2026 (3) TMI 135 - HC - Income Tax

Time-bar for reassessment: compute surviving limitation excluding stayed periods and response time; late notices invalid.

Reassessment notices issued under the pre-amendment regime on or after 01.04.2021 are to be treated as deemed show-cause notices under the substituted ... Validity of reopening of assessment u/s 147 - New regime law -Limitation for issuance of reassessment notice u/s 149 - application of Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 to compute surviving limitation - exclusion of period consequent to deemed show-cause notices under Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] Whether the order under Section 148A(d) dated 25.07.2022 and the consequential notice under Section 148 dated 26.07.2022 for Assessment Year 2013-14 were time-barred? - HELD THAT: - The court applied the post 1 April 2021 statutory scheme and the principles laid down in the Supreme Court judgments (Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] and Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)]) to compute the surviving limitation. The notice issued on 31.05.2021 fell within the period extended by Section 3(1) of TOLA so that thirty days of limitation remained available to the Revenue as at that date. The period from 01.06.2021 until 04.05.2022 (date of Ashish Agarwal) is excluded under the third proviso to Section 149(1); the interval from 04.05.2022 to 24.05.2022 (date of issuance of the Section 148A(b) communication) is also excluded; and the two week period allowed to the assessee to respond to the Section 148A(b) show cause notice is excluded. Because the petitioner did not furnish any reply, limitation recommenced on 08.06.2022, after which the AO had thirty days to pass an order u/s 148A(d) and issue a notice u/s148. The order under Section 148A(d) was in fact passed on 25.07.2022 and the notice issued on 26.07.2022, both falling beyond the surviving period available under Section 149 read with TOLA and the exclusions recognized by the Supreme Court; therefore the impugned proceedings are barred by limitation and invalid. [Paras 23, 24, 25, 26, 27] The order dated 25.07.2022 under Section 148A(d) and the consequential notice dated 26.07.2022 under Section 148 are time-barred and are quashed. Final Conclusion: The writ petition is allowed; the impugned order under Section 148A(d) and the consequential notice u/s 148 for Assessment Year 2013-14 are set aside as barred by limitation. Issues: Whether the order dated 25.07.2022 under Section 148A(d) and the consequent notice dated 26.07.2022 under Section 148 of the Income-tax Act, 1961 for Assessment Year 2013-14 are time-barred and liable to be quashed.Analysis: The statutory framework governing reassessment for the relevant period comprises Sections 147 to 151 of the Income-tax Act, 1961, the temporary extensions under Section 3(1) of the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA), and the substituted limitation regime effected by the Finance Act, 2021. The Supreme Court decisions in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal establish that reassessment notices issued under the unamended regime on or after 01.04.2021 are to be treated as deemed show-cause notices under the substituted Section 148A; the surviving period available under the Income-tax Act read with TOLA must be computed by excluding the period during which the deemed show-cause notice remained stayed and the two weeks allowed for response; and any notice under Section 148 of the new regime must therefore be issued within the surviving time available after receipt of the assessee's reply. In the present case the original notice dated 31.05.2021 left thirty days of limitation as extended by TOLA; the period from 01.06.2021 to 04.05.2022 and the period from 04.05.2022 to 24.05.2022 are excluded under the third proviso to Section 149(1); the two-week response period from the notice dated 24.05.2022 was also excluded; the limitation recommenced on 08.06.2022 and the Assessing Officer had thirty days (up to 08.07.2022) to pass an order under Section 148A(d) and issue a notice under Section 148. The impugned order under Section 148A(d) dated 25.07.2022 and the notice dated 26.07.2022 were issued after expiry of the surviving limitation period.Conclusion: The order dated 25.07.2022 under Section 148A(d) and the consequential notice dated 26.07.2022 under Section 148 are time-barred and are quashed.Final Conclusion: The writ petition is allowed and the impugned order and notice are set aside; pending applications, if any, stand disposed of.Ratio Decidendi: Where reassessment proceedings arise from notices issued under the pre-amendment regime on or after 01.04.2021, the notices are to be treated as deemed show-cause notices under the substituted Section 148A; the surviving limitation under the Income-tax Act read with TOLA (after excluding the period of stay and the statutory response time) governs the time within which the Assessing Officer must pass an order under Section 148A(d) and issue a notice under Section 148, and any order or notice issued beyond that surviving period is time-barred and invalid.