2025 (12) TMI 745 - HC - Income Tax

Second reopening notice for AY 2003-04 held time-barred; assessment final u/s 153(2) deadline breach

HC held that the second reopening notice dated 03.10.2008 for AY 2003-04 was wholly without jurisdiction and barred by limitation under Section 153(2). ... Validity of Second reopening notice issued - period of limitation - Income escaping assessment - whether it is barred by the provisions of Section 153(2)? - HELD THAT:- When the first notice was issued on 28.03.2007, the clock stated ticking on a 9 months deadline that expired on 31.12.2007, as clearly prescribed by the second proviso to Section 153(2). AO had ample opportunity during this period to complete the reassessment, hearings were held, notices were issued, yet the deadline came and went without a completed assessment order. This wasn’t a case of the petitioner being evasive or uncooperative rather it was simply a failure on the part of Revenue to manage its own statutory obligations. The existing law doesn't provide for extensions or do-overs in such situations. AO could take multiple bites at the apple, issuing notice after notice whenever convenient; transforming what should be a time-bound proceeding into an endless cycle. This would leave taxpayers like the petitioner in a perpetual state of anxiety, never knowing when the matter is truly closed. Such a result would be antithetical to the very purpose of Section 153(2) and would render its protections entirely hollow. When a statutory authority lacks jurisdiction to act in the first place and the affected party need not exhaust alternative remedies before seeking constitutional relief. To require the petitioner to go through the entire reassessment process, gather and submit documents, attend hearings, and then pursue appeals through multiple levels of the Income Tax hierarchy would be forcing them to participate in proceedings that are void from the inception. This would not only waste months or even years of the petitioner's time and resources but would also legitimize an action that the law simply does not authorize. The principles of natural justice demand that when an authority acts beyond its jurisdiction, immediate judicial intervention is not just appropriate but necessary. Writ jurisdiction exists precisely for situations like this, where fundamental statutory rights are at stake and where requiring a litigant to proceed through prolonged proceedings would itself constitute an injustice. This Bench concludes that the second notice dated 03.10.2008, is wholly without jurisdiction, illegal, and contrary to the clear provisions of Sections 147, 148, and 153(2) of the Act. The second notice is accordingly set aside / quashed holding that the assessment for the year 2003-04 is hereby declared to have attained finality upon the expiry of the statutory deadline on 31.12.2007. 1. ISSUES PRESENTED AND CONSIDERED 1.1 pWhether the second notice dated 03.10.2008 issued under Section 148 for Assessment Year 2003-04 is valid in law or barred by Section 153(2). 1.2 pWhether, after failing to complete reassessment within the statutory period of nine months under Section 153(2) pursuant to the first notice dated 28.03.2007, the Assessing Officer could issue a fresh notice under Section 148 for the same assessment year. 1.3 pWhether the assessment for Assessment Year 2003-04 attained finality on expiry of the time limit on 31.12.2007, thereby precluding further reassessment proceedings for that year. 1.4 pWhether the writ petition was maintainable despite availability of alternative statutory remedies, in view of the alleged lack of jurisdiction to issue the second notice. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2 - Validity of the second notice dated 03.10.2008 under Section 148 and competence of the Assessing Officer to issue a fresh notice after expiry of the period under Section 153(2) p (Legal framework) The Court considered Sections 147 and 148, which empower the Assessing Officer to assess or reassess income that has escaped assessment, subject to Sections 148 to 153, and Section 153(2), which mandates that no order of assessment, reassessment or recomputation under Section 147 shall be made after nine months from the end of the financial year in which the notice under Section 148 was served (for the relevant period). p (Interpretation and reasoning) The Court noted that the first notice under Section 148 was issued on 28.03.2007. By operation of Section 153(2), the reassessment pursuant to that notice had to be completed within nine months from the end of the financial year in which the notice was issued, i.e., on or before 31.12.2007. The Court found that although hearing notices were issued and the petitioner participated, no reassessment order was completed within this period, and the delay was attributable to the Revenue's failure to discharge its statutory obligations, not to any non-cooperation by the assessee. pThe Court emphasized that the statutory time limit under Section 153(2) is a mandatory, substantive protection, not a mere procedural technicality. Parliament had consciously reduced the time limit (from one year to nine months) to ensure expeditious completion of reassessment proceedings and to secure certainty and finality to taxpayers. Accepting the contention that a fresh notice could be issued whenever an earlier attempt failed would effectively nullify this legislative mandate, allow 'multiple bites at the apple', and convert a time-bound proceeding into an endless cycle, leaving taxpayers under perpetual threat of reassessment. pThe Court rejected the Revenue's argument that Sections 147 and 148 independently and continuously confer jurisdiction so long as limitation under Section 149 is met and that Section 153(2) only governs completion of a particular reassessment. The Court held that permitting repetitive notices for the same assessment year, after the statutory period triggered by the first notice has expired, would defeat the purpose and protections embedded in Section 153(2) and would be contrary to the statutory scheme. p (Conclusions) The Court held that once the first notice dated 28.03.2007 set the statutory time limit running and the reassessment was not completed by 31.12.2007, the Assessing Officer had no jurisdiction to initiate fresh reassessment proceedings for the same assessment year by issuing the second notice dated 03.10.2008. The second notice under Section 148 was declared wholly without jurisdiction, illegal, and contrary to Sections 147, 148 and 153(2), and was quashed. Issue 3 - Finality of assessment upon expiry of the statutory time limit under Section 153(2) p (Interpretation and reasoning) The Court reasoned that the expiry of the statutory deadline on 31.12.2007, without completion of reassessment pursuant to the first notice, resulted in the assessment for Assessment Year 2003-04 attaining finality. There is no statutory provision allowing the Assessing Officer to extend the time limit or restart the process for the same year by a fresh notice once the period prescribed by Section 153(2) has lapsed. pThe Court rejected the contention that the lapse of time merely rendered the first notice infructuous without conferring finality upon the assessment. It held that the statutory scheme, particularly the reduction of the reassessment time frame, was intended to prevent indefinite exposure of assessees to reassessment proceedings and to ensure certainty and closure in tax affairs. p (Conclusions) The Court concluded that the assessment for Assessment Year 2003-04 stood concluded and attained finality on the expiry of the statutory deadline of 31.12.2007, and no further reassessment proceedings for that year could be lawfully undertaken. Issue 4 - Maintainability of the writ petition despite alternative remedy p (Interpretation and reasoning) The Court observed that when a statutory authority acts without jurisdiction, the affected party is not obliged to exhaust alternative statutory remedies before invoking constitutional jurisdiction. Compelling the petitioner to undergo the entire reassessment process, adduce evidence, attend hearings and then pursue appeals would require participation in proceedings void ab initio and would result in unnecessary waste of time and resources. pThe Court held that where fundamental statutory protections and jurisdictional limits are breached, immediate judicial intervention through writ jurisdiction is appropriate and necessary. In such circumstances, the existence of an appellate mechanism does not bar recourse to writ proceedings. p (Conclusions) The Court held that the writ petition was maintainable, as the impugned second notice was a jurisdictional error. It therefore exercised its writ jurisdiction to quash the notice dated 03.10.2008 and declared that the assessment for Assessment Year 2003-04 had attained finality upon expiry of the statutory deadline.