for purposes of Section 149.

(b) Interpretation and reasoning

2.1.4 The Tribunal found as a matter of fact that the notice under Section 148 (old provision) bore the date 31.03.2021 but was actually served through e-mail on 20.04.2021.

2.1.5 Applying the jurisdictional High Court's ratio, the Tribunal held that the relevant date for determining issuance is the date of despatch/service of the e-mail, not the date printed on the notice or its generation on the system.

2.1.6 As on 20.04.2021, the old Section 148 had been substituted and the new Sections 148, 148A and 149 were in force. Consequently, any reopening notice served on or after 01.04.2021 was required to strictly follow the amended provisions, including the procedure under Section 148A.

2.1.7 Since the notice dated 31.03.2021 under the un-amended Section 148 was actually served only on 20.04.2021, the Tribunal held that such notice was in violation of the mandatory amended provisions and could not be treated as a valid notice for reopening under the post-01.04.2021 regime.

(c) Conclusion

2.1.8 The Tribunal concluded that the notice under the old Section 148, although dated 31.03.2021, having been served on 20.04.2021, was invalid being contrary to the substituted Sections 148, 148A and 149, and therefore could not confer valid jurisdiction for reassessment.

2.2 Applicability of Section 292BB to cure the defect

(a) Legal framework as discussed

2.2.1 The Tribunal relied on the Supreme Court's decision which held that Section 292BB deems proper service of a notice where the assessee has participated in proceedings, but only cures infirmities in the manner, timing, or mode of service; it does not cure the complete absence of a notice itself, and for its application the notice must have emanated from the department in accordance with law.

(b) Interpretation and reasoning

2.2.2 The Department argued that since the assessee had appeared and cooperated in the reassessment proceedings, any defect in the service of the Section 148 notice was cured under Section 292BB.

2.2.3 The assessee contended that the defect was jurisdictional, arising from non-compliance with the mandatory new regime under Sections 148, 148A and 149 at the time of service, and therefore not curable by Section 292BB.

2.2.4 The Tribunal accepted the assessee's plea that the vice was not a mere irregularity in service but the very invalidity of the notice under the law applicable on the date of its service, namely failure to follow the substituted provisions. Hence, the defect went to the root of jurisdiction.

(c) Conclusion

2.2.5 The Tribunal held that Section 292BB could not be invoked to validate a notice that was itself invalid for non-compliance with the mandatory substituted provisions of Sections 148, 148A and 149, and therefore the Revenue could not take shelter under Section 292BB.

2.3 Sustainability of the reassessment order under Section 147

(a) Interpretation and reasoning

2.3.1 Having held that the notice under Section 148 (old) was invalid and in violation of the amended provisions operative on the date of its service, the Tribunal considered that the foundational jurisdiction for reopening under Section 147 was lacking.

2.3.2 Since the reassessment was framed solely on the strength of the impugned invalid notice, the entire reassessment proceedings stood vitiated.

(b) Conclusion

2.3.3 The Tribunal set aside the reassessment order passed under Section 147 as being contrary to law and without valid jurisdiction.

2.3.4 In consequence of setting aside the reassessment order on this jurisdictional ground, all other grounds raised by the assessee and the Revenue, including those relating to additions under Section 68, were held to have become infructuous and were left open without adjudication.

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