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), notice could be issued only up to 31.03.2022. The first proviso to section 149(1), introduced by the Finance Act, 2021, prevents use of the amended reassessment regime where, under the earlier law, the notice was already out of time. The exclusion provisions in the amended section 149 do not revive a notice barred by the first proviso. On that basis, the reassessment order was quashed and relief was granted to the assessee.

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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.

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