Facts of the Case

M/s Tirupati Buildings and Offices Pvt. Ltd. was one of the petitioners forming part of a large batch of writ petitions challenging reassessment proceedings initiated by the Income Tax Department pursuant to the judgment of the Supreme Court in Principal Commissioner of Income Tax v. Abhisar Buildwell Pvt. Ltd.

The reassessment notices under Section 148 were issued after the coming into force of the Finance Act, 2021, for assessment years which had already attained finality. The notices were issued long after the expiry of the limitation period prescribed under Section 149(1), even when tested against the First Proviso thereto.

The reassessment action was sought to be justified on the basis of earlier search proceedings, despite the fact that no incriminating material relating to the completed assessment years had been found during the course of search.

 

Issues Involved

Whether reassessment proceedings initiated after the Finance Act, 2021, in respect of completed/unabated assessment years, are barred by limitation under the First Proviso to Section 149(1) of the Income Tax Act, and whether the judgment in Abhisar Buildwell can be treated as a “finding or direction” enabling reopening under Section 150 of the Act.

 

Petitioner’s Arguments

The petitioner contended that the reassessment notices were ex facie barred by limitation. It was argued that the First Proviso to Section 149(1) mandates that no notice under Section 148 can be issued for assessment years where such notice could not have been issued on the date when the Finance Act, 2021 came into force.

It was further submitted that the Supreme Court in Abhisar Buildwell merely preserved the power of reassessment subject to fulfilment of statutory conditions and did not issue any finding or direction authorising reopening beyond limitation. Reliance was placed on CIT v. Kabul Chawla and subsequent judgments holding that in the absence of incriminating material, completed assessments cannot be disturbed.

 

Respondent’s Arguments

The Revenue argued that the Supreme Court in Abhisar Buildwell had expressly observed that the Department would not be left remediless and could initiate reassessment proceedings under Sections 147 and 148. It was contended that these observations constituted a finding or direction within the meaning of Section 150, thereby overriding the limitation prescribed under Section 149.

Reliance was also placed on CBDT Instruction No. 1 of 2023, which directed reopening of completed assessments in accordance with Sections 147 and 148 following the Abhisar Buildwell judgment.

 

Court Order / Findings

The Delhi High Court rejected the submissions of the Revenue and held that the reassessment notices were clearly barred by limitation.

The Court held that the observations made by the Supreme Court in Abhisar Buildwell cannot be construed as a “finding” or “direction” under Section 150 of the Act. The Supreme Court merely clarified that reassessment could be initiated if otherwise permissible in law, which necessarily includes compliance with limitation provisions.

The Court further held that CBDT instructions cannot override statutory provisions. Since the reassessment notices were issued beyond the limitation period prescribed under Section 149(1), read with the First Proviso thereto, the reassessment proceedings were unsustainable in law and liable to be quashed.

Accordingly, the impugned notices issued under Section 148, along with consequential proceedings, were set aside.

 

Important Clarification

The Court clarified that Abhisar Buildwell does not grant a blanket or automatic right to reopen completed assessments. Reassessment powers remain subject to strict compliance with Sections 147, 148, and 149 of the Income Tax Act. The First Proviso to Section 149(1) acts as a legislative bar and cannot be diluted by administrative instructions or expansive interpretation of judicial observations.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770194201_MSTIRUPATIBUILDINGSANDOFFICESPVTLTDVsASSISTANTCOMMISSIONEROFINCOMETAXANR..pdf

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