Reassessment notice validity and TOLA applicability: notices held time barred and reassessment quashed for lack of limitation

TOLA was held inapplicable to the relevant assessment year, so the regular limitation for issuing reassessment notices remained in force and expired on 31 March 2022; notices issued under the prior law between 1 April and 30 June 2021 therefore did not obtain an extended validity and were invalid. Following the Supreme Court precedent on limitation, an impugned notice issued after the extended due date was time barred; the notice and consequent reassessment were quashed, and the assessee's challenge on limitation grounds was allowed.

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Issues: Whether the notice issued under section 148 of the Income-tax Act, 1961 on 21.07.2022 for assessment year 2015-16 is time-barred and consequently whether the reassessment proceedings and consequent reassessment are void ab initio.

Analysis: The Tribunal examined applicability of the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA) and the effect of the Supreme Court's decision in Union of India v. Rajeev Bansal on the computation of surviving limitation for issuance of reassessment notices. Applying the legal framework set out in Rajeev Bansal, the period between issuance of the deemed show-cause notice under the old regime and the receipt of the assessee's response is to be excluded and the assessing officer must complete the mandated steps within the surviving time limit. For AY 2015-16 the regular limitation under the Income-tax Act read with TOLA did not extend the validity of notices issued under the old law between 1.4.2021 and 30.6.2021, and the surviving time limit for issuance of a fresh notice expired before 21.07.2022. The Tribunal relied on the chronology of notices, replies and orders in the record and respectfully followed the Supreme Court's computation and the reasoning in Rajeev Bansal and related High Court authority to hold that the notice dated 21.07.2022 fell outside the surviving limitation.

Conclusion: The notice issued under section 148 on 21.07.2022 is time-barred; the notice is quashed and the consequent reassessment is quashed. The assessee's challenge is allowed and the appeal is allowed.

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