The Delhi High Court said that Section 149 of the Income Tax Act, which defines a limitation period for initiating reassessment against taxpayers, is not an enabling provision but rather a prohibition on the Assessing Officer’s administrations.
A division bench of Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela observed,
“The opening sentence of Section 149(1) of the Act clearly indicates that the time limit as prescribed under Section 149(1) of the Act is a hard stop. Therefore, the procedure that is required to be completed for issuance of notice under Section 148 of the Act is required to be completed prior to the expiry of the time limit as prescribed under Section 149(1) of the Act.
Such time limit cannot be breached…There is no ambiguity in this regard given the construct of Section 149(1) of the Act, which is not in the nature of enabling provision but a provision that proscribes an action.”
The observation arrives while dealing with the petition of the company contesting the reassessment measure initiated against it for the alleged unexplained cash of Rs 75 lakh as limited to time.
The Delhi High Court at the outset indulged in discussing the process and duration to initiate the reassessment measure founded on the decision of the Apex court in Rajeev Bansal.
If more than three years have gone from the end of the relevant assessment, Section 149(1)(a) bars issuance of notice. But a notice could be furnished up to 10 years if the said pre-requisites u/s 149(1)(b) are satisfied.
It is crucial to mark that Section 149(1) extends the limitation period to issue notice u/s 148 to furnish the AO a minimum of 7 days to pass an order u/s 148A(d).
The Court explained, “If the show cause notice under Section 148A(b) of the Act is issued to an assessee, on the last date on which issuance of such a notice under Section 148 of the Act is permissible, that is, on the last day of expiry of three years from the end of the relevant assessment year or ten years from the end of the assessment year as the case may be, the time made available to the assessee to respond to a notice under Section 148A(b) of the Act (being a minimum of seven days but not exceeding thirty days as provided in the notice plus such further time as extended pursuant to an application), is required to be excluded for the calculation of the period of three years or ten years as the case may be.”
Also, it mentioned that an additional period of 7 days is made available for the AO to pass an order. Therefore the duration of limitation in the case shall be 3 years (after excluding the time provided to the taxpayer to answer to the notice u/s 148A(b) of the Act) and seven days or a period of 10 years (after excluding the time provided to the assessee to respond to the notice under Section 148A(b) of the Act) and 7 days as the case may be.
Pertinent with the merits of the case the High Court marked that the impugned reassessment measure related to the assessment year 2013-14, i.e. period before Finance Act 2021.
No notice u/s 148 can be issued under the provisions of Section 149(1) prior to 01.04.2021 if,
- four years had gone by from the end of the relevant assessment year;
- four years though is not more compared to 6 years from the finish of the pertinent assessment year if the income levied to tax which has not undergone the assessment amounted to or may amount to Rs 1 lakh or exceeding that year or
- four years but not exceeding then 16 years had elapsed from the end of the relevant assessment year if the income concerning any asset (including financial interest) in any entity located outside India and chargeable to tax had escaped assessment.
The court in the current case mentioned that no allegation was there that the income of the taxpayer has not undergone the assessment concerning any asset located outside India.
“Thus, in terms of Section 149(1)(b) of the Act as in force prior to 01.04.2021, no notice under Section 148 of the Act could have been issued beyond the period of six years from the end of the relevant assessment year…no notice under Section 148 of the Act could have been issued in this case after 31.03.2020 in respect of AY 2013-14,” it held.
Thus the court applied the surviving period under TOLA, in which the time limits for distinct measures and compliance were extended for the COVID-19 pandemic. In the Kanwaljeet Kaur case, the subject was discussed by the HC.
It was noted by the court that the time to complete the particular acts which counted in the duration 20.03.2020 to 31.12.2020 was extended till 30.06.2021. The notice related to it dated 01.06.2021 was issued 29 days before the expiry of the period of limitation. Hence, the Court ruled,
“AO was required to pass an order under Section 148A(d) of the Act within the said twenty-nine days notwithstanding the time stipulated under Section 148A(d) of the Act. This period expired on 12.07.2022…the impugned notice dated 30.07.2022 has been issued beyond the period of limitation,” and dismissed the petition.
Recommended: Time Limitation for Income Tax-Related Documents Retention
Before parting, it noted that,
“the AO is required to complete the entire procedure for issuance of notice under Section 148 of the Act within the period as prescribed under Section 149 of the Act. Plainly, if the AO is unable to complete such procedure within the period of limitation, the AO would cease to have the jurisdiction to issue such a notice.”
| Case Title | Ram Balram Buildhome PVT. LTD. vs. Income Tax Officer and ANR |
| Citation | W.P.(C) 16232/2024 & CM APPL. 68188/2024 |
| Date | 30.01.2025 |
| For the Petitioner | Mr Keshav Sehgal, Mr Shivam Gaur, Mr Kshitij Joshi, and Mr Aryan Kumar |
| For the Respondent | Mr Aseem Chawla, Ms Pratishtha Choudhary, Mr Puneet Rai, Mr Ashvini Kumar, and Mr Rishabh Nangia |
| Delhi High Court | Read Order |
