Facts of the Case

The petitioner, Manisha Agarwal, challenged the notice dated 08.06.2021 deemed to be a show cause notice under Section 148A(b), the subsequent notices dated 18.05.2022, the order dated 25.07.2022 passed under Section 148A(d), and the consequential notice issued under Section 148 for Assessment Year 2014–15. The petitioner also questioned the validity of Instruction No. 1/2022 dated 11.05.2022 to the extent it permitted issuance of reassessment notices for earlier assessment years. The reassessment proceedings arose pursuant to the Supreme Court judgment in Union of India vs. Ashish Agarwal, whereby notices issued under the old regime were deemed to be notices under the new regime.

Issues Involved

Whether the reassessment notice issued under Section 148 on 25.07.2022 for AY 2014–15 was barred by limitation after applying the legal fiction created in Ashish Agarwal, whether the surviving limitation period stood exhausted in terms of the Supreme Court judgment in Rajeev Bansal, and whether the entire reassessment proceedings were without jurisdiction.

Petitioner’s Arguments

The petitioner contended that the original notice dated 08.06.2021 under Section 148 was deemed to be a show cause notice under Section 148A(b). The surviving limitation period from 08.06.2021 to 30.06.2021 was only 22 days. It was submitted that the period between 08.06.2021 and 16.06.2022 was liable to be excluded in terms of the third proviso to Section 149, and therefore the last permissible date for issuance of notice under Section 148 was 08.07.2022. Since the actual notice was issued on 25.07.2022, the proceedings were barred by limitation. Reliance was placed on the Supreme Court judgment in Rajeev Bansal.

Respondent’s Arguments

The Revenue did not dispute the limitation computation advanced by the petitioner and was unable to demonstrate any legal basis to justify issuance of the notice dated 25.07.2022 beyond the surviving limitation period.

Court Order / Findings

The Delhi High Court held that the issue was squarely covered by the Supreme Court judgment in Union of India vs. Rajeev Bansal. The Court accepted the limitation chart placed on record, which demonstrated that only 22 days of limitation survived after issuance of the deemed show cause notice. The Court held that once the clock restarted on 16.06.2022 after exclusion of the deemed stay period, the Revenue was required to issue notice under Section 148 within the surviving 22 days. Issuance of notice on 25.07.2022 was therefore held to be clearly time-barred. The Court also noted that a final assessment order had been passed during pendency of the writ petition, which could not survive once the foundational reassessment proceedings were invalid.

Important Clarification

The Court clarified that reassessment notices issued pursuant to the legal fiction created in Ashish Agarwal must strictly comply with the surviving limitation period as computed under the Income-tax Act read with TOLA. Any notice issued beyond such surviving period is without jurisdiction and liable to be set aside along with all consequential proceedings.

Final Outcome

The writ petition was allowed. The order dated 25.07.2022 passed under Section 148A(d), the notice dated 25.07.2022 issued under Section 148 for Assessment Year 2014–15, and the final assessment order passed pursuant thereto were all set aside. The reassessment proceedings were held to be barred by limitation, and the petition was disposed of accordingly.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505482_MANISHAAGARWALVsINCOMETAXOFFICERWARD591DELHIANDORS..pdf

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