ARN Infrastructures India Limited Vs ACIT (Delhi High Court)
Liberty to Revenue to initiate reassessment proceedings in Abhisar Buildwell didn’t construe to overcome Limitation u/s 149
Conclusion: Power of Revenue to initiate reassessment proceedings under Sections 147/148 in case of completed/ unabated assessment, if no incriminating material was found during the search- could not be construed to be an authority to override the limitation prescribed under Section 149.
Held: In the instant case, proceedings for reassessment initiated after the decision of the Supreme Court in Principal Commissioner of Income Tax, Central- 3 v. Abhisar Buildwell Private Limited. The Supreme Court in unambiguous terms held that it would only be in cases where undisclosed income was found on the basis of incriminating material that AO could be said to have validly assumed jurisdiction to assess income for the ten-year block assessment period constituting the subject matter of Section 153A. It thus held, while affirming the view taken by the Delhi and the Gujarat High Courts, that no addition could be made in respect of completed assessments in the absence of any incriminating material. Supreme Court also pertinently observed that in case a search did not result in any incriminating material being found, the only remedy that would be available to the Revenue would be to resort to Sections 147/148 of the Act “subject to fulfilment of the conditions mentioned” in those provisions. It thus observed that where a search did not result in any incriminating material being unearthed, the power of the Revenue to initiate reassessment action would stand preserved subject to the same being in conformity with the scheme of reassessment as embodied in Sections 147 and 148. Assessee argued that the Supreme Court’s observation could not be construed as a “direction” warranting initiation of action under Section 148. They opposed reassessment action initiated against them, principally on the ground of being barred by time under Section 149. The action was proposed on the strength of Instructions issued by CBDT in August 2023, calling upon AOs to re-examine all search assessment cases which had come to be set at naught by virtue of declarations of nullity rendered either by the Tribunal or the High Courts and to examine the feasibility of commencing reassessment action. It was held that insofar as completed assessments were concerned, the AOs’ would be required to reopen cases following the procedure for reassessment as existing in the Act. The Instruction laid emphasis on the Supreme Court in Abhisar Buildwell having observed that completed assessments could be reopened in exercise of powers conferred by Section 147/148 of the Act and the time limit for the issuance of such a notice guided by the provisions of Section 150. Subsequent to the issuance of the aforenoted CBDT Instruction and pursuant to a Scheme of Arrangement sanctioned by the National Company Law Tribunal, ABPL was merged with DSL with effect from 25 September 2023. Notwithstanding the same, notices were issued thereafter under Section 148A(b) on 27 September 2023 in the name of the erstwhile ABPL entity, based on the observations made in the special audit report and which culminated in an order and a consequential notice being framed under respective Sections 148A(d) and 148 on 30 November 2023. It became pertinent to note that the substratum of the Section 148A(b) notice and on the anvil of which the order of Section 148A(d) had been passed, had been answered in favour of ABPL vide an order of the Tribunal dated 17 January 2024 for AY 2018-19. However and on the basis of the CBDT Instructions, the respondents sought to initiate reassessment proceedings by issuing a notice under Section 148A(b) and which culminated in the order framed under Section 148A(d) on 30 March 2024 and the notice impugned before us of even date for AY 2007-08. The High Court pointed that SC had caveated its observation on reassessment by observing that the initiation of reassessment would be “…subject to fulfilment of the conditions mentioned in Sections 147/148.” This note of caution, it added, appears at more than one place in the Abhisar Buildwell judgment and was apparent from the Supreme Court observing that the power to reassess would be subject to the fulfilment of the conditions mentioned in Sections 147 and 148 of the Act. It would be open for the Revenue to initiate reassessment in accordance with law and “if it is permissible under the law”. The High Court said an identical issue, as in the case at hand, was mounted before it in Dinesh Jindal v. Assistant Commissioner of Income Tax and Others (2024) and it was held that the reassessment procedure initiated after Apr 1, 2021 would have to meet the foundational tests as specified in the first proviso to Section 149(1). The Court held, “The Supreme Court had, in order to balance equities, additionally observed that it would be open for the Revenue to commence reassessment, if otherwise permissible in law. That observation could not be viewed as amounting to a direction which would enable the respondents to overcome the prescription of limitation which otherwise applied…neither Abhisar Buildwell nor U.K. Paints were liable to be read as enabling the respondents to overcome the statutory bar of limitation which may have come into play.” Accordingly, the High Court quashed the impugned notices and consequent proceedings against assessee.
