Facts of the Case

The petitioner, Acropolis Realty Pvt. Ltd., filed its return of income for Assessment Year 2019-20 on 20.03.2020, declaring nil income. No intimation regarding the return was received at the relevant time.

Thereafter, the Assessing Officer initiated reassessment proceedings by issuing a notice dated 01.04.2023 under Section 148A(b) of the Income Tax Act, 1961, alleging that income chargeable to tax had escaped assessment based on information flagged on the Insight Portal as High-Risk CRIU/VRU information.

The annexure to the notice recorded that the alleged escaped income amounted to ₹4,86,300, arising from transactions with M/s Capacious Tradex Pvt. Ltd. (₹1,70,800) and M/s Alight Tradex Pvt. Ltd. (₹3,15,500), described as accommodation entries. Subsequently, an order under Section 148A(d) dated 17.04.2023, a notice under Section 148 dated 17.04.2023, and an order disposing of objections dated 01.08.2024 were passed.

The petitioner challenged the reassessment proceedings on the ground that they were barred by limitation under Section 149 of the Act.

Issues Involved

Whether reassessment proceedings initiated beyond three years from the end of the relevant assessment year are valid where the alleged escaped income is below ₹50 lakh, and whether a notice can be treated as “issued” prior to its digital signing.

Petitioner’s Arguments

The petitioner contended that since the alleged escaped income was only ₹4,86,300, the extended limitation under Section 149(1)(b) was inapplicable. It was argued that the notice dated 01.04.2023 was issued beyond three years from the end of Assessment Year 2019-20 and was therefore barred by limitation.

It was further submitted that a notice can be regarded as issued only when it is digitally signed and dispatched, and not when internal or preparatory system steps commence.

Respondent’s Arguments

The Revenue contended that although the notice bore the date 01.04.2023, the process of issuing the notice had commenced late on 31.03.2023, and the digital signature was affixed at 12:02 AM on 01.04.2023. It was argued that this marginal delay of a few minutes should not render the notice time-barred and that it ought to be construed as having been issued within the limitation period.

Court Order / Findings

The Delhi High Court rejected the Revenue’s contention and held that a notice cannot be considered as issued prior to being digitally signed. Relying on the Coordinate Bench decision in Suman Jeet Agarwal v. Income Tax Officer, the Court reiterated that the expression “issue” of notice requires an overt act of signing and dispatch, whether in physical or electronic form.

The Court observed that the notice under Section 148A(b) was digitally signed on 01.04.2023, and that the DIN and Notice Number clearly reflected issuance in Financial Year 2023-24. The commencement of preparatory steps on 31.03.2023 was held to be irrelevant.

Since the alleged escaped income was below ₹50 lakh, reassessment proceedings initiated beyond three years were held to be without jurisdiction.

Important Clarification

The Court clarified that limitation provisions under Section 149 must be strictly complied with. The determinative factor for “issue” of notice is the date of signing and dispatch, and not internal system activity or preparatory steps undertaken prior thereto.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the notices dated 01.04.2023 and 17.04.2023 issued under Sections 148A and 148, as well as the orders dated 17.04.2023 and 01.08.2024, holding the reassessment proceedings for Assessment Year 2019-20 to be time-barred and without authority of law. Pending applications were also disposed of.

link to download the order- https://www.mytaxexpert.co.in/uploads/1770112564_ACROPOLISREALTYPVT.LTDVsINCOMETAXOFFICERWARD11DELHIANR..pdf 

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