Delhi HC Quashed Reassessment Notice as Six-Year Limitation Had Expired

Kalpana Buildmart Private Limited Vs ITO (Delhi High Court)

The writ petition before the Delhi High Court challenged a notice dated 30.08.2024 issued under Section 148 of the Income Tax Act, 1961 for Assessment Year (AY) 2014–15. The petitioner also impugned the prior notice issued under Section 148A(b) and the order passed under Section 148A(d) of the Act, contending that the initiation of reassessment proceedings was barred by limitation.

Read SC Judgment in this case: Reassessment Notices Beyond Six-Year Limitation Invalid: SC Upholds Delhi HC Order

The petitioner’s counsel submitted that the issue was squarely covered by a prior decision of the same Court and relied upon the judgment of the Supreme Court in Union of India & Others v. Rajeev Bansal. Reliance was placed on the interpretation of the proviso to Section 149(1)(b) of the Act, as explained by the Supreme Court, to demonstrate that reassessment notices under the new regime could not be issued for assessment years prior to AY 2021–22 if the limitation period under the old regime had already expired.

The Supreme Court judgment, as referred to, clarified that no notice under Section 148 of the new regime can be issued for assessment years beginning on or before 1 April 2021 if such notice was already barred by limitation under the time limits prescribed in Section 149(1)(b) of the old regime. The Court further explained that the proviso to Section 149(1)(b) ensures that the extended ten-year time limit introduced under the new regime operates only prospectively. As a result, if the six-year limitation period under the old regime had expired at the time of issuance of the notice, reassessment proceedings could not be initiated under the new regime, even if the alleged escaped income exceeded the monetary threshold.

Applying these principles, the High Court noted that in the present case, the period of six years from the end of the relevant assessment year, AY 2014–15, expired on 31.03.2021. The impugned notice under Section 148 was issued on 30.08.2024, well after the expiry of the six-year limitation period. Consequently, the notice was held to be barred by limitation.

The learned counsel for the Revenue fairly concurred with this legal position and did not dispute that the notice had been issued beyond the permissible time limit.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. The petitioner has filed the present petition, inter alia, impugning a notice dated 30.08.2024 (hereafter the impugned notice) issued under Section 148 of the Income Tax Act, 1961 (hereafter the Act) for the assessment year (AY) 2014-15.

2. The petitioner also impugns the notice issued under Section 148A(b) of the Act, and the order passed under Section 148A(d) of the Act prior to the issuance of the impugned notice.

3. The learned counsel appearing for the petitioner submits that the issue stands covered by the decision of this Court in Manju Somani v. Income Tax Officer Ward-70(1) & Ors: Neutral Citation : 2024: DHC:5411-DB.

4. Mr Jain, also referred to the decision of the Supreme Court in Union of India & Others v. Rajeev Bansal : 2024 SCC OnLine SC 2693 and drew the attention of this Court to the following passages from the said judgment:

“46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the “time limits specified under the provisions of” 149(1)(b) of the old regime. Thus, a notice could be issued under Section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under Section 149(1)(b) of the old regime.

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49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under Section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under Section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.”

5. In the present case, the period of six years from the end of the relevant (AY) 2014-15 expired on 31.03.2021. The impugned notice has been issued thereafter, and the same is thus barred by limitation.

6. The learned counsel for the respondent concurs with the aforesaid view.

7. In view of the above, the impugned notice is set aside.

8. The petition is allowed in the aforesaid terms. Pending application also stands disposed of.