Facts of the Case

The petitioner, MK Jain HUF, filed a writ petition challenging the notice dated 27.05.2024 issued under Section 148A(b) of the Income-tax Act, 1961, the order dated 31.07.2024 passed under Section 148A(d), and the consequential notice dated 31.07.2024 issued under Section 148 for Assessment Year 2016–17. The petitioner also challenged the prior approval granted before passing the order under Section 148A(d).

The primary contention of the petitioner was that the impugned reassessment proceedings were initiated beyond six years from the end of the relevant assessment year and were therefore barred by limitation under Section 149 of the Act.

Issues Involved

Whether reassessment proceedings initiated for Assessment Year 2016–17 by issuance of notice under Section 148A(b) on 27.05.2024 were barred by limitation under Section 149, and whether time spent by the assessee in earlier rounds of litigation could be excluded for computing limitation.

Petitioner’s Arguments

The petitioner submitted that the issue was no longer res integra in view of the Delhi High Court judgment in Manju Somani vs. Income Tax Officer Ward-70(1) and the authoritative pronouncement of the Supreme Court in Union of India vs. Rajeev Bansal. It was argued that for AY 2016–17, the maximum permissible period for issuance of notice was six years from the end of the assessment year, which expired on 31.03.2023.

The petitioner contended that issuance of the impugned notice dated 27.05.2024 was therefore clearly time-barred and liable to be quashed.

Respondents’ Arguments

The Revenue argued that the impugned notices and order should be examined in the context of earlier litigation initiated by the petitioner, during which proceedings had been stayed by the High Court. It was contended that the period during which the earlier writ petition remained pending should be excluded while computing limitation, and therefore the impugned proceedings were within time.

Court Order / Findings

The Delhi High Court examined the rival submissions and referred extensively to the judgment of the Supreme Court in Union of India vs. Rajeev Bansal, particularly paragraphs 46 and 49, which clarified that no notice under Section 148 of the new regime can be issued for an assessment year where the six-year limitation under the old regime had already expired.

The Court held that for AY 2016–17, the six-year period expired on 31.03.2023 and that the notice under Section 148A(b) issued on 27.05.2024 was clearly beyond the permissible period. The Court rejected the Revenue’s contention that the time spent by the assessee in earlier litigation could be excluded for computing limitation.

The Court observed that the Revenue is required to initiate reassessment proceedings strictly in accordance with law within the statutory period of limitation and that failure to take lawful steps earlier cannot be used to extend or revive limitation. The fact that earlier notices were found invalid and set aside could not enure to the benefit of the Revenue.

Important Clarification

The Court clarified that time spent by an assessee in pursuing legal remedies against invalid reassessment notices cannot be excluded or treated as extending the statutory period of limitation under Section 149. Limitation provisions must be strictly construed, and the Revenue cannot derive advantage from its own procedural lapses.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the notice dated 27.05.2024 issued under Section 148A(b), the order dated 31.07.2024 passed under Section 148A(d), and the notice dated 31.07.2024 issued under Section 148 for Assessment Year 2016–17. The reassessment proceedings were quashed as barred by limitation. No costs were awarded.

Link to download order - https://www.mytaxexpert.co.in/uploads/1769678324_MKJAINHUFVsINCOMETAXOFFICERWARD441DELHIANDORS..pdf

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