Facts of the Case

The petitioner, KAD Housing Private Limited, challenged a notice dated 31.08.2024 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for Assessment Year (AY) 2015-16.

The reopening was based on information allegedly found during a search conducted on 11.10.2023 in the case of Sterling Agro Industries Ltd., a third party. Certain materials pertaining to the petitioner were forwarded to the Assessing Officer on 16.08.2024, following which a notice under Section 148A(b) was initially issued and replied to by the petitioner.

Subsequently, the Assessing Officer passed an order under Section 148A(d) dropping the proceedings under Section 148A, while simultaneously issuing the impugned notice under Section 148, invoking the exception applicable to non-search parties.

 

Issues Involved

  1. Whether the reassessment notice issued under Section 148 for AY 2015-16 was barred by limitation under Section 149(1).
  2. Whether the first proviso to Section 149(1) applied to searches conducted after 1 April 2021.
  3. Whether reopening could be sustained when the relevant assessment year fell beyond the maximum ten-year limitation period.

 

Petitioner’s Arguments

The petitioner contended that:

  • The impugned notice was issued beyond the permissible time limit prescribed under Section 149(1)(b).
  • By virtue of the first proviso to Section 149(1), no notice could be issued for assessment years beginning on or before 1 April 2021 if such notice was already time-barred under the pre-Finance Act, 2021 regime.
  • Even assuming applicability of the extended ten-year period, AY 2015-16 fell beyond the terminal point of ten years when reckoned from the date of issuance of notice.
  • The issue was squarely covered by binding precedents of the Delhi High Court in Dinesh Jindal v. ACIT and Pr. CIT v. Ojjus Medicare Pvt. Ltd.

 

Respondent’s Arguments

The Revenue fairly conceded that:

  • The computation of limitation as presented by the petitioner was correct.
  • The issue stood covered by earlier decisions of the Delhi High Court.
  • However, the Revenue reserved its right to challenge those decisions in appropriate proceedings.

 

Court Order / Findings

The Delhi High Court held that:

  • The first proviso to Section 149(1) requires the reopening of earlier assessment years to be tested on the basis of the limitation provisions as they stood prior to the Finance Act, 2021.
  • For search-related information concerning non-search parties, the limitation period must also satisfy the framework of Sections 153A and 153C, read with Section 149.
  • In the present case, the reassessment notice dated 31.08.2024 sought to reopen AY 2015-16, which fell beyond the ten-year limitation period.
  • The issue was no longer res integra and stood conclusively settled by Dinesh Jindal and Ojjus Medicare Pvt. Ltd.

Accordingly, the Court set aside the impugned notice under Section 148 and restrained the Revenue from proceeding with reassessment for AY 2015-16.

 Important Clarification

The Court clarified that:

  • The extended reassessment window under the Finance Act, 2021 cannot revive time-barred assessment years.
  • The first proviso to Section 149(1) acts as a statutory bar against reopening past assessments that were already beyond limitation under the erstwhile law.
  • Reassessment proceedings initiated contrary to limitation provisions are void ab initio.

 Link to download the order - https://www.mytaxexpert.co.in/uploads/1770113710_KADHOUSINGPRIVATELIMITEDVsDEPUTYCOMMISSIONEROFINCOMETAXCENTRALCIRCLE6DELHI.pdf 

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