Facts of the Case

The petitioner, Pratistha Garg, filed a writ petition challenging the continuation of reassessment proceedings for Assessment Year 2016–17 pursuant to an order dated 31.08.2024 passed under Section 148A(d) of the Income-tax Act, 1961. By the said order, the Assessing Officer dropped proceedings initiated through a notice dated 14.08.2024 issued under Section 148A(b) but sought to revive proceedings initiated earlier through a notice dated 14.07.2022 issued under Section 148 of the Act.

The petitioner had originally filed her return of income for AY 2016–17 on 30.07.2016. A notice dated 23.06.2021 under Section 148 was issued under the old reassessment regime, which later stood governed by the directions of the Supreme Court in Union of India vs. Ashish Agarwal. Thereafter, proceedings under Section 153C were initiated pursuant to a search conducted in the case of the Alankit Group. The petitioner challenged the Section 153C proceedings, which were quashed by the Delhi High Court on 24.05.2024 insofar as AYs 2014–15, 2015–16 and 2016–17 were concerned on the ground of limitation.

Subsequently, the Assessing Officer issued a fresh notice dated 14.08.2024 under Section 148A(b), which was dropped, but the Assessing Officer simultaneously held that proceedings pursuant to the earlier Section 148 notice dated 14.07.2022 stood revived.

Issues Involved

Whether reassessment proceedings that had abated on account of initiation of proceedings under Section 153C could be revived after such Section 153C proceedings were quashed, and whether the second notice issued under Section 148 for Assessment Year 2016–17 was barred by limitation.

Petitioner’s Arguments

The petitioner contended that the Assessing Officer could not revive reassessment proceedings that had already abated due to initiation of proceedings under Section 153C. It was argued that initiation of parallel assessment proceedings is impermissible under the Act.

It was further contended that the second notice issued under Section 148 was beyond the permissible period of limitation. The petitioner relied on the decisions of the Supreme Court in Union of India vs. Ashish Agarwal and Union of India vs. Rajeev Bansal, as well as the Delhi High Court judgment in Ram Balram Buildhome Pvt. Ltd., to submit that the statutory timelines had expired and the proceedings were time-barred.

Respondents’ Arguments

The Revenue advanced mutually inconsistent submissions. On one hand, it was contended that the second Section 148 notice was non est as it was issued after initiation of proceedings under Section 153C. On the other hand, it was argued that upon quashing of the Section 153C proceedings, the reassessment proceedings under Section 148 stood automatically revived.

The Revenue also initially argued that the limitation period was six years from the end of the relevant assessment year but subsequently conceded that, under the applicable statutory regime, the limitation period was four years from the end of AY 2016–17.

Court Order / Findings

The Delhi High Court held that the Revenue could not be permitted to take inconsistent and mutually destructive stands. The Court observed that revival of abated reassessment proceedings would amount to initiation of parallel assessment proceedings, which is impermissible in law.

The Court further held that once the Revenue conceded that the applicable limitation period was four years from the end of the relevant assessment year, the second notice under Section 148 was clearly barred by limitation. The Court noted that although the first notice under Section 148 dated 23.06.2021 was saved by the extension of limitation under TOLA, the subsequent notice issued after completion of the Section 148A procedure was issued beyond the statutorily permissible period.

Relying on the decision in Ram Balram Buildhome Pvt. Ltd., the Court held that once the assessee had responded to the Section 148A(b) notice, the order under Section 148A(d) and consequential notice under Section 148 were required to be issued within the prescribed timeline, which had not been complied with in the present case.

Important Clarification

The Court clarified that abated reassessment proceedings under Section 148 do not automatically revive upon quashing of proceedings initiated under Section 153C. Further, statutory timelines prescribed for reassessment proceedings must be strictly adhered to, and inconsistent positions taken by the Revenue cannot be sustained.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the order dated 31.08.2024 insofar as it sought to revive reassessment proceedings and also quashed all proceedings initiated pursuant to the second notice issued under Section 148 for Assessment Year 2016–17, holding the same to be barred by limitation and unsustainable in law.

Link to download order - https://www.mytaxexpert.co.in/uploads/1769686777_PRATISHTHAGARGVsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE25DELHI.pdf

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