Karnataka HC Quashes Section 148 Notice for AY 2015-16 as Time-Barred

Mohammed Yaseen Vs ITO (Karnataka High Court)

The Karnataka High Court allowed the writ petition filed by Mohammed Yaseen challenging reassessment proceedings initiated for Assessment Year 2015-16 under the Income-tax Act, 1961. The petitioner sought quashing of the order passed under Section 148A(d), the notice issued under Section 148, the show-cause notice under Section 148A(b), the assessment order passed under Sections 147 read with 144, the computation sheet, demand notice, and the penalty orders and consequential notices issued under Sections 271(1)(c) and 271F. The petitioner contended that the notice under Section 148 ought to have been issued on or before 31.03.2021 and that the notice dated 01.04.2022 was barred by limitation in view of the Supreme Court decisions in Union of India v. Rajeev Bansal and Assistant Commissioner of Income Tax v. Nehal Ashit Shah.

The Revenue opposed the petition and contended that it lacked merit.

The High Court observed that it was undisputed that the reassessment proceedings related to Assessment Year 2015-16 and that the impugned notice under Section 148 had been issued on 01.04.2022. Referring to the Supreme Court judgment in Union of India v. Rajeev Bansal (2024) 469 ITR 46 (SC), the Court noted that notices issued on or after 01.04.2021 for Assessment Year 2015-16 were not permissible, and that the Revenue itself had conceded before the Supreme Court that such notices would have to be dropped as they were beyond the prescribed limitation period. The Court also relied upon the subsequent decision of the Supreme Court in Assistant Commissioner of Income Tax v. Nehal Ashit Shah dated 04.04.2025, wherein the Supreme Court reiterated that notices issued after 01.04.2022 were barred by limitation.

Holding that the notice dated 01.04.2022 issued under Section 148 for Assessment Year 2015-16 was beyond the period of limitation and therefore impermissible in law, the High Court concluded that the entire reassessment proceedings could not be sustained. Consequently, the writ petition was allowed, and the impugned order under Section 148A(d), the notice under Section 148, the notice under Section 148A(b), the assessment order, the penalty orders, and all consequential notices and proceedings issued by the Assessing Officer were quashed.

Cases Discussed:

• Union of India & Others v. Rajeev Bansal – (2024) 469 ITR 46 (SC)
• Assistant Commissioner of Income Tax & Others v. Nehal Ashit Shah – SLP (Civil) Diary No.(S) 57209/2024, decided on 04.04.2025

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

In this petition, the petitioner seeks for the following reliefs:

(i) Quashing the undated, unsigned impugned Order bearing no Document Identification Number passed by Respondent No.1 under Section 148(d) of the Income-tax Act, 1961 for the Assessment Year 2015­16 (Annexure’A-1);

(ii) Quashing the impugned notice bearing DIN and Notice No. ITBA/ AST/ S/148_1/ 2022-23/ 1042426411(1) dated 01.04.2022 issued by Respondent No.1 under Section 148 of the Income-tax Act, 1961 for the Assessment year 2015-16 (Annexure ‘A-2’);

(iii) Quashing the impugned Notice dated 15.03.2022 bearing DIN and Notice No.ITBA/AST/F/148A(SCN)/ 2021-22/104768406(1) issued by Respondent No.1 under Section 148A(b) of the Income-tax Act, 1961 for the Assessment Year 2015-16 (Annexure ‘B’);

(iv) Quashing the impugned Assessment Order bearing DIN & Order No.ITBA/AST/S/147/2023-24/ 1062316215(1) dated 09.03.2024 passed by Respondent No.1 under Section 147 read with Section 144 of the Income-tax Act, 1961 for the Assessment Year 2015-16 (Annexure “C-1’);

(v) Quashing the impugned computation sheet bearing DIN & Document No.ITBA/AST/S/114/2023-24/ 1062316308(1) dated 09.03.2024 issued by Respondent No.1 for the Assessment Year 2015-16 (Annexure-‘C-2);

(vi) Quashing the impugned Notice of Demand bearing DIN & Notice No. ITBA/ AST/S/ 156/ 2023-24/ 1062316330(1) dated 09.03.2024 issued by Respondent No.1 under Section 156 of the Income-tax Act, 1961 for the Assessment Year 2015-16 (Annexure ‘C-3’);

(vii) Quashing the impugned penalty Order bearing DIN No. ITBA/ PNL/F/ 271(1)(c)/ 2024-25/ 1068037937(1) dated 27.08.2024 passed by Respondent No.1 under Section 271(1)(c) of the Income-tax Act, 196, for the Assessment Year 2015-15 (Annexure ‘D-1’);

(viii) Quashing the impugned computation sheet bearing DIN & Document No.ITBA/PNL/S/271(1)(c)/20 23- 24/1062316346(1) dated 27.08.2024 issued by Respondent No.1 for the Assessment Year 2015-16 (Annexure ‘D-2’);

(ix) Quashing the impugned Notice of Demand bearing DIN & Notice No. ITBA/ PNL/S/ 156/ 2024-25/ 1068037718(1) dated 27.08.2024 issued by Respondent No.1 under Section 156 of the Income-tax Act, 1961 for the Assessment Year 2015-16 (Annexure ‘D-3’);

(x) Quashing the impugned Penalty Order bearing DIN No.ITBA/PNL/F/271F/2024-25/1068065687(1) dated 27.08.2024 passed by Respondent No.1 under Section 271F of the Income-tax Act, 1961, for the Assessment Year 2015-15 (Annexure ‘E-1’);

(xi) Quashing the impugned computation sheet bearing DIN & Document No. ITBA/ PNL/S/ 271F/ 2023-24/ 1062316032(1) dated 27.08.2024 issued by Respondent No.1 for the Assessment year 2015-16 (Annexure ‘E-2’);

(xii) Quashing the impugned Notice of Demand bearing DIN & Notice No. ITBA/ PNL/ S/ 156/ 2024-25/ 1068065323(1) dated 27.08.2024 issued by Respondent No.1 under Section 156 of the Income-tax Act, 1961 for the Assessment Year 2015-16 (Annexure ‘E-3’) and

(xiii) Pass such order that Hon’ble Court, may seem fit, in the facts and circumstances of the case, and in the interest of justice and equity.

2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.

3. In addition to reiterating various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner invited my attention to the impugned orders and notices in order to point out that the proceedings relating to the assessment year 2015-16, the notice under Section 148 of the I.T.Act ought to have been issued on or before 31.03.2021 and any notice issued after the aforesaid date including the instant notice issued on 01.04.2022 was barred by limitation as held by the Apex Court in the case of Union of India & others vs.Rajeev Bansal – (2024) 469 ITR 46 (SC) and subsequently followed by the Apex Court in the case of Assistant Commissioner of Income Tax & others vs. Nehal Ashit Shah – SLP (Civil) Diary No.(S) – 57209/2024 Dated 04.04.2025. It is therefore submitted that the impugned orders/ Notices deserve to be quashed.

4. Per contra, learned counsel for the respondents – Revenue submits that there is no merit in the petition and that the same is liable to be set aside.

5. As rightly contended by the learned counsel for the petitioner, the material on record discloses that the impugned proceedings is relating to the Assessment Year 2015-16 in respect of the petitioner; however, it is an undisputed fact that the respondents issued impugned notice at Annexure-A2 under Section 148 of the I.T.Act on 01.04.2022, beyond the period of limitation and the same has already been held not to be permissible by the Apex Court in Rajeev Bansal’s case supra, which reads as under:-

“19(e). The Finance Act, ([2021]) 431 ITR (St.) 52) substituted the old regime for reassessment with a new regime. The first proviso to Section 149 does not expressly bar the application of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 3 of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-Tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to assessment years 2013-14, 2014-15, 2015-16, 2016-17, and 2017-18 will be within the period of limitation as explained in the tabulation below:

19(f). The Revenue concedes that for the assessment year 2015-16, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020;

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 2021-22 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 2012-13, the ten-year period would have expired on March 31, 2023, while the six-year period expired on March 31, 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 2012-13 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.

6. Subsequently, in Nehal Ashit’s case supra also, the Apex Court reiterated the very same position and dismissed the appeal filed by the Revenue on the ground that the notice issued after 01.04.2022 was barred by limitation and the impugned proceedings are not permissible beyond period of limitation. In the instant case, it is an undisputed fact that the impugned proceedings is relating to the Assessment Year 2015-16, while the impugned notice under Section 148 of the Act dated 01.04.2022 was issued beyond/after 01.04.2021 which is impermissible in law and barred by limitation and consequently, the impugned orders/notices etc., deserve to be quashed.

7. In the result, I pass the following:-

ORDER 

(i) Petition is hereby allowed.

(ii) The impugned orders/Notices at Annexures-A1, A2, B, C1, D1 and E1 dated 01.04.2022, 01.04.2022, 15.03.2022, 09.03.2022, 27.08.2024 and 27.08.2024 respectively and subsequent orders/notices issued by the 1^st respondent are hereby quashed.