2026 (2) TMI 92 - HC - Income Tax

Validity of reassessment proceedings under Section 153A: reopening beyond ten-year limit held invalid; writ allowed

Reopening assessments under the search-triggered reassessment provision must respect the ten-year computation from the first assessment year determined by ... Validity of Reassessment proceedings - proceedings were initiated based on the documents pertaining to the petitioner which were discovered during the search conducted - limitation prescribed in the provision of Section 153A - reopening based on search as being beyond the ten-year limitation applicable under Section 153A read with Section 149 HELD THAT:- The date of search as 11.11.2022 during the Financial Year 2023-24, the Assessment Year will become the first Assessment Year, in wake of the fact that notice was issued in the end of the Assessment Year on 31.03.2023, and the tenth Assessment Year would be 2014-15. In the instant case, the impugned action of reopening assessment is 2012-13 which would be 12th year and hence the action of the respondent is contrary to the provisions of Section 153A of the Act read with Sections 148 and Section 149 of the Act. We do not subscribe to the submissions advanced objecting to the submission of limitation of beyond 10 years on the ground that the same is raised for the first time before this Court, since it is settled legal precedent, a pure question of law relating to interpretation of statutory interpretation, and its violation, which has direct bearing on the legal claim can be raised at any stage. In the present case, the revenue has erroneously and in violation of the statutory provisions of Section 153A of the Act, has calculated the period and has tried to re-open the assessment which is beyond its purview. Thus, such an issue/submission can always be raised before this Court even if the same is not raised before the authorities during the assessment proceedings since it is expected from the Assessing Officer to be alive to the limitation prescribed in the provision of Section 153A of the Act. It is not expected that the Assessing Officer would be ignorant in computation of ten years as required under Section 148 read with Sections 149 and 153 of the Act and go beyond the scope of assessment years. Hence, this Court can always delve into the same while exercising its inherent power under Article 226 of the Constitution of India. WP allowed. Issues: Whether the notice under Section 148 and the consequent reassessment order for Assessment Year 2012-13, issued following a search conducted on 11.11.2022, are barred by limitation because the relevant assessment year falls beyond the ten-year period computed under Explanation 1 to Section 153A read with Section 149 of the Income-tax Act, 1961.Analysis: The statutory scheme distinguishes computation of the six-year block (Section 153A(1)(b)) from the ten-year outer limit (Explanation 1 to Section 153A). Explanation 1 fixes the starting point for the ten-year computation at the end of the assessment year relevant to the previous year in which the search is conducted. For a search on 11.11.2022 (financial year 2023-24), the search-related assessment year and the ten-year block are computed accordingly, producing a terminal assessment year of 2014-15 for the ten-year period; any earlier assessment year falls outside the ten-year limit. The proviso to Section 149(1) bars issuance of a Section 148 notice for assessment years beginning on or before 01.04.2021 if a notice could not have been issued at that time due to expiry of the limits under Section 149(1)(b) or Sections 153A/153C as they stood prior to Finance Act, 2021. Applying these provisions to the facts, Assessment Year 2012-13 lies beyond the ten-year outer limit as computed from the end of the search-related assessment year; reopening under Section 148 in respect of that year therefore exceeds the statutory limitation.Conclusion: The notice under Section 148 and the consequent reassessment order for Assessment Year 2012-13 are barred by limitation and are quashed and set aside; decision in favour of the assessee.