Facts of the Case

The petitioner, Saroj Mehndi, challenged a notice dated 11.07.2022 issued under Section 148 of the Income-tax Act for Assessment Year 2014-15 on the ground that it was barred by limitation. An earlier notice under Section 148 was issued on 23.06.2021 under the old reassessment regime. In view of the Delhi High Court decision in Mon Mohan Kohli, such notices issued after 31.03.2021 without following Section 148A were held invalid.

Subsequently, pursuant to the Supreme Court decision in Union of India v. Ashish Agarwal, the said notice was deemed to be a notice under Section 148A(b), and the Assessing Officer furnished information to the petitioner on 26.05.2022, granting two weeks to file a reply. The petitioner did not submit any response.

Thereafter, the Assessing Officer passed an order under Section 148A(d) on 11.07.2022 and issued the impugned notice under Section 148 on the same date.

Issues Involved

Whether the notice under Section 148 issued on 11.07.2022 for AY 2014-15 was barred by limitation under Section 149, after accounting for extensions under TOLA and exclusions mandated by the Supreme Court decisions in Ashish Agarwal and Rajeev Bansal, and whether reassessment proceedings could survive beyond the statutorily permissible period.

Petitioner’s Arguments

The petitioner contended that the six-year limitation period for AY 2014-15 expired on 31.03.2021, which stood extended only up to 30.06.2021 by virtue of TOLA. Since the original notice was issued on 23.06.2021, only seven days of limitation remained. After excluding the period directed by the Supreme Court, the Assessing Officer was required to issue the final notice under Section 148 within seven days from the end of the time granted to the assessee to reply. The impugned notice dated 11.07.2022 was therefore issued beyond the permissible period.

Respondent’s Arguments

The Revenue relied on the extension of limitation under TOLA and the deemed conversion of notices under Ashish Agarwal to contend that the reassessment proceedings were validly initiated. It was argued that the Assessing Officer acted in accordance with the directions of the Supreme Court.

Court Order / Findings

The Delhi High Court examined the statutory scheme of Section 149 along with the impact of TOLA and the Supreme Court decisions in Ashish Agarwal and Rajeev Bansal. The Court held that after accounting for the permissible exclusions, the Assessing Officer had only seven days to issue a valid notice under Section 148, which expired on 18.06.2022.

Since the impugned notice was issued on 11.07.2022, it was clearly beyond the period of limitation. The Court observed that the issue was squarely covered in favour of the assessee by its earlier decision in Ram Balram Buildhome Pvt. Ltd. v. Income Tax Officer.

Important Clarification

The High Court clarified that even after giving full effect to extensions under TOLA and exclusions directed by the Supreme Court, reassessment notices must strictly adhere to the residual limitation available under Section 149. Any notice issued beyond such residual period is without jurisdiction.

Final Outcome

The writ petition was allowed. The notice dated 11.07.2022 issued under Section 148 for Assessment Year 2014-15 and all proceedings initiated pursuant thereto were set aside as being barred by limitation. All pending applications were disposed of.

Link to download order https://www.mytaxexpert.co.in/uploads/1769756718_SAROJMEHNDIVsINCOMETAXOFFICERWARD49.1ANR.pdf 

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