2026 (1) TMI 1204 - HC - Income Tax

Validity of reopening of assessment limitation: computation of six- and ten-year periods clarified; reopening beyond ten years barred.

Statutory prescription distinguishes computation for six-year and ten-year limitation periods for reopening assessments under pre-Finance Act, 2021 ... Validity of reopening of assessment on period of limitation - Computation of six assessment years and ten assessment years u/s 153A - limitation for reopening assessment - Time limit for notice as per old regime - scope of new regime - as submitted that as per clause (b) to sub-section (1) of Section 149 the period of ten years, in a case where the escaped income is more than Rs. 50 lakhs, would begin after ten years have lapsed from the end of the relevant assessment year HELD THAT:- Statute prescribes different modes of computation for six years and ten years. We reiterate that the provisions of Section 153A(1) (b) of the Act stipulate that the Assessing Officer shall assess or reassess the total income of six years immediately preceding the assessment year relevant to the previous year in which the search is conducted. Ten assessment year period, consequently, is to be reckoned from the end of the assessment year pertaining to the previous year in which the search was conducted, as distinct from the preceding year which is spoken of in the case of the six relevant assessment years. Thus, the contention with regard to the computation of six years as well as ten years under the provisions of Section 153A of the Act has already been gone into by the Delhi High Court as well as the Madras High Court, and we have no convincing reason to take a divergent view from the view expressed hereinabove. Applying the aforesaid computation to the facts of the present case, taking the date of the search as 09.05.2024 during the Financial Year 2024-25, the Assessment Year 2025-26 will become the first assessment year and, in the same manner, the Assessment Year 2016-17 will become the tenth assessment year. Thus, the year under consideration, namely, Assessment Year 2015- 16, for which the impugned notice has been issued under Section 148 of the Act, would fall beyond the period of ten years prescribed under the statute as it stood immediately before the commencement of the Finance Act, 2021, and hence, on this count, the impugned notice can be said to be barred by limitation. The impugned notice issued u/s 148 by the respondent – Department seeking to reopen the income-tax assessment of the petitioner for the respective assessment year is hereby quashed and set aside. Assessee appeal allowed. Issues: Whether the notice issued under Section 148 of the Income-tax Act, 1961 for Assessment Year 2015-16 is time-barred having regard to a search conducted on 09.05.2024 and the computation of the six-year and ten-year periods under Section 153A/153C and Section 149 (old regime).Analysis: The Court applied Section 152(3) to hold that, because the search took place on 09.05.2024, the pre- Finance (No.2) Act, 2024 regime of Sections 147151 (and the then wording of Section 149) governs. Section 153A(1)(b) prescribes that the six assessment years are the six years immediately preceding the assessment year relevant to the previous year in which the search is conducted; Explanation 1 to Section 153A prescribes that the ten assessment years are to be computed from the end of the assessment year relevant to the previous year in which the search is conducted. The Court adopted the established construction that the statute uses different starting points for the six-year block and the ten-year block: the six years are counted immediately preceding the search assessment year (excluding the search assessment year), whereas the ten-year period is reckoned backwards from the end of the assessment year relevant to the previous year in which the search was conducted (thus including the search assessment year in the ten-year computation). Applying these rules to a search in Financial Year 2024-25 (search assessment year AY 2025-26), the ten-year block terminates at AY 2016-17 and does not extend to AY 2015-16. The Court therefore found that issuance of a Section 148 notice for AY 2015-16 falls beyond the ten-year outer limit as it stood immediately before the Finance Act, 2021.Conclusion: The notice dated 31.03.2025 issued under Section 148 for Assessment Year 2015-16 is quashed as time-barred; the writ petitions are allowed (decision in favour of the assessee).