Calcutta HC Dismisses Reassessment Order Challenge, Cites Alternative Remedy

Manoj Kumar Bagree Vs ITO (Calcutta High Court)

Calcutta High Court has dismissed a writ petition filed by Manoj Kumar Bagree challenging a reassessment order issued under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961, for the assessment year 2019-20. The court primarily based its decision on the availability of an alternative statutory remedy and rejected the petitioner’s argument that the order under Section 148A(d) was barred by limitation.

The petitioner had approached the High Court seeking to annul the assessment order dated January 16, 2025. The core of Bagree’s challenge rested on two main contentions. Firstly, a jurisdictional issue was raised, arguing that the notice under Section 148 of the Act was issued by the jurisdictional assessing officer, which the petitioner deemed improper, particularly after a new scheme was notified under Section 151A of the Act. However, the petitioner admitted to participating in the subsequent proceedings, though asserting that such participation should not be construed as submitting to the assessing officer’s jurisdiction.

Secondly, and more significantly, the petitioner contended that the order passed under Section 148A(d) of the Act for the relevant assessment year was beyond the statutory period and thus barred by limitation. This argument was central to the writ petition, as a time-barred proceeding would render the entire reassessment invalid.

The Income Tax Department, represented by its counsel, argued that the writ petition was an “afterthought.” The revenue highlighted that the petitioner had participated in the reassessment proceedings without raising these specific issues at the appropriate time. Now, after the reassessment order had been finalized, the writ petition was filed, seemingly to bypass the statutory appellate remedy available under the Income Tax Act. The department urged the court not to entertain the writ petition given the existence of this alternative remedy.

The High Court, after hearing both parties, indicated its disinclination to entertain the jurisdictional issue at such a belated stage, especially given the petitioner’s prior participation in the proceedings. However, acknowledging the gravity of a limitation argument, the court proceeded to examine this specific contention.

The court’s detailed analysis focused on Section 149(1) of the Income Tax Act, 1961, which prescribes the time limits for issuing notices under Section 148. The relevant provisions for this case were the third and fourth provisos to Section 149(1), as amended by the Finance Act, 2021.

The third proviso stipulates that for computing the period of limitation, the time or extended time allowed to the assessee as per the show-cause notice issued under Section 148A(b), or any period during which the proceedings are stayed by a court order, shall be excluded. In this specific case, a notice under Section 148A(b) was issued on March 2, 2023, for the assessment year 2019-20, with an initial response deadline of March 13, 2023. This deadline was subsequently extended to March 27, 2023. The court calculated that the assessing officer was entitled to an exclusion of 25 days (from March 2, 2023, to March 27, 2023) from the period of limitation as per this proviso.

The fourth proviso further states that if, after excluding the period mentioned in the third proviso, the remaining period of limitation available to the Assessing Officer for passing an order under Section 148A(d) is less than seven days, such remaining period shall be extended to seven days, and the overall limitation period shall be deemed to be extended accordingly.

The impugned order under Section 148A(d) was passed on April 6, 2023. The High Court, applying the third proviso, found that with the exclusion of the 25-day period, the order was passed within the permissible timeframe. Consequently, the court concluded that there was no application of the fourth proviso in this instance, as the period available was not less than seven days after the exclusion. Therefore, the contention raised by the petitioner that the order under Section 148A(d) was beyond the period of limitation could not be sustained.

The court’s findings on the limitation aspect were also noted to be consistent with an unreported judgment delivered by a Coordinate Bench of the Calcutta High Court in Giriraj Commercial Private Limited versus Union of India and others (WPO 1122 of 2023). Although the Giriraj Commercial case pertained to substituted provisions of Section 149(1) by the Finance Act, 2023, the underlying principle of calculating and excluding periods for limitation remained aligned.

Given that the petitioner had an established alternative remedy to challenge the reassessment order under Section 147 read with Sections 144 and 144B of the Act, and having rejected the limitation argument, the High Court directed that the petitioner was at liberty to pursue this statutory remedy. Acknowledging that the writ petition had been pending for some time and substantial questions of limitation had been raised, the court allowed the petitioner a period of four weeks from the date of receiving the downloaded copy of the order to file an appeal. Upon compliance with all formalities, the appellate authority is mandated to hear and dispose of the appeal on its merits.

This judgment reinforces the judiciary’s stance on the importance of exhausting statutory remedies before invoking writ jurisdiction, especially when issues could have been raised at earlier stages. It also provides clarity on the interpretation and application of the amended limitation provisions under Section 149(1) of the Income Tax Act, 1961, particularly concerning the exclusion of time for taxpayer responses in reassessment proceedings.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

1. Challenging the order passed under Section 147 read with Section 144 and 144B of the Income Tax Act, 1961 (hereinafter referred to as the “said Act”) dated 16^thJanuary 2025 for the assessment year 2019-20, the instant writ petition has been filed.

2. At the very outset, Ms. Roychowdhury, learned Senior Advocate appearing for the petitioner would submit that though the writ petition seeks to raise a jurisdictional issue on the ground that the notice under Section 148 of the said Act being issued by the jurisdictional assessing officer is bad, however, the petitioner has participated in the said proceeding and an assessment order has been passed thereon. The aforesaid participation should not be construed as the petitioner submitting to the jurisdiction or the authority of the assessing officer to issue a notice under Section 148 of the said Act, subsequent to the Scheme being notified under Section 151A of the said Act.

3. This apart, she submits that the order passed under Section 148A(d) of the said Act for the relevant assessment year is beyond the statutory period and is barred by limitation. The proceeding thus, should fail.

4. Dhudoria, learned advocate appearing for the respondents at the very outset submits that the instant writ petition has been filed as and by way of an afterthought. Admittedly, the petitioner has participated in the said proceeding without raising the above issues. Today, after the re-assessment order has been passed, though such order is an appellable order, the instant writ petition has been filed to somehow bypass the statutory remedy. According to him, this Court ought not to entertain this writ petition having regard to the alternative remedy provided for in the Scheme of the said Act.

5. Having heard the learned advocates appearing for the respective parties, though I am not inclined to entertain the writ petition on the ground that the notice under Section 148 of the said Act has been issued by the jurisdictional assessing officer at this belated stage, however, since an issue of limitation has been raised, I am inclined to examine the same.

6. It would transpire from the records that a notice under Section 148A(b) of the said Act dated 2^ndMarch 2023 had been issued for the assessment year 2019-20 providing therein that the response to the same shall be filed on or before the 13^th March 2023. Admittedly, time to file response had been extended till 27^th March 2023 and as such, having regard to the submissions made by Ms. Roychowdhury with regard to the forth proviso of Section 149(1) of said Act (substituted by Finance Act 2021 w.e.f. 01.04.2021) since the order under Section 148A(d) was not passed within a period of 7 days from the extended period, the order is barred by limitation. To appropriately appreciate the scope and effect of third and fourth proviso of Section 149(1) of the said Act as amended by the Finance Act 2021 for the purpose of excluding the period of limitation in issuance of a notice under Section 148 or for an order under Section 148A(d) of the said Act, as the case may be, as provided for in Section 149(1) of the said Act, the relevant section being Section 149(1) of the said Act along with its proviso is extracted hereinbelow:-

“[149.Time limit for notice

(1) No notice under Section 148 shall be issued for the relevant assessment year.—

(a) If three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) If three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of –

i. asset;

ii. Expenditure in respect of a transaction or in relation to an event or occasion; or

iii. An An entry or entries in the books of account, Which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:]

Provided that no notice under Section 148 shall be issued at the time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [ a notice under Section 148 or Section 153A or Section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of Sub-Section (1) of this section or section 153A or Section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021:

Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31^st day of March, 2021:

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.”

7. As would appear from the above primarily, upon issuance of a notice under Section 148A(b) of the said Act, while computing the period of limitation, the time or the extended time allowed to the assessee as per the show cause notice issued under Section 148A(b) of the said Act is excluded, in addition to the period during which the proceeding under Section 148A remains stayed by order or injunction of any Court. In addition to the above, having regard to the forth proviso, if after excluding the period provided for in the third proviso it transpires that the period of limitation available to the assessing officer for passing the order under clause (d) of Section 148A is less than 7 days, such remaining period shall stand extended to a further period of 7 days and the period of limitation under the sub-Section shall be deemed to be extended accordingly.

8. Admittedly, in this case, in terms of the notice issued under Section 148A(b) of the said Act the original period for filing the response was till 13^thMarch 2023 which stood extended till 27^th March 2023. Having regard to the third proviso contained in Section 149(1) of the said Act the assessing officer is entitled to the exclusion of the time provided for seeking response including the extended time therefor. Having regard thereto, in my view, the assessing officer was entitled to exclusion of 25 days. Admittedly, the order impugned has been passed on 6^th April 2023 and as such, there was no application of the fourth proviso at all.

9. In view thereof, the contention raised by Ms. Roychowdhury that the order passed under Section 148A(d) of the said Act is beyond the period of limitation, cannot be sustained. Since, the petitioner otherwise has an alternative remedy to challenge the order passed under Section 147 read with Section 144 and Section 144B of the said Act, I am of the view that the petitioner shall be at liberty to pursue his remedy before the statutory authority.

10. The above observations and findings are also in tune with an unreported judgment delivered by a Coordinate Bench of this Court in the case of Giriraj Commercial Private Limited versus Union of India and others (WPO 1122 of 2023) though the same pertains to the substituted provisions of Section 149(1) of the said Act as substituted by Finance Act, 2023.

11. This apart having regard to the fact that the instant writ petition was pending before this Court for sometime and since substantial questions in the form of limitation had been raised, I am of the view that the petitioner should be given an opportunity to pursue its statutory remedy.

12. Thus, in the event, the petitioner files an appeal within a period of 4 weeks from the date of receipt of the downloaded copy of this order from the official website of this Court, upon compliance of all formalities by the petitioner, the appellate authority shall hear out and dispose of the appeal on merit.

13. With the above observation and direction, the writ petition is disposed of.

14. All parties shall act on the basis of the server copy of this order duly downloaded from this Court’s official website.