Facts of the Case

The petitioner, Accolade Holdings Private Limited, formerly known as Blue Eye Entertainment Private Limited, filed a writ petition challenging the order dated 31.07.2022 passed under Section 148A(d) of the Income-tax Act, 1961 and the consequential notice dated 31.07.2022 issued under Section 148 for Assessment Year 2013–14.

An initial notice under Section 148 had been issued on 26.06.2021 under the unamended reassessment regime. Following the judgment of the Delhi High Court in Mon Mohan Kohli, such notices were held to be invalid. However, pursuant to directions of the Supreme Court in Union of India vs. Ashish Agarwal, the said notice was deemed to be a notice under Section 148A(b). In compliance, the Assessing Officer furnished information to the assessee on 24.05.2022 and sought a response by 07.06.2022, which the assessee duly submitted.

Thereafter, the Assessing Officer passed an order under Section 148A(d) and issued the impugned notice under Section 148 on 31.07.2022.

Issues Involved

Whether the notice issued under Section 148 on 31.07.2022 for Assessment Year 2013–14 was barred by limitation under Section 149, whether the extended limitation under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 was correctly applied, and how the fifth and sixth provisos to Section 149 were to be computed in light of binding judicial precedents.

Petitioner’s Arguments

The petitioner contended that the six-year limitation period for AY 2013–14 expired on 31.03.2020 and was extended only up to 30.06.2021 by virtue of TOLA. Since the original notice was issued on 26.06.2021, only four days of limitation remained. After exclusion of the period mandated by the fifth proviso to Section 149 as explained by the Supreme Court in Rajeev Bansal, the Assessing Officer was required to issue the final notice within seven days in terms of the sixth proviso to Section 149. It was argued that the last permissible date was 14.06.2022, rendering the notice dated 31.07.2022 clearly time-barred.

Respondent’s Arguments

The Revenue did not dispute the applicability of the legal position laid down by the Delhi High Court in Ram Balram Buildhome Pvt. Ltd. and conceded that the controversy was covered by the said decision.

Court Order / Findings

The Delhi High Court analysed the statutory scheme of Section 149 along with the fifth and sixth provisos as interpreted by the Supreme Court in Union of India vs. Rajeev Bansal. The Court noted that since the original notice was issued four days prior to expiry of limitation, only four days remained available to the Assessing Officer after the assessee submitted its reply on 07.06.2022.

In view of the sixth proviso to Section 149, the Assessing Officer had a maximum of seven days to issue the notice under Section 148, making 14.06.2022 the outer limit. The Court held that issuance of the notice on 31.07.2022 was clearly beyond limitation. The Court further observed that the issue was squarely covered in favour of the assessee by the decision in Ram Balram Buildhome Pvt. Ltd.

Important Clarification

The Court clarified that computation of limitation under Section 149 must strictly adhere to the exclusions and extensions provided in the provisos, and once the outer limit expires, reassessment proceedings cannot be sustained. The Assessing Officer cannot assume jurisdiction beyond the statutorily prescribed timeline.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the order dated 31.07.2022 passed under Section 148A(d), the notice dated 31.07.2022 issued under Section 148 for Assessment Year 2013–14, and all proceedings initiated pursuant thereto. The pending application was also disposed of accordingly.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769676076_ACCOLADEHOLDINGSPRIVATELIMITEDFORMERLYKNOWNASBLUEEYEENTERTAINMENTPRIVATELIMITEDVsINCOMETAXOFFICERWARD21DELHIORS..pdf

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