2026 (3) TMI 626 - AT - Income Tax

Limitation under first proviso to section 149(1) renders a section 148 notice time barred and invalidates subsequent assessment.

The article analyses whether a notice issued under section 148 for AY 2015-16 was time barred by the first proviso to section 149(1) after substitution by ... Validity of reopening of assessment - period of limitation - Time-bar of reassessment notice under section 148 by operation of the first proviso to section 149(1) - six-year limitation under the old regime - last date for issuing the notice u/s 148 of the Act under erstwhile section 149(1)(b) of the for the AY 2015-16 - whether the issuance of the notice u/s 148 of the Act on April 08, 2022, for AY 2015- 16, falls within the permissible time limits or not? HELD THAT: - The Tribunal held that for AY 2015-16 the six-year limitation under the pre Finance Act, 2021 regime expired on 31/03/2022, so the first proviso to amended section 149(1) prevents issuance of a notice under section 148 after that date if it was already time barred under the old law. Tribunal applied the reasoning in Union of India v. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] and subsequent High Court authorities to conclude that procedural compliance with section 148A or exclusion of time under the erstwhile provisos cannot revive a notice which was beyond the old limitation period; consequently the notice dated 08/04/2022 was held invalid as barred by limitation and the consequential reassessment order was without jurisdiction. [Paras 8, 9] The notice under section 148 dated 08/04/2022 for AY 2015-16 is time barred by the first proviso to section 149(1) and the consequent reassessment order is quashed. Final Conclusion: The Tribunal allowed the appeal, holding the notice under section 148 issued on 08/04/2022 for AY 2015-16 to be time barred by the first proviso to section 149(1) and quashed the reassessment order; other grounds were rendered academic. Issues: (i) Whether the notice issued under section 148 of the Income-tax Act, 1961 dated 08/04/2022 for AY 2015-16 was barred by limitation under the first proviso to section 149(1) of the Income-tax Act, 1961, and whether the consequent proceedings and assessment order under section 147 r.w.s. 144C(13) are invalid.Analysis: The applicable statutory framework includes Section 149(1) of the Income-tax Act, 1961 as substituted by Finance Act, 2021, and the first proviso thereto which preserves the old regime's time limits for assessment years beginning on or before 01-04-2021. For AY 2015-16 the six-year limitation under the old regime expired on 31-03-2022. The notice under section 148 was issued on 08-04-2022, after that cut-off date. The exclusions for time computation relating to section 148A proceedings cannot operate to validate a notice that was already time-barred under the old regime as per the first proviso to section 149(1). Precedent and comparative authorities interpreting the proviso confirm that the first proviso acts as a threshold restricting retrospective application of extended limitation; procedural compliance with section 148A or reliance on later provisos does not revive a notice that was beyond the old law's limitation at the time of issuance.Conclusion: The notice issued under section 148 of the Income-tax Act, 1961 dated 08/04/2022 for AY 2015-16 was barred by limitation under the first proviso to section 149(1) of the Income-tax Act, 1961; the subsequent proceedings and the assessment order passed under section 147 r.w.s. 144C(13) are invalid. The appeal is allowed in favour of the assessee.