Case Law Details
Festino Vincom Limited Vs ITO (ITAT Kolkata)
Notice u/s 148 issued on 31.03.2018 but served on 11.04.2018; service beyond 6-year limit u/s 149(1)(b) makes reopening time-barred & void ab initio-ITAT Kolkata quashes reassessment
Assessee filed its return on 29.09.2011 declaring income of ₹4,850, which was processed u/s 143(1). Later, AO reopened the case u/s 147 based on Investigation Wing information that ₹16.46 crore had allegedly been routed through layering of companies to Assessee. A notice u/s 148 was issued on 31.03.2018, & reassessment was completed u/s 144/147 making addition of ₹16.46 crore as undisclosed income. In appeal, Assessee remained non-compliant & CIT(A) confirmed the assessment.
Before Tribunal, Assessee raised a pure legal ground that the notice u/s 148 was served on 11.04.2018, i.e. after the limitation period of six years from the end of AY 2011-12 (which ended on 31.03.2018) as prescribed in Section 149(1)(b). Therefore, even if the notice was dated 31.03.2018, service beyond limitation renders it invalid & void ab initio. Assessee produced departmental email evidence showing actual date of service as 11.04.2018.
Tribunal condoned the delay of 496 days in filing the appeal by applying Supreme Court rulings in Improvement Trust vs Ujagar Singh & Collector vs Katiji, observing that COVID-19 disruption, email malfunction (Sify & Rediff accounts) & change of management constituted reasonable cause. Substantial justice should prevail over technicalities.
On the legal issue, Tribunal noted that the DR was given opportunity to verify date of service, but could not prove that notice was served within the limitation period. Section 149(1)(b) (as applicable to AY 2011-12) required that where escaped income exceeds ₹1 lakh, notice must be issued AND effectively served within six years from end of AY, i.e. by 31.03.2018. Since service happened on 11.04.2018, Tribunal held that the case is squarely covered by the jurisdictional Calcutta High Court decision in Marudhar Vintrade Pvt. Ltd. vs UOI (WPA 4382/2022, dated 12.04.2022), which clarified that service of notice beyond the limitation period is fatal, even if the notice is dated within time. Therefore, Tribunal declared the notice u/s 148 as barred by limitation, & consequently quashed the entire reassessment as null & void. Having allowed the appeal on this legal ground, Tribunal did not adjudicate the other grounds on merits, leaving them open. Notice u/s 148 & entire reassessment quashed as time-barred.
Takeaways
- To reopen an assessment, it is not enough to merely “issue” the notice within time-“service” on the assessee must also be within the statutory limitation u/s 149.
- Service beyond limitation = jurisdiction fails = entire 147/144 order is void.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 15.06.2023 for the AY 2011-12.
2. At the outset, we observe on the basis of records before us that the appeal of the assessee is barred by limitation of 496 days, for which the assessee has filed the condonation petition along with affidavit through Shri Dipesh P. Pala, Director. It was stated that the reasons for the delay in filing the appeal were beyond the control of the assessee as there was complete disruption in the office and operation of the assessee due to Covid-19 pandemic. It was also submitted that the assessee has given Sify and Rediff mail account address for receiving communication from the department. However, the same were disrupted, resulting into non-receipt of communication from the department. Besides, there was change of management of company. Therefore, the delay was neither deliberate nor willful and it was prayed that the same may be condoned.
3. The ld. DR on the other hand opposed the condonation of delay on the ground that no plausible reasons were presented for the delay.
4. We find that the reasons for delay in filing the appeal was stated to be on account of disruption of operation of the assessee due to Covid-19 pandemic and its aftermath. We also note that the assessee did not receive any communication from the ld. CIT (A) due to malfunctioning of the email accounts in Sify and Rediff mail. In our opinion, the assessee cannot be denied the substantial justice merely on technical ground as has been held by the Hon’ble Apex court in the case of Improvement Trust vs. Ujagar Singh & Ors. [2010] 6SCC 786 (SC) and Collector, Land Acquisition vs. Mst. Katiji [1987] 1987 com1072 (SC).Considering all these facts and the ratio laid down in the above decision, we are inclined to condone the delay and admit the appeal for adjudication.
5. The issue raised in grounds no. 1 is a technical and legal issue and is against the notice u/s 148 of the Act dated 31.03.2018 which was served on the assessee on 11.04.2018 beyond the prescribed time limit u/s 149 of the Act thereby rendering the notice itself barred by limitation and as invalid and void ab initio with all consequent proceedings including the reassessment proceeding as invalid and nullity.
6. The facts in brief are that the assessee filed the return of income on 29.09.2011, declaring total income at ₹4,850/-, which was processed u/s 143(1) of the Act. Thereafter the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act dated 31.03.2018, which was served on the assessee. The reopening was made by the ld. AO after receiving information from ITO, Investigation Unit-1, Kolkata in which it was stated that the huge funds were routed through various companies and same were transferred in several layers and ultimately landed in the hands of the beneficiaries of which the assessee is one of them because an amount of ₹16,46,04,848/-was transferred to the assessee’s account which has escaped assessment. The assessee complied with the said notice issued u/s 148 of the Act by filing the return of income on 26.1.2018, disclosing the total income at ₹4,848/-. Thereafter the statutory notice and other notice along with questionnaire were duly issued and served upon the assessee which were not complied with by the assessee. Finally, the ld. AO treated ₹16,46,00,000/- as undisclosed income and added the same to the income of the assessee in the assessment framed u/s 144/147 of the Income-tax Act, 1961 (the Act) dated 24.12.2018.
7. In the appellate proceedings, again the assessee was non-compliant and the ld. CIT (A) affirmed the assessment order in absence of any submission or documentary evidences being furnished by the assessee in the appellate proceedings.
8. The ld. AR vehemently submitted before the Bench that the notice issued u/s 148 of the Act dated 31.03.2018 is hopelessly barred by limitation as the same was served upon the assessee on 11.04.2018 which was apparently beyond the time limit prescribed u/s 149 of the Income-tax Act, 1961 (the Act) and therefore, the same is invalid and nullity in the eyes of the law. The ld. AR submitted that the said notice is barred by limitation with all the subsequent proceedings including the assessment framed in consequence to such notice are invalid and void ab initio and may kindly be quashed. The ld. AR while referring to the provisions of Section 149(1)(b) of the Act submitted that the said notice u/s 148 of the Act was to be issued within a period of 6 years from the end of the relevant assessment year as income chargeable to tax which has escaped assessment was likely to be an amount of ₹1 lac or more. Therefore, the ld. AR submitted that the period of 6 years expired on 31st March, 2018, whereas notice was served on the assessee on 11.04.2018 as is apparent from the copy of the departmental email. The ld. AR therefore prayed that the reopening proceeding and notice u/s 148 of the Act may kindly be quashed along with reassessment framed consequently.
9. The ld. DR on the other hand strongly opposed to the arguments of the assessee by submitting that the notice was issued on 31.03.2018 was also served upon the assessee by referring to the page no. 2 of the assessment order, wherein it was mentioned by the ld. AO on page no.2 that notice was issued u/s 148 of the Act dated 31.03.2018, which was duly served upon the assessee. The ld. DR also prayed before the Bench that one day time may be allowed so that the date of service of notice issued u/s 148 of he Act on the assessee could be verified from the assessment record and accordingly, the case was adjourned to the next date and fixed the date on 17.03.2025 and during the time of hearing, the ld. DR could not controvert the fact that the notice u/s 148 of the Act was served within the statutory time limit. The ld. DR referred to the provisions of Section 149(1)(b) of the Act as was prevalent during the relevant point of time and submitted that this was required to be issued within a period of six years from the end of relevant assessment year and was accordingly issued and fact has also been stated by the ld. AO in the assessment order.
10. After hearing the rival contentions and perusing the materials available on record, we find that the assessment of the assessee was reopened u/s 147 of the Act after the AO received information from the ITO, Investigation Unit-1, Kolkata to the effect that the assessee was a beneficiary of accommodation entries which has escaped assessment. Accordingly, the notice u/s 148 of the Act was issued on 31.03.2018. The ld. AR placed before the Bench a copy of email received from the department that notice was served on the assessee on 11.04.2018. The ld. DR despite being given specific opportunity to prove the service of notice within the time limit as prescribed u/s 149(1)(b) of the Act could not prove that the same was issued within the time limit as prescribed hereinabove. The case of the assessee is squarely covered by the decision of jurisdictional High Court in the case of Marudhar Vintrade Pvt Ltd Vs Union of India in WPA No. 4382 of 2022 dated 12.4.2022. Therefore, we are inclined to treat the notice issued u/s 148 of the Act, as being barred by limitation within the meaning of Section 149(1)(b) of the Act. Considering these facts of the case in the light of above decision, we are inclined to quash the notice issued u/s 148 of the Act and also the consequent assessment framed. The appeal of the assessee is allowed on legal ground.
11. Since, we have allowed the appeal of the assessee on legal issue, the other ground raised are not being adjudicated at this stage and are being left open to be decided if need arises for the same at later stage.
12. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 09.10.2025.
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