Facts of the Case

The petitioner, Bhadani Financers Pvt. Ltd., was subjected to reassessment proceedings through issuance of a notice under Section 148 in November 2023 for a completed/unabated assessment year.

Earlier, search-related proceedings under Sections 153A/153C against group entities had been set aside by appellate authorities on the ground that no incriminating material pertaining to the petitioner was found during the search.

After the Supreme Court judgment in Principal Commissioner of Income Tax v. Abhisar Buildwell Pvt. Ltd. and issuance of CBDT Instruction No. 1/2023 dated 23 August 2023, the Assessing Officer initiated reassessment under Sections 147/148, relying on the said judgment and instruction.

The petitioner challenged the reassessment as being time-barred and without jurisdiction.

 

Issues Involved

Whether reassessment under Section 148 could be initiated beyond the limitation prescribed under Section 149.

Whether Abhisar Buildwell constitutes a “finding or direction” enabling reopening under Section 150.

Whether CBDT Instruction No. 1/2023 can override statutory limitation provisions.

Whether completed/unabated assessments can be reopened in the absence of incriminating material.

 

Petitioner’s Arguments

The petitioner contended that:

The reassessment notice was ex facie barred by limitation under the First Proviso to Section 149(1).

Abhisar Buildwell merely preserved reassessment subject to law and did not mandate reopening.

The Supreme Court did not issue any binding finding or direction within the meaning of Section 150.

CBDT instructions under Section 119 cannot confer jurisdiction or extend limitation.

Reopening completed assessments without incriminating material is contrary to settled law including Kabul Chawla.

 

Respondent’s Arguments

The Revenue argued that:

Abhisar Buildwell preserved the power to reassess under Sections 147/148.

CBDT Instruction No. 1/2023 mandated uniform reopening of affected cases.

Section 150 permitted reassessment notwithstanding limitation.

Without reassessment, the Revenue would be left without remedy.

 

Court Order / Findings

The Delhi High Court rejected the Revenue’s submissions and held that:

Observations in Abhisar Buildwell do not amount to a “finding or direction” under Section 150.

Liberty to reassess “if permissible under law” does not override statutory limitation.

CBDT Instruction No. 1/2023 cannot override Sections 149 or 150 of the Act.

Completed/unabated assessments cannot be reopened merely because search assessments failed.

Incriminating material remains a jurisdictional prerequisite for disturbing concluded assessments.

The Court reaffirmed jurisprudence laid down in:

Kabul Chawla (Delhi High Court)

Saumya Construction (Gujarat High Court)

Sumitomo Corporation India (P) Ltd. (Delhi High Court)

 

Important Clarification

The Court clarified that:

Section 150 applies only when reassessment is necessary to give effect to a specific judicial finding or direction.

Administrative instructions cannot enlarge reassessment powers or extend limitation.

Reassessment provisions must be strictly construed as they impinge upon finality of completed assessments.

 

Final Outcome

Writ Petition Allowed
 Reassessment Notice Issued Under Section 148 Quashed
 Proceedings Held Barred by Limitation
 CBDT Instruction No. 1/2023 Declared Inapplicable for Reviving Time-Barred Cases

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770191845_BHADANIFINANCERSPVT.LTD.VsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE8NEWDELHI.pdf  

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