Delhi High Court
Ram Balram Buildhome Pvt Ltd vs Income Tax Officer & Anr. on 30 January, 2025
Author: Vibhu Bakhru
Bench: Tushar Rao Gedela, Vibhu Bakhru
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 30.01.2025
+ W.P.(C) 16232/2024 & CM APPL. 68188/2024
RAM BALRAM BUILDHOME PVT. LTD. ..... Petitioner
Versus
INCOME TAX OFFICER AND ANR. ..... Respondents
Advocates who appeared in this case:
For the Petitioner : Mr Keshav Sehgal, Mr Shivam Gaur, Mr
Kshitij Joshi and Mr Aryan Kumar,
Advocates.
For the Respondent : Mr. Aseem Chawla, Sr. Advocate with Ms.
Pratishtha Choudhary, Mr Puneet Rai, Senior
Standing Counsel with Mr Ashvini Kumar
and Mr Rishabh Nangia, Advocates.
CORAM
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR JUSTICE TUSHAR RAO GEDELA
JUDGMENT
VIBHU BAKHRU, J
INTRODUCTION
1. The petitioner (hereafter the Assessee) has filed the present
petition under Article 226 of the Constitution of India, inter alia,
impugning (i) a notice dated 01.06.2021 issued under Section 148 of the
Income Tax Act, 1961 (hereafter the Act); (ii) a notice dated 30.05.2022
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issued in furtherance of the notice dated 01.06.2021; (iii) an order dated
30.07.2022 passed under Section 148A(d) of the Act; (iv) a notice dated
30.07.2022 issued under Section 148 of the Act; and (v) an assessment
order dated 30.05.2023 framed under Section 147 of the Act read with
Section 144 and 144B of the Act. These abovementioned impugned
notices and orders were issued in respect of the assessment year (AY)
2013-14.
2. Mr Sehgal, the learned counsel appearing for the Assessee has
confined the challenge to the notices and the orders impugned in this
petition on a singular ground – that the order dated 30.07.2022 passed
under Section 148A(d) of the Act (hereafter the impugned order) as well
as the notice dated 30.07.2022 (hereafter the impugned notice) issued
under Section 148 of the Act were beyond the period as stipulated under
Section 149(1) of the Act.
3. Mr Chawla, learned senior counsel appearing for the Revenue
stoutly disputed the Assessee’s claim that the impugned order and the
impugned notice, are barred by limitation. He, however, did not dispute
that if the Assessee’s contention was accepted and the impugned notice
was found to have been issued beyond the period of limitation, further
proceedings pursuant to the impugned notice as well as the assessment
order dated 30.05.2023, would, as a consequence, be liable to be set
aside.
4. In view of the above, the only controversy that is required to be
addressed by this court is whether the impugned order and the impugned
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notice was issued beyond the period as prescribed under Section 149(1)
of the Act.
THE FACTUAL CONTEXT
5. The Assessee is a company incorporated under the Companies
Act, 1956. The petitioner claims that it has been regularly filing its
return of income and had done so for the AY 2013-14 as well.
6. On 24.03.2020, the Government of India announced the
nationwide lockdown (initially for a period of twenty-one days) in the
wake of spread of the novel coronavirus (COVID-19) pandemic.
7. On 31.03.2020, the President of India promulgated the Taxation
and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020,
whereby time limits as stipulated in respect of various actions and
compliances, were extended. Thereafter, the Parliament enacted the
Taxation and Other Laws (Relaxation and Amendment of Certain
Provisions) Act, 2020 [hereafter TOLA], which came into force with
effect from 31.03.2020.
8. The Assessing Officer [hereafter the AO] issued a notice dated
01.06.2021 under Section 148 of the Act on the basis that he had reason
to believe that the income of the Assessee chargeable to tax in respect
of AY 2013-14 had escaped assessment within the meaning of Section
147 of the Act. Such reason to believe is the jurisdictional condition for
issuance of such notices under the provisions for reassessment as
existed prior to 01.04.2021. The Assessee responded to the notice dated
01.06.2021 disputing the validity of the notice. The Assessee claimed
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that the notice was void ab initio as the necessary procedure as
prescribed under Section 148A of the Act was not followed.
9. A similar challenge, as raised by the Assessee, was sustained by
this court in Mon Mohan Kohli v. ACIT & Anr.1 and such notices were
set aside. However, subsequently, on 04.05.2022, the Supreme Court
rendered a decision in Union of India and Ors. v. Ashish Agarwal2.
And, in exercise of its powers under Article 142 of the Constitution of
India, the Supreme Court issued directions construing such notices
issued under Section 148 of the Act as the notices under Section
148A(b) of the Act. The AOs were also directed to furnish such material
to the assessees, as was required on the basis of which such notices were
premised.
10. In compliance with the said directions, the AO issued another
notice dated 30.05.2022 in furtherance of the notice dated 01.06.2021
construing the same as a notice under Section 148A(b) of the Act. The
Assessee was called upon to furnish a response to the said notice within
a period of two weeks from the said date, that is, on or before
13.06.2022.
11. The petitioner furnished its response to the notice dated
30.05.2022 on 13.06.2022.
12. Thereafter, the AO passed the impugned order dated 30.07.2022
under Section 148A(d) of the Act holding that it was a fit case to re-
open the Assessee’s assessment for the AY 2013-14. According to the
Assessee, the impugned notice was issued beyond the period of
1
Neutral Citation No.: 2021:DHC:4181-DB
2
(2023) 1 SCC 617
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limitation as prescribed under Section 149(1) of the Act as extended by
the Supreme Court.
13. Pursuant to the aforesaid notice, the Assessee filed its return of
income on 26.08.2022. The said proceedings culminated in the
assessment order dated 30.05.2023, whereby the AO held that an entry
amounting to ₹75 lacs remained unexplained and thus, added the said
amount under Section 69 of the Act, to the Assessee’s returned income.
charged to tax under Section 115BBE of the Act.
THE ISSUE
14. As noted at the outset, the question that falls for consideration of
this court is whether the impugned order and the impugned notice were
issued beyond the period as stipulated for passing such an order or
issuance of such a notice.
15. Section 149(1) of the Act as in force with effect from 01.04.2021
and prior to its substitution with effect from 01.09.2024 by the Finance
(No.2) Act, 2024, expressly provided that no notice under Section 148
of the Act can be issued for the relevant assessment year if three years
had elapsed from the end of the relevant assessment year unless the case
fell within Clause (b) of the said sub-section. Clause (b) proscribed
issuance of notice if three years, but not more than ten years, had
elapsed from the end of the relevant assessment year unless the AO had
in its possession books of account, other documents, or evidence, which
revealed that the income chargeable in the form as stipulated, had
escaped assessment. And, such income amounted to or was likely to
₹50 lacs or more. Thus, no notice under Section 148 of the Act could
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be issued beyond the period of ten years from the end of the relevant
assessment year. However, in terms of the first proviso to Section
149(1) of the Act, no notice under Section 148 of the Act could be
issued in respect of the relevant assessment year beginning on or before
01.04.2021, if such a notice could not be issued, inter alia, under
Section 148 of the Act.
16. Concededly, no notice under Section 148 of the Act could be
issued under the provisions of Section 149(1) of the Act as was in force
prior to 01.04.2021 if, (i) four years had elapsed from the end of the
relevant assessment year; (ii) four years but not more than six years had
elapsed from the end of the relevant assessment year if the income
chargeable to tax, which had escaped assessment, amounted to or was
likely to amount to ₹1 lac or more for that year; or (iii) four years but
not more than sixteen years had elapsed from the end of the relevant
assessment year if the income in relation to any asset (including
financial interest) in any entity located outside India and chargeable to
tax had escaped assessment.
17. In the present case, there is no allegation that the Assessee’s
income that had escaped assessment in respect of AY 2013-14 was in
relation to any asset located outside India. Thus, in terms of Section
149(1)(b) of the Act as in force prior to 01.04.2021, no notice under
Section 148 of the Act could have been issued beyond the period of six
years from the end of the relevant assessment year.
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18. In view of the above, no notice under Section 148 of the Act
could have been issued in this case after 31.03.2020 in respect of AY
2013-14.
19. However, it is the Revenue’s case that the impugned notice is
within the time as extended by virtue of the TOLA [Taxation and Other
Laws (Relaxation and Amendment of Certain Provisions) Act, 2020]
and the decision of the Supreme Court in Union of India & Ors. v.
Ashish Agarwal2. The Revenue contends that the impugned notice has
been issued within the time as prescribed under Section 149(1) of the
Act computed in accordance with the third and fourth proviso to Section
149 of the Act as was in force at the material time3. The learned counsel
for the Revenue contends that the issue is substantially covered by the
decision of the Supreme Court in Union of India & Ors. v. Rajeev
Bansal4. Whilst the learned counsel for the Revenue contends that it is
favour of the Revenue however, the learned counsel for the Assessee
contends otherwise.
20. Thus, the central question to be addressed is whether the
impugned notice was issued within the extended time as available to the
AO by virtue of the provisions of the TOLA, the directions issued under
Article 142 of the Constitution of India by the Supreme Court in the
case of Union of India & Ors. v. Ashish Agarwal2 and the timelines as
3
As in force with effect from 01.04.2021 but prior to 01.04.2023
4
2024 SCC OnLine SC 2693
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explained by the Supreme Court in Union of India & Ors. v. Rajeev
Bansal4.
UNION OF INDIA AND ORS. V. ASHISH AGARWAL2
21. As noted at the outset, the proceedings for reassessment were
initiated by issuance of the notice dated 01.06.2021 under Section 148
of the Act as in force prior to 01.04.2021. The question regarding
validity of such notices was considered by the Supreme Court in Union
of India & Ors. v. Ashish Agarwal2 . It is thus necessary to briefly
consider the import of the directions issued by the Supreme Court in
that case and the context in which the same were issued.
22. Substantial amendments were introduced by the Finance Act,
2021 with effect from 01.04.2021 in respect of the provisions relating
to re-assessment of income that has escaped assessment and Section 147
to 151 of the Act, were substituted. As noted above, notwithstanding
the amendments to the said Sections, the AOs had issued various notices
under Section 148 of the Act to various assesses – including the notice
dated 01.06.2021 to the Assessee – under the regime for re-assessment
that was in force prior to 01.04.2021.
23. The aforementioned notices were issued on the premise that the
TOLA permitted the AOs to issue such notices by imputing that the
same were issued prior to 31.03.2021. It was, thus, assumed that the
notices could be issued under the provisions as were extant prior to
31.03.2021.
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24. The said notices were impugned in various petitions filed in High
Courts across the country. Various High Courts (including this court)
sustained the said challenge and set aside such notices issued under
Section 148 of the Act on the ground that the same could not be issued
under the statutory regime for reassessment as was in force prior to
31.03.2021. The Revenue appealed the said decisions before the
Supreme Court.
25. The Supreme Court examined the amendments introduced in the
Act relating to re-assessment of income and concurred with the views
expressed by various high courts that it was incumbent upon the AO to
follow the procedure as prescribed under Section 148A of the Act after
01.04.2021. The relevant extract of the said decision is set out below:
“15. It cannot be disputed that by substitution of sections
147 to 151 of the Income Tax Act (“the IT Act“) by the
Finance Act, 2021, radical and reformative changes are
made governing the procedure for reassessment
proceedings. Amended Sections 147 to 149 and Section
151 of the IT Act prescribe the procedure governing
initiation of reassessment proceedings. However, for
several reasons, the same gave rise to numerous
litigations and the reopening were challenged inter alia,
on the grounds such as:
(1) no valid “reason to believe”,
(2) no tangible/reliable material/information in
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(3) no enquiry being conducted by the assessing officer
prior to the issuance of notice; and reopening is based on
change of opinion of the assessing officer and
(4) lastly the mandatory procedure laid down by this
Court in the case of GKN Driveshafts (India) Ltd. Vs.
Income Tax Officer and Ors; (2003) 1 SCC 72, has not
been followed.
16. Further pre-Finance Act, 2021, the reopening was
permissible for a maximum period up to six years and in
some cases beyond even six years leading to uncertainty
for a considerable time. Therefore, Parliament thought it
fit to amend the Income Tax Act to simplify the tax
administration, ease compliances and reduce litigation.
Therefore, with a view to achieve the said object, by the
Finance Act, 2021, Sections 147 to 149 and Section 151
have been substituted.
17. Under the substituted provisions of the IT Act vide
Finance Act, 2021, no notice under section 148 of the IT
Act can be issued without following the procedure
prescribed under Section 148-A of the IT Act. Along
with the notice under Section 148 of the IT Act, the
assessing officer (“AO”) is required to serve the order
passed under Section 148-A of the IT Act. Section 148-
A of the IT Act is a new provision which is in the nature
of a condition precedent. Introduction of Section 148-A
of the IT Act can thus be said to be a game changer with
an aim to achieve the ultimate object of simplifying the
tax administration, ease compliance and reduce
litigation.
18. But prior to pre-Finance Act, 2021, while reopening
an assessment, the procedure of giving the reasons for
reopening and an opportunity to the assessee and the
decision of the objectives were required to be followed
as per the judgment of this Court in the case of GKN
Driveshafts (India) Ltd. (supra).
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19. However, by way of Section 148-A, the procedure
has now been streamlined and simplified. It provides that
before issuing any notice under Section 148, the
assessing officer shall:
(i) conduct any enquiry, if required, with the approval of
specified authority, with respect to the information which
suggests that the income chargeable to tax has escaped
assessment;
(ii) provide an opportunity of being heard to the assessee,
with the prior approval of specified authority;
(iii) consider the reply of the assessee furnished, if any,
in response to the show cause notice referred to in clause
(b); and
(iv) decide, on the basis of material available on record
including reply of the assessee, as to whether or not it is
a fit case to issue a notice under section 148 of the IT Act:
and
(v) the AO is required to pass a specific order within the
time stipulated.
20. Therefore, all safeguards are provided before notice
under Section 148 of the IT Act is issued. At every stage,
the prior approval of the specified authority is required,
even for conducting the enquiry as per section 148-A(a).
Only in a case where, the assessing officer is of the
opinion that before any notice is issued under section
148-A(b) and an opportunity is to be given to the
assessee, there is a requirement of conducting any
enquiry, the assessing officer may do so and conduct any
enquiry. Thus if the assessing officer is of the opinion
that any enquiry is required, the assessing officer can do
so, however, with the prior approval of the specified
authority, with respect to the information which suggests
that the income chargeable to tax has escaped
assessment.
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21. Substituted Section 149 is the provision governing
the time-limit for issuance of notice under Section 148 of
the IT Act. The substituted Section 149 of the IT Act has
reduced the permissible time-limit for issuance of such a
notice to three years and only in exceptional cases ten
years. It also provides further additional safeguards
which were absent under the earlier regime pre-Finance
Act, 2021.
22. Thus, the new provisions substituted by the Finance
Act, 2021 being remedial and benevolent in nature and
substituted with a specific aim and object to protect the
rights and interest of the assessee as well as and the same
being in public interest, the respective High Courts have
rightly held that the benefit of new provisions shall be
made available even in respect of the proceedings
relating to past assessment years, provided Section 148
notice has been issued on or after 1-4-2021. We are in
complete agreement with the view taken by the various
High Courts in holding so.”
26. However, the Supreme Court was also of the view that the
Revenue could not be left remediless and the object of re-assessment
could not be frustrated. Accordingly, the Supreme Court allowed the
appeals in part and modified and substituted the directions issued by
various high courts. The relevant extract of the said order containing
the aforesaid directions is set out below:
“28. In view of the above and for the reasons stated
above, the present Appeals are allowed in part. The
impugned common judgments and orders (Ashok Kumar
Aggarwal v. Union of India, 2021 SCC OnLine All 799)
passed by the High Court of Judicature at Allahabad in
WT No. 524 of 2021 and other allied tax
appeals/petitions, is/are hereby modified and substituted
as under:
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28.1. The impugned Section 148 notices issued to the
respective assessees which were issued under
unamended Section 148 of the IT Act, which were the
subject-matter of writ petitions before the various
respective High Courts shall be deemed to have been
issued under Section 148-A of the IT Act as substituted
by the Finance Act, 2021 and construed or treated to be
show-cause notices in terms of Section 148-A(b). The
assessing officer shall, within thirty days from today
provide to the respective assessees information and
material relied upon by the Revenue, so that the assesees
can reply to the show-cause notices within two weeks
thereafter;
28.2. The requirement of conducting any enquiry, if
required, with the prior approval of specified authority
under Section 148-A(a) is hereby dispensed with as a
one-time measure vis-à-vis those notices which have
been issued under Section 148 of the unamended Act
from 1-4-2021 till date, including those which have been
quashed by the High Courts.
28.3. Even otherwise as observed hereinabove holding
any enquiry with the prior approval of specified authority
is not mandatory but it is for the concerned Assessing
Officers to hold any enquiry, if required.
28.4. The assessing officers shall thereafter pass orders
in terms of Section 148-A(d) in respect of each of the
assessees concerned; Thereafter after following the
procedure as required under Section 148-A may issue
notice under Section 148 (as substituted).
28.5. All defences which may be available to the assesses
including those available under section 149 of the IT Act
and all rights and contentions which may be available to
the assessees concerned and Revenue under the Finance
Act, 2021 and in law shall continue to be available.”
[emphasis added]
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27. The Supreme Court also directed that the aforesaid directions
would be applicable PAN India to all notices issued under Section 148
of the Act after 01.04.2021, which were similar to the ones that were
impugned before various high courts.
28. It is apparent from the above that while the Supreme Court had
dispensed with the inquiry under Section 148A(a) of the Act and had
directed that the notices issued under Section 148 of the unamended Act
be treated as a notice under Section 148A(b) of the Act as a onetime
measure. The AOs were directed, within a period of thirty days from
date, to provide the assessees’ information and material relied upon by
the Revenue so that the assessees could respond to the notices within a
period of two weeks thereafter. The AOs were required to pass orders
under Section 148A(d) of the Act.
29. It is material to note that the Supreme Court expressly held that
all defences “including those available under Section 149 of the Act
would continue to be available to the assessees”.
THE RELEVANT STATUTORY FRAMEWORK
30. The controversy in the present case is required to be addressed is
whether in respect of the provisions relating to procedure of re-
assessment as were in force with effect from 01.04.2021 but prior to
01.03.2023. The references to Sections 147, 148, 148A and 149 of the
Act hereafter, unless the context indicates otherwise, are to the said
provisions as in force with effect from 01.04.2021 but prior to
01.03.2023.
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31. In terms of Section 147 of the Act as in force prior to 01.04.2021,
an AO would assess/re-assess the income of an assessee for the relevant
assessment year if he had reason to believe that the income chargeable
to tax for the said relevant AY had escaped assessment. However, this
power was not open ended and the period, which an officer could travel
back for re-opening the assessment was not indefinite. Section 149(1)
of the Act proscribed the issuance of notice under Section 148 of the
Act – which was necessary for initiating the assessment/re-assessment
proceedings under Section 147 of the Act – beyond the period of four
years from the end of the relevant assessment year. This period was
extended to six years if the amount, that has, escaped assessment was
₹1 lac or more, and to sixteen years if the income that has escaped
assessment was in relation to any asset located outside India.
Additionally, the AO could assume jurisdiction to reopen assessments
under Section 147 of the Act only where he had reason to believe that
the income had escaped assessment. The reason to believe was not
construed expansively. It was necessarily required to be based on
tangible material having nexus with the view that an assessee’s income
had escaped assessment.
32. In GKN Driveshafts (India) Ltd. v. ITO & Ors.5, the Supreme
Court upheld the procedure evolved to ensure that the assessments are
not re-opened on the basis of reasons that are unsustainable. The
Supreme Court had, thus, enabled the assessee to obtain a copy of the
reasons for reopening of the assessments and file objections to the same.
5 (2003) 1 SCC 72
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The AO was required to consider and decide the same. If the AO
accepted the objections, the reassessment proceedings were required to
be dropped.
33. The procedure for re-assessment was substantially amended by
virtue of the Finance Act, 2021. Section 148A of the Act was
introduced, which included the procedure for providing the assessee an
opportunity to address any information available with the AO, which
was suggestive of the assessee’s income escaping assessment for any
relevant year. The procedure enabled the AO to take an informed
decision whether it was a fit case for issuance of a notice under Section
148 of the Act after considering the material on record including
responses furnished by the assessee.
34. It is relevant to refer to the provisions of Section 148, 148A and
149 of the Act as were brought in force with effect from 01.04.2021.
The same are set out below:
“148. Issue of notice where income has escaped
assessment. –Before making the assessment,
reassessment or recomputation under section 147, and
subject to the provisions of section 148A, the Assessing
Officer shall serve on the assessee a notice, along with a
copy of the order passed, if required, under clause (d) of
section 148A, requiring him to furnish within such period,
as may be specified in such notice, a return of his income
or the income of any other person in respect of which he
is assessable under this Act during the previous year
corresponding to the relevant assessment year, in the
prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed;
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and the provisions of this Act shall, so far as may be, apply
accordingly as if such return were a return required to be
furnished under section 139:
Provided that no notice under this section shall be issued
unless there is information with the Assessing Officer
which suggests that the income chargeable to tax has
escaped assessment in the case of the assessee for the
relevant assessment year and the Assessing Officer has
obtained prior approval of the specified authority to issue
such notice.
Explanation 1.–For the purposes of this section and
section 148A, the information with the Assessing Officer
which suggests that the income chargeable to tax has
escaped assessment means,–
(i) any information flagged in the case of the assessee
for the relevant assessment year in accordance with the
risk management strategy formulated by the Board from
time to time;
(ii) any final objection raised by the Comptroller and
Auditor General of India to the effect that the assessment
in the case of the assessee for the relevant assessment year
has not been made in accordance with the provisions of
this Act.
Explanation 2.–For the purposes of this section,
where,–
(i) a search is initiated under section 132 or books of
account, other documents or any assets are requisitioned
under section 132A, on or after the 1st day of April, 2021,
in the case of the assessee; or
(ii) a survey is conducted under section 133A, other than
under sub-section (2A) or sub-section (5) of that section,
on or after the 1st day of April, 2021, in the case of the
assessee; or
(iii) the Assessing Officer is satisfied, with the prior
approval of the Principal Commissioner or Commissioner,
that any money, bullion, jewellery or other valuable article
or thing, seized or requisitioned under section 132 or
section 132A in case of any other person on or after the 1st
day of April, 2021, belongs to the assessee; or
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(iv) the Assessing Officer is satisfied, with the prior
approval of Principal Commissioner or Commissioner,
that any books of account or documents, seized or
requisitioned under section 132 or section 132A in case of
any other person on or after the 1st day of April, 2021,
pertains or pertain to, or any information contained
therein, relate to, the assessee, the Assessing Officer shall
be deemed to have information which suggests that the
income chargeable to tax has escaped assessment in the
case of the assessee for the three assessment years
immediately preceding the assessment year relevant to the
previous year in which the search is initiated or books of
account, other documents or any assets are requisitioned
or survey is conducted in the case of the assessee or
money, bullion, jewellery or other valuable article or thing
or books of account or documents are seized or
requisitioned in case of any other person.
Explanation 3.–For the purposes of this section, specified
authority means the specified authority referred to in
section 151.”
“148A. Conducting inquiry, providing opportunity
before issue of notice under section 148. –The
Assessing Officer shall, before issuing any notice under
section 148,–
(a) conduct any enquiry, if required, with the prior
approval of specified authority, with respect to the
information which suggests that the income chargeable to
tax has escaped assessment;
(b) provide an opportunity of being heard to the
assessee, with the prior approval of specified authority, by
serving upon him a notice to show cause within such time,
as may be specified in the notice, being not less than seven
days and but not exceeding thirty days from the date on
which such notice is issued, or such time, as may be
extended by him on the basis of an application in this
behalf, as to why a notice under section 148 should not be
issued on the basis of information which suggests that
income chargeable to tax has escaped assessment in hisSignature Not Verified
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case for the relevant assessment year and results of
enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in
response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record
including reply of the assessee, whether or not it is a fit
case to issue a notice under section 148, by passing an
order, with the prior approval of specified authority,
within one month from the end of the month in which the
reply referred to in clause (c) is received by him, or where
no such reply is furnished, within one month from the end
of the month in which time or extended time allowed to
furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply
in a case where,–
(a) a search is initiated under section 132 or books of
account, other documents or any assets are requisitioned
under section 132A in the case of the assessee on or after
the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior
approval of the Principal Commissioner or Commissioner
that any money, bullion, jewellery or other valuable article
or thing, seized in a search under section 132 or
requisitioned under section 132A, in the case of any other
person on or after the 1st day of April, 2021, belongs to
the assessee; or
(c) the Assessing Officer is satisfied, with the prior
approval of the Principal Commissioner or Commissioner
that any books of account or documents, seized in a search
under section 132 or requisitioned under section 132A, in
case of any other person on or after the 1st day of April,
2021, pertains or pertain to, or any information contained
therein, relate to, the assessee.
Explanation.–For the purposes of this section, specified
authority means the specified authority referred to in
section 151.”
“149. Time limit for notice.–(1) No notice under section
148 shall be issued for the relevant assessment year,–
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(a) if three years have elapsed from the end of the
relevant assessment year, unless the case falls under clause
(b);
(b) if three years, but not more than ten years, have
elapsed from the end of the relevant assessment year
unless the Assessing Officer has in his possession books
of account or other documents or evidence which reveal
that the income chargeable to tax, represented in the form
of
(i) an asset;
(ii) expenditure in respect of a transaction or in relation to
an event or occasion; or
(iii) an entry or entries in the books of account,
which has escaped assessment amounts to or is likely to
amount to fifty lakh rupees or more:
Provided that no notice under section 148 shall be issued
at any time in a case for the relevant assessment year
beginning on or before 1st day of April, 2021, if a notice
under section 148 or section 153A or section 153C could
not have been issued at that time on account of being
beyond the time limit specified under the provisions of
clause (b) of sub-section (1) of this section or section 153A
or section 153C, as the case may be, as they stood
immediately before the commencement of the Finance
Act, 2021:
Provided further that the provisions of this sub-section
shall not apply in a case, where a notice under section
153A, or section 153C read with section 153A, is required
to be issued in relation to a search initiated under section
132 or books of account, other documents or any assets
requisitioned under section 132A, on or before the 31st
day of March, 2021:
Provided also that for the purposes of computing the
period of limitation as per this section, the time or
extended time allowed to the assessee, as per show-cause
notice issued under clause (b) of section 148A or the
period during which the proceeding under section 148A is
stayed by an order or injunction of any court, shall be
excluded:
Provided also that where immediately after the exclusion
of the period referred to in the immediately precedingSignature Not Verified
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proviso, the period of limitation available to the Assessing
Officer for passing an order under clause (d) of section
148A is less than seven days, such remaining period shall
be extended to seven days and the period of limitation
under this sub-section shall be deemed to be extended
accordingly.
Explanation.–For the purposes of clause (b) of this
subsection, “asset” shall include immovable property,
being land or building or both, shares and securities, loans
and advances, deposits in bank account.
(2) The provisions of sub-section (1) as to the issue of
notice shall be subject to the provisions of section 151.”
35. Subsequent to the Finance Act, 2021, the Finance Act, 2023 was
brought into force with effect from 01.04.2023, wherein two additional
provisos were added before the third and fourth proviso to Section
149(1) of the Act, making the existing third and fourth provisos to fifth
and sixth. In addition, by the Finance Act, 2023, the words “is less than
seven days” were replaced by the words “does not exceed seven days”
in the sixth proviso to Section 149(1) of the Act.
36. It is also relevant to refer to Section 3 of TOLA. The relevant
extract of Section 3(1) of the Act is set out below:-
“3(1) Where, any time-limit has been specified in, or
prescribed or notified under, the specified Act which falls
during the period from the 20th day of March, 2020 to the
31st day of December, 2020, or such other date after the
31st day of December, 2020, as the Central Government,
may, by notification, specify in this behalf, for the
completion or compliance of such action as –
(a) completion of any proceedings or passing of any
order or issuance of any notice, intimation,
notification, sanction or approval, or such other
action, by whatever name called, by any authority,Signature Not Verified
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commission or tribunal, by whatever name called,
under the provisions of the specified Act;
*** *** ***
and where completion or compliance of such action
has not been made within such time, then, the time-limit
for completion or compliance of such action shall,
notwithstanding anything contained in the specified
Act, stand extended to the 31st day of
March, 2021, or such other date after 31st day of March,
2021, as the Central Government may, by
notification, specify in this behalf.”
37. In exercise of the powers under Section 3(1)(a) of the TOLA, the
Government of India issued three notifications successively extending
the time for completion of the specified acts. In terms of the
Notification No.93/2020 dated 31.12.2020, the time limit for
completion of the specified acts which fell within the period of
20.03.2020 to 31.12.2020 was extended till 31.03.2021. The said period
thereafter was extended till 30.04.2021 by the Notification No.20/2021
dated 31.03.2021 and further stood extended till 30.06.2021 by the
notification No.38/21 dated 27.04.2021.
38. Thus, by virtue of the provisions of the TOLA and the
notifications issued by the Government of India, the time limit for
completion of the specified acts [as defined under Section 3(1)(a) of the
TOLA] stood extended till 30.06.2021.
OVERARCHING PERIOD OF LIMITATION UNDER SECTION 149 OF ACT.
39. For the purposes of the present petition, it is important to examine
the time periods for issuing notices and passing orders under Section
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148A of the Act and the overarching period of limitation as stipulated
under Section 149 of the Act.
40. Clause (b) of Section 148A of the Act expressly provides that the
AO is required to give a notice to the assessee to show cause why a
notice under Section 148 of the Act not be issued, within such time as
may be specified in the notice. This time is required to be not less than
seven days but not more than thirty days. This time can be further
extended by the AO, if an application is made by the assessee in this
regard.
41. In terms of Sub-clause (c) of Section 148A of the Act, the AO is
required to consider the response to the show cause notice furnished by
the Assessee.
42. Clause (d) of Section 148A of the Act requires the AO to decide
on the basis of the material on record, including the response furnished
by the assessee to the notice issued under Section 148A(b) of the Act,
whether it is a fit case for issuance of notice under Section 148 of the
Act. The said clause also stipulates that such a decision is required to
be made within one month from the end of the month in which a reply
referred to Clause (c) is received by the AO or in case where no reply
is furnished by the assessee, within one month from the end of the
month in which time or extended time to furnish the reply expires.
43. Section 148 of the Act requires the AO to serve a copy of the
notice under Section 148 of the Act along with an order passed under
Clause (d) of Section 148A of the Act. As is apparent from the above,
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the procedure as prescribed under Section 148A of the Act including
holding of inquiry as contemplated under Clause (a) of Section 148A of
the Act; issuance of a show cause notice under Section 148A(b) of the
Act; considering the reply of the assessee under Clause (c) of Section
148A of the Act; and deciding in terms of Clause (d) of Section 148A
of the Act, whether it is a fit case for issuance of notice under Section
148 of the Act, is required to be completed prior to issuance of notice
under Section 148 of the Act.
44. Section 149(1) of the Act prohibits issuance of notice beyond the
time period as specified. In terms of Clause (a) of Section 149(1) of the
Act, a notice cannot be issued for relevant assessment year if more than
three years had elapsed from the end of the relevant assessment unless
the case falls under Clause (b) of the said sub-section.
45. In terms of Clause (b) of Section 149(1) of the Act, the following
conditions are required to be satisfied:
(i) that the AO has in its possession books of account or other
documents or evidence, which reveal that the income had
escaped assessment;
(ii) that such income chargeable to tax, which is revealed from
the material available with the AO is in the form of (a) an
asset; or (b) expenditure in respect of transaction or in
relation to an event or occasion; or (c) an entry or entries
in the books of account;
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(iii) that the income which has escaped assessment amounts to
or is likely to amounts to ₹50 lacs or more.
46. If the aforesaid conditions are satisfied, a notice under Section
148 can be issued beyond the period of three years but not beyond the
period of ten years.
47. The opening sentence of Section 149(1) of the Act clearly
indicates that the time limit as prescribed under Section 149(1) of the
Act is a hard stop. Therefore, the procedure that is required to be
completed for issuance of notice under Section 148 of the Act is
required to be completed prior to the expiry of the time limit as
prescribed under Section 149(1) of the Act. Such time limit cannot be
breached on account of the AO not completing the procedure required
for issuance of notice under Section 148 of the Act. There is no
ambiguity in this regard given the construct of Section 149(1) of the
Act, which is not in the nature of enabling provision but a provision that
proscribes an action.
48. Having stated the above, it is also important to note the provisos
to Section 149(1) of the Act also provide for exclusion of that certain
time periods for the purposes of computing the period of limitation as
prescribed under Section 149(1) of the Act as well as for extending the
period of limitation.
49. The third to Section 149(1) of the Act (as existed prior to
01.04.2023) reads as under:
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Provided also that for the purposes of computing the
period of limitation as per this section, the time or
extended time allowed to the assessee, as per show-cause
notice issued under clause (b) of section 148A or the
period during which the proceeding under section 148A is
stayed by an order or injunction of any court, shall be
excluded:
50. As is apparent from the above, third proviso to Section 149(1),
provides for exclusion of time in computing of the limitation period to
the aforesaid extent:
(i) the time or extended time allowed to the assessee in the show
cause notice issued under Section 148A(b) of the Act; and
(ii) the period during which proceedings under Section 148A of
the Act are stayed by an order or injunction by any court, are
required to be excluded.
51. Thus the period of three years or ten years from the end of the
relevant assessment year, as the case may be, is required to be computed
after excluding the time allowed to an assessee as per the show cause
notice issued under Section 148A(b) of the Act or if there is a stay order
or injunction passed by any court staying the proceedings under Section
148A of the Act, the period during which the proceedings are so stayed.
52. The fourth proviso to Section 149(1) of the Act (as existed prior
to 01.04.2023) is set out below:
Provided also that where immediately after the exclusion of the
period referred to in the immediately preceding proviso, theSignature Not Verified
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period of limitation available to the Assessing Officer for
passing an order under clause (d) of section 148A is less than
seven days, such remaining period shall be extended to seven
days and the period of limitation under this sub-section shall be
deemed to be extended accordingly.
53. As is apparent from the plain language of the fourth proviso to
Section 149(1) of the Act, it extends the period of limitation for issuing
a notice under Section 148 of the Act so as to provide the AO a
minimum of seven days to pass an order under Section 148A(d) of the
Act. If the time available to the AO to decide whether it is a fit case for
issuance of notice under Section 148 of the Act in terms of Section
148A(d) of the Act is less than seven days after excluding the period as
provided under the third proviso, then the period of three years or ten
years as prescribed is required to be extended by such period so as to
make available to the AO at least seven days to pass an order under
Section 148A(d) of the Act and issue a notice under Section 148 of the
Act. Illustratively, if the show cause notice under Section 148A(b) of
the Act is issued to an assessee, on the last date on which issuance of
such a notice under Section 148 of the Act is permissible, that is, on the
last day of expiry of three years from the end of the relevant assessment
year or ten years from the end of the assessment year as the case may
be, the time made available to the assessee to respond to a notice under
Section 148A(b) of the Act (being a minimum of seven days but not
exceeding thirty days as provided in the notice plus such further time as
extended pursuant to an application), is required to be excluded for the
calculation of the period of three years or ten years as the case may be.
And, an additional period of seven days is made available for the AO to
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pass an order. Thus, the period of limitation in such case would be three
years (after excluding the time provided to the assessee to respond to
the notice under Section 148A(b) of the Act) and seven days, or a period
of ten years (after excluding the time provided to the assessee to respond
to the notice under Section 148A(b) of the Act) and seven days as the
case may be.
54. It is obvious, that in such a case, the AO would not have a time
for passing an order under Section 148A(d) of the Act as stipulated
under the said Clause, that is, one month from the end of the month in
which the assessee furnishes a reply to the notices issued under Section
148A(b) of the Act. As noted above, the AO is required to complete
the entire procedure for issuance of notice under Section 148 of the Act
within the period as prescribed under Section 149 of the Act. Plainly, if
the AO is unable to complete such procedure within the period of
limitation, the AO would cease to have the jurisdiction to issue such a
notice.
55. As noted above, in Union of India & Ors. v. Ashish Aggarwal2,
also emphasises the requirement of the notice under Section 148 being
accompanied by an order under Section 148A(d) of the Act6.
56. This aforesaid aspect was examined by this court in Raminder
Singh v. Assistant Commissioner of Income Tax Circle 52(1) New
Delhi7. In that case, a notice under Section 148A(b) of the Act was
6
Paragraph 6.2
7
Neutral Citation No.:2023:DHC:6672-DB
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issued on 31.03.2023 in respect of AY 2019-20. This was on the last
date of limitation as prescribed under Section 149(1)(a) of the Act. The
assessee in that case was granted an opportunity to respond to the said
notice on or before 10.04.2023. Thus, it was held that the period
between 31.03.2023 and 10.04.2023 was required to be excluded by
virtue of the third proviso to Section 149(1) of the Act. Since the time
remaining for the AO to pass an order under Section 148A(d) of the Act
and issuance of notice under Section 148 of the Act was less than seven
days, the period of limitation as provided under Section 149(1) of the
Act was required to be extended by a period of seven days. Accordingly,
the notice issued under Section 148 of the Act was held to be within the
period of limitation as prescribed under Section 149(1) of the Act. It is
relevant to refer to the following extract of the said decision:
“15. The Assessing Officer has one month from the end
of the month in which time provided to the assessee to
furnish a reply expires, to pass an order under clause (d)
of Section 148A of the Act. However, it is also clear that
the said order is to accompany the notice under Section
148 of the Act. This is apparent from the opening
sentence of Section 148(1) of the Act, which is
reproduced below:
“148. Before making the assessment,
reassessment or recomputation under section
147, and subject to the provisions of section
148A, the Assessing Officer shall serve on the
assessee a notice, along with a copy of the order
passed, if required, under clause (d) of section
148A, requiring him to furnish within [a period
of three months from the end of the month in
which such notice is issued, or such furtherSignature Not Verified
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period as may be allowed by the Assessing
Officer on the basis of an application made in
this regard by the assessee], a return of his
income or the income of any other person in
respect of which he is assessable under this Act
during the previous year corresponding to the
relevant assessment year, in the prescribed form
and verified in the prescribed manner and
setting forth such other particulars as may be
prescribed; and the provisions of this Act shall,
so far as may be, apply accordingly as if such
return were a return required to be furnished
under section 139….”
16. It is apparent that an order under clause (d) of Section
148A of the Act must precede the issuance of notice
under Section 148 of the Act. It follows that although in
terms of clause (d) of Section 148A of the Act, the time
available to the Assessing Officer to make an order under
the said clause is one month from the end of the month
in which the time provided to the assessee to respond to
a notice under clause (b) of Section 148A of the Act
expires; the said order is required to be necessarily
passed within the time period available for issuing a
notice under Section 148 of the Act. This is so because
in terms of Section 148 of the Act, the order under clause
(d) of Section 148A of the Act is required to accompany
the notice under Section 148 of the Act.
17. Section 149(1) of the Act expressly provides the time
limit for issuing the notice under Section 148 of the Act.
The relevant extract of the Section 149(1) of the Act is
set out below:
“149. (1) No notice under section 148 shall be
issued for the relevant assessment year,– (a) if
three years have elapsed from the end of the
relevant assessment year, unless the case falls
under clause (b);
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[(b) if three years, but not more than ten years,
have elapsed from the end of the relevant
assessment year unless the Assessing Officer
has in his possession books of account or other
documents or evidence which reveal that the
income chargeable to tax, represented in the
form of–
(i) an asset;
(ii) expenditure in respect of a transaction or in
relation to an event or occasion; or
(iii) an entry or entries in the books of account,
which has escaped assessment amounts to or is
likely to amount to fifty lakh rupees or more:]
…
…
Provided also that for the purposes of
computing the period of limitation as per this
section, the time or extended time allowed to
the assessee, as per show-cause notice issued
under clause (b) of section 148A or the period
during which the proceeding under section
148A is stayed by an order or injunction of any
court, shall be excluded:
Provided also that where immediately after the
exclusion of the period referred to in the
immediately preceding proviso, the period of
limitation available to the Assessing Officer for
passing an order under clause (d) of section
148A [does not exceed seven days], such
remaining period shall be extended to seven
days and the period of limitation under this sub-
section shall be deemed to be extended
accordingly.”
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18. Thus, the notice under Section 148 of the Act
(accompanied by an order under clause (d) of Section
148A of the Act) is required to be issued within the
period of three years from the end of the relevant
assessment year if the income escaping assessment is
less than ₹50,00,000/-. The sixth proviso to Section
149(1) of the Act makes it amply clear that if the time
available to the Assessing Officer to pass an order under
Clause (d) of Section 148A is truncated to less than 7
days on account of the period of limitation available for
issuing a notice under Section 148, the same shall be
extended for the said period.
19. In our view, the period of one month from the end of
the month in which the time available to the assessee to
respond to the notice under Clause (b) of Section 148A
expires, is available to the Assessing Officer to pass an
order under clause (d) of Section 148A of the Act only
within the rubric of Section 149 of Act, that is, within the
overall time available in terms of Section 149(1) of the
Act for issuance of a notice under Section 148 of the Act.
This is because a notice under Section 148 of the Act
which is not accompanied with the order under Clause
(d) of Section 148 of the Act would be non-compliant
with the Act. And, no such notice can be issued beyond
the period as specified under Section 149(1) of the Act.”
UNION OF INDIA & OTHERS V. RAJEEV BANSAL4.
57. The question arose as to the applicability of the TOLA to the
notices issued for reassessment after 01.04.2021; as to the validity of
the notices issued under Section 148 of the Act; and the Finance Act,
2021 which fell for consideration of the Supreme Court in the case of
Union of India & Ors. v. Rajeev Bansal4.
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58. The question whether the impugned notices were issued within
the time is, thus, required to be addressed by referring to the decision
rendered by the Supreme Court in Union of India & Ors. v. Ashish
Agarwal2 and Union of India & Others v. Rajeev Bansal4.
59. The Supreme Court noted the effect of TOLA and the
notifications issued by the Government of India as under:-
“9.The effect of Taxation and other Laws
(Relaxation and Amendment of Certain Provisions)
Act, 2020 and the notifications issued under the
legislation was that: (i) if the time prescribed for
passing of any order or issuance of any notice,
sanction, or approval fell for completion or
compliance from March 20, 2020 to March 31,
2021; and (ii) if the completion or compliance of
such action could not be made during the stipulated
period, then the time limit for completion or
compliance of such action was extended to June 30,
2021.”
60. In regard to the applicability of Section 149(1) of the Act, the
Supreme Court concluded as under:-
“53. The position of law which can be derived based
on the above discussion may be summarized thus:
(i) section 149(1) of the new regime is not
prospective. It also applies to past assessment years;
(ii) The time limit of four years is now reduced to
three years for all situations. The Revenue can issue
notices under Section 148 of the new regime only if
three years or less have elapsed from the end of the
relevant assessment year; (iii) the proviso to section
149(1)(b) of the new regime stipulates that the
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according to section 149(1)(b) of the old regime,
that is, six years from the end of the relevant
assessment year; and (iv) all notices issued invoking
the time limit under section 149(1)(b) of the old
regime will have to be dropped if the income
chargeable to tax which has escaped assessment is
less than Rupees fifty lakhs.”
61. The next question examined by the Supreme Court was the
applicability of the TOLA in the context of provisos to Section 149(1)
of the Act.
62. The Supreme Court also considered the directions in Union of
India & Ors. v. Ashish Agarwal2 in the context of third proviso to
Section 149 of the Act (as existed prior to 01.04.2023), which expressly
extends the time allowed to an assessee to respond to the notice under
Section 148A of the Act and the period during which the proceedings
under Section 148 are stayed by an injunction order or an order of the
court to be excluded for the purpose of limitation under Section 149 of
the Act. In the aforesaid context, the Supreme Court held as under:-
“99. In Union of India v. Ashish Agarwal (supra),
this court created a legal fiction by deeming the
section 148 notices issued under the old regime as
show-cause notices under Section 148A(b) of the
new regime. The purpose of the legal fiction was to
enable the Revenue “to proceed further with the
reassessment proceedings as per the substituted
provisions” of the Income-tax Act. Accordingly, all
the reassessment notices issued under the old
regime were deemed to always have been show-
cause notices issued under section 148A(b) of the
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notices with section 148A(b) notices with effect
from the date when the notices under section 148 of
the old regime were issued between April 1, 2021
and June 30, 2021, as the case may be. This ensured
the continuance of the reassessment process
initiated by the Revenue from April 1, 2021 to June
30, 2021 under the old regime.
100. Importantly, this Court in Union of India v.
Ashish Agarwal (supra) did not quash the
reassessment notices issued under section 148 of the
old regime. In Shree Chamundi Mopeds Ltd. v.
Church of South India Trust Association : (1992) 3
SCC 1, a three-Judge Bench of this court explained
the distinction between quashing an order and
staying the operation of an order thus:
“10. […] Quashing of an order results in
the restoration of the position as it stood
on the date of the passing of the order
which has been quashed. The stay of
operation of an order does not, however,
lead to such a result. It only means that the
order which has been stayed would not be
operative from the date of the passing of
the stay order and it does not mean that the
said order has been wiped out from
existence.”
The reassessment proceedings
erroneously initiated by the Revenue
under the old regime were not wiped out
from existence. Consequently, the
Revenue was not required to start the
procedure of reassessment afresh after the
decision of this Court in Union of India v.
Ashish Agarwal (supra).
101. Under Section 148A(b), the Assessing Officer
has to comply with two requirements: (i) issuanceSignature Not Verified
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of a show-cause notice; and (ii) supply of all the
relevant information which forms the basis of the
show-cause notice. The supply of the relevant
material and information allows the assessee to
respond to the show-cause notice. The deemed
notices were effectively incomplete because the
other requirement of supplying the relevant material
or information to the assesses was not fulfilled. The
second requirement could only have been fulfilled
by the Revenue by an actual supply of the relevant
material or information that formed the basis of the
deemed notice.
102. While creating the legal fiction in Union of
India v. Ashish Agarwal (supra), this court was
cognizant of the fact that the Assessing Officers
were effectively inhibited from performing their
responsibility under Section 148A until the
requirement of supply of relevant material and
information to the assesses was fulfilled. This court
lifted the inhibition by directing the Assessing
Officers to supply the assesses with the relevant
material and information relied upon by the
Revenue within thirty days from the date of the
judgment. Thus, during the period between the
issuance of the deemed notices and the date of
judgment in Union of India v. Ashish Agarwal
(supra), the Assessing Officers were deemed to
have been prohibited from proceeding with the
reassessment proceedings.
*** ***
105. A direction issued by this court in the exercise
of its jurisdiction under Article 142 is an order of a
court. The third proviso to section 149 of the new
regime provides that the period during which the
proceedings under Section 148A are stayed by an
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from the date of issuance of the deemed notice
under section 148A(b) and the date of the decision
of this Court in Union of India v. Ashish Agarwal
(supra), the Assessing Officers were deemed to
have been prohibited from passing a reassessment
order. Resultantly, the show-cause notices were
deemed to have been stayed by order of this Court
from the date of their issuance (somewhere from
April 1, 2021 till June 30, 2021) till the date of
decision in Union of India v. Ashish Agarwal
(supra), that is, May 4, 2022.
106. In Union of India v. Ashish Agarwal (supra),
this court directed the Assessing Officers to provide
relevant information and materials relied upon by
the Revenue to the assesses within thirty days from
the date of the judgment. A show-cause notice is
effectively issued in terms of section 148A(b) only
if it is supplied along with the relevant information
and material by the Assessing Officer. Due to the
legal fiction, the Assessing Officers were deemed to
have been inhibited from acting in pursuance of the
section 148A(b) notice till the relevant material was
supplied to the assesses. Therefore, the show-cause
notices were deemed to have been stayed until the
Assessing Officers provided the relevant
information or material to the assesses in terms of
the direction issued in Union of India v. Ashish
Agarwal (supra). To summarize, the combined
effect of the legal fiction and the directions issued
by this court in Union of India v. Ashish Agarwal
(supra) is that the show-cause notices that were
deemed to have been issued during the period
between April 1, 2021 and June 30, 2021 were
stayed till the date of supply of the relevant
information and material by the Assessing Officer
to the assessee. After the supply of the relevant
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begins to run for the assesses to respond to the
show-cause notices.
107. The third proviso to section 149 allows the
exclusion of time allowed for the assesses to
respond to the show-cause notice under section
149A(b) to compute the period of limitation. The
third proviso excludes “the time or extended time
allowed to the assessee.” Resultantly, the entire
time allowed to the assessee to respond to the show
cause notice has to be excluded for computing the
period of limitation. In Ashish Agarwal (supra), this
Court provided two weeks to the assesses to reply
to the show cause notices. This period of two weeks
is also liable to be excluded from the computation
of limitation given the third proviso to Section 149.
Hence, the total time that is excluded for
computation of limitation for the deemed notices is:
(i) the time during which the show cause notices
were effectively stayed, that is, from the date of
issuance of the deemed notice between 1 April 2021
and 30 June 2021 till the supply of relevant
information or material by the assessing officers to
the assesses in terms of the directions in Ashish
Agarwal (supra); and (ii) two weeks allowed to the
assesses to respond to the show cause notices.
b. Interplay of Ashish Agarwal with Taxation
and other Laws (Relaxation and Amendment of
Certain Provisions) Act, 2020
108. The Income Tax Act read with Taxation and
other Laws (Relaxation and Amendment of Certain
Provisions) Act, 2020 extended the time limit for
issuing reassessment notices under section 148,
which fell for completion from March 20, 2020 to
March 31, 2021, till June 30, 2021. All the
reassessment notices under challenge in the present
appeals were issued from April 1, 2021 to June 30,
2021 under the old regime. Union of India v. Ashish
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Agarwal (supra) deemed these reassessment notices
under the old regime as show-cause notices under
the new regime with effect from the date of issuance
of the reassessment notices. The effect of creating
the legal fiction is that this court has to imagine as
real all the consequences and incidents that will
inevitably flow from the fiction. [East End
Dwellings Co. Ltd. v. Finsbury Borough Council,
[1952] AC 109. (Lord Asquith, in his concurring
opinion, observed: “If you are bidden to treat an
imaginary state of affairs as real, you must surely,
unless prohibited from doing so, also imagine as
real the consequences and incidents which, if the
putative state of affairs had in fact existed, must
inevitably have flowed from or accompanied it.”]
Therefore, the logical effect of the creation of the
legal fiction by Union of India v. Ashish Agarwal
(supra) is that the time surviving under the Income-
tax Act read with Taxation and other Laws
(Relaxation and Amendment of Certain Provisions)
Act, 2020 will be available to the Revenue to
complete the remaining proceedings in furtherance
of the deemed notices, including issuance of
reassessment notices under Section 148 of the new
regime. The surviving or balance time limit can be
calculated by computing the number of days
between the date of issuance of the deemed notice
and 30 June 2021.
109. If this court had not created the legal fiction
and the original reassessment notices were validly
issued according to the provisions of the new
regime, the notices under Section 148 of the new
regime would have to be issued within the time
limits extended by Taxation and other Laws
(Relaxation and Amendment of Certain Provisions)
Act, 2020. As a corollary, the reassessment notices
to be issued in pursuance of the deemed notices
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must also be within the time limit surviving under
the Income Tax Act read with Taxation and other
Laws (Relaxation and Amendment of Certain
Provisions) Act, 2020. This construction gives full
effect to the legal fiction created in Union of India
v. Ashish Agarwal (supra) and enables both the
assesses and the Revenue to obtain the benefit of all
consequences flowing from the fiction. [See State
of A.P. v. A.P. Pensioners Association, (2005) 13
SCC 161 [28]. (This Court observed that the “legal
fiction undoubtedly is to be construed in such a
manner so as to enable a person, for whose benefit
such legal fiction has been created, to obtain all
consequences flowing therefrom.”)]
110. The effect of the creation of the legal fiction in
Union of India v. Ashish Agarwal (supra) was that
it stopped the clock of limitation with effect from
the date of issuance of section 148 notices under the
old regime [which is also the date of issuance of the
deemed notices]. As discussed in the preceding
segments of this judgment, the period from the date
of the issuance of the deemed notices till the supply
of relevant information and material by the
Assessing Officers to the assesses in terms of the
directions issued by this court in Union of India v.
Ashish Agarwal (supra) has to be excluded from the
computation of the period of limitation. Moreover,
the period of two weeks granted to the assesses to
reply to the show-cause notices must also be
excluded in terms of the third proviso to section
149.
111. The clock started ticking for the Revenue only
after it received the response of the assesses to the
show-causes notices. After the receipt of the reply,
the Assessing Officer had to perform the following
responsibilities: (i) consider the reply of the
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assessee under section 149A(c); (ii) take a decision
under section 149A(d) based on the available
material and the reply of the assessee; and (iii) issue
a notice under section 148 if it was a fit case for
reassessment. Once the clock started ticking, the
Assessing Officer was required to complete these
procedures within the surviving time limit. The
surviving time limit, as prescribed under the
Income-tax Act read with Taxation and other Laws
(Relaxation and Amendment of Certain Provisions)
Act, 2020, was available to the Assessing Officers
to issue the reassessment notices under section 148
of the new regime.”
63. It is clear from the above that the Supreme Court had in
unambiguous terms held that (a) the date of notices issued under Section
148 of the Act, under the old regime which was subject matter of
challenge in Union of India & Ors. v. Ashish Agarwal2, has not been
struck off and further notices and orders issued under Section 148 of the
Act were in continuance of the proceedings that had commenced on the
date of issuance of such notices; (b) the period from the date of issuance
of such notices till the date of the decision in the case of Union of India
& Ors. v. Ashish Agarwal2, that is 04.05.2021, was required to be
excluded for the period of calculation of limitation by virtue of the third
proviso to Section 149(1) of the Act. The AO could not continue any
proceeding till the Supreme Court rendered its decision to treat the
notices issued under Section 148 of the Act as notices issued under
Section 148A(b) of the Act; and, (c) the period from the date of the
decision in Union of India & Ors. v. Ashish Agarwal2, that is
04.05.2022, to the date when the material was supplied by the AO to
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the Assessee, as was required under Section 148A(b) of the Act, was
also required to be excluded. The Supreme Court reasoned that the AO
could not proceed further till the said material was supplied. Therefore,
the said period is also required to be excluded by virtue of the third
proviso to Section 149(1) of the Act.
64. It is material to note that the Supreme Court had also explained
that provision of TOLA would be applicable to notices which were
subject matter of challenge in Union of India & Ors. v. Ashish
Agarwal2.
ANALYSIS – IN THE FACTUAL CONTEXT
65. Thus, in the facts of the present case, the last date for issuance of
notice under Section 148 of the Act for AY 2013-14 under the statutory
framework, as was existing prior to 01.04.2021 was 31.03.2020, that is,
six years from the end of the relevant assessment year.
66. By virtue of Section 3(1) of TOLA time for completion of
specified acts, which fell during the period 20.03.2020 to 31.12.2020
were extended till 30.06.20218. Thus, the notice dated 01.06.2021 was
issued twenty-nine days prior to the expiry of period of limitation for
issuing a notice under Section 148 of the Act as was extended by TOLA.
As noted above, the period from 01.06.2021, the date of issuance of
notice, and 04.05.2022, being the date of decision of the Supreme Court
8
Notification No.38/21 dated 27.04.2021
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in Union of India & Ors. v. Ashish Agarwal2 is required to be excluded
by virtue of the third proviso to Section 149(1) of the Act.
67. Additionally, the period from the date of decision in Union of
India & Ors. v. Ashish Agarwal2 till the date of providing material, as
required to the accompanied with a notice under Section 148A(b) of the
Act, is required to be excluded. Thus, the period between 04.05.2022 to
30.05.2022, the date on which the AO had issued the notice under
Section 148A(b) of the Act in furtherance of his earlier notice dated
01.06.2021, is also required to be excluded by virtue of the third proviso
to Section 149(1) of the Act as held by the Supreme Court in Union of
India & Ors. v. Rajeev Bansal4.
68. In addition to the above, the time granted to the petitioner to
respond to the notice dated 30.05.2022 – the period of two weeks -is
also required to be excluded by virtue of the third proviso to Section
149(1) of the Act. The petitioner had furnished its response to the notice
under Section 148A(b) of the Act on 13.06.2022. Thus, the period of
limitation began running from that date.
69. As noted above, by virtue of TOLA, the AO had period of
twenty-nine days limitation left on the date of commencement of the
reassessment proceedings, which began on 01.06.2021, to issue a notice
under Section 148 of the Act. The said notice was required to be
accompanied by an order under Section 148A(d) of the Act. Thus, the
AO was required to pass an order under Section 148A(d) of the Act
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within the said twenty-nine days notwithstanding the time stipulated
under Section 148A(d) of the Act. This period expired on 12.07.2022.
70. Since the period of limitation, as provided under Section 149(1)
of the Act, had expired prior to issuance of the impugned notice on
30.07.2022. The said is squarely beyond the period of limitation.
71. It is contended on behalf of the Revenue that the AO is required
to pass an order under Section 148A(d) of the Act by the end of the
month following the month on which the reply to the notice under
Section 148A(b) of the Act was received. Thus, the order under Section
148A(d) of the Act as well as the notice under Section 148 of the Act
(both dated 30.07.2022) are within the prescribed period. This
contention is without merit as it does not take into account that
proceedings under Section 148A of the Act necessarily required to be
completed within the period available for issuing notice under Section
148 of the Act, as prescribed under Section 149 of the Act. Thus, the
time available to the AO to pass an order under Section 148A(d) of the
Act was necessarily truncated and the same was required to be passed
on or before 12.07.2022. The fourth proviso to Section 149 of the Act
did not come into play as the time period available for the AO to pass
an order under Section 148A(d) of the Act was in excess of the seven
days.
72. In view of the above, we find merit in Mr. Sehgal’s contention
that the impugned notice dated 30.07.2022 has been issued beyond the
period of limitation.
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73. The petition is accordingly allowed and the impugned order dated
30.07.2022 passed under Section 148A(d) of the Act; the impugned
notice dated 30.07.2022 issued under Section 148 of the Act; and the
assessment order dated 30.05.2023 framed under Section 147 of the Act
pursuant to the notice dated 30.07.2022 for AY 2013-14, are set aside.
Pending application is also disposed of.
VIBHU BAKHRU, J
TUSHAR RAO GEDELA, J
JANUARY 30, 2025
RK
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