2026 (3) TMI 1223 - AT - Income Tax

Reassessment notice limitation under the first proviso to section 149(1) barred a late reopening and the reassessment was quashed.

A reassessment notice issued on 03.04.2022 for A.Y. 2015-16 was held to be time-barred because, under the unamended limitation under section 149(1)(b), ... Reopening of assessment - period of limitation - Limitation on reopening assessments under the first proviso to section 149(1) - non-application of fifth and sixth provisos to extend restriction in the first proviso Validity of notice u/s148 dated 03.04.2022 and consequent reassessment framed under section 147 r.w.s. 144 r.w.s. 144B for AY 2015-16 - HELD THAT: - The Tribunal held that the notice under section 148 dated 03.04.2022 was issued after the six year period available under the pre amended provision and therefore was barred by the first proviso to section 149(1) as introduced by the Finance Act, 2021. The Court's reasoning follows the Supreme Court's exposition in Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] and subsequent High Court decisions: the first proviso operates as a substantive restriction for assessment years beginning on or before 01.04.2021 and prevents issuance of notices where the old regime's time limit had already expired. Tribunal rejected the contention that the fifth and sixth provisos (which exclude certain periods for computing limitation under the amended section) could be read into or operate to extend the restriction created by the first proviso; those provisos qualify the amended substantive provision and do not revive notices barred by the first proviso. Applying these principles to the facts, the notice dated 03.04.2022 was beyond the permissible period and could not sustain the reassessment. [Paras 16, 17, 19, 20] Notice under section 148 dated 03.04.2022 was barred by limitation and the assessment order passed u/s 147 r.w.s. 144 r.w.s. 144B was quashed for want of valid jurisdiction. Final Conclusion: The Tribunal allowed the appeal, holding the reopening notice for AY 2015-16 to be time barred under the first proviso to section 149(1) and quashed the consequent reassessment order; other grounds were left open. Issues: (i) Whether the notice dated 03.04.2022 issued under section 148 of the Income-tax Act, 1961 for A.Y. 2015-16 was barred by limitation under the first proviso to section 149(1) of the Income-tax Act, 1961 and consequently whether the assessment framed under section 147 r.w.s. 144 r.w.s. 144B of the Income-tax Act, 1961 dated 21.02.2024 is liable to be quashed.Analysis: The issued notice under section 148 was dated 03.04.2022 and the un-amended time limit under clause (b) of sub-section (1) of section 149 of the Income-tax Act, 1961 permitted issuance of a notice for A.Y.2015-16 only up to 31.03.2022. The first proviso to section 149(1) (as enacted by Finance Act, 2021) prohibits issuance of a notice under section 148 for assessment years beginning on or before 01.04.2021 if such a notice could not have been issued at that time because it was beyond the time limit specified under clause (b) of sub-section (1) of section 149 as it stood immediately before the commencement of the Finance Act, 2021. The provisions in the amended section 149 that exclude periods (fifth and sixth provisos) qualify the amended substantive section and cannot be read into the pre-amendment limitation governed by the first proviso; thus exclusion under the fifth and sixth provisos cannot validate a notice that is already barred by the first proviso. Reliance on relevant authoritative decisions applying the first proviso to section 149(1) supports the conclusion that notices issued after the expiry of the pre-amendment six-year period are invalid where the first proviso applies.Conclusion: The notice dated 03.04.2022 issued under section 148 of the Income-tax Act, 1961 for A.Y. 2015-16 was barred by limitation under the first proviso to section 149(1) of the Income-tax Act, 1961; consequently the assessment order dated 21.02.2024 passed under section 147 r.w.s. 144 r.w.s. 144B of the Income-tax Act, 1961 is quashed and the appeal is allowed in favour of the assessee.