Facts of the Case

The assessee filed its return of income for Assessment Year 2016-17. The Assessing Officer issued notice under Section 148 on 29.06.2021 under the erstwhile reassessment regime. Pursuant to the Supreme Court decision in Union of India vs. Ashish Agarwal, the said notice was treated as a show cause notice under Section 148A(b), and further proceedings were initiated. The Assessing Officer issued notice under Section 148A(b) on 24.05.2022, to which the assessee responded on 14.06.2022. Thereafter, the Assessing Officer passed an order under Section 148A(d) and issued a fresh notice under Section 148 on 29.07.2022. The reassessment proceedings were upheld by the CIT(A), leading to the appeal before the Tribunal.

Issues Involved

Whether the notice issued under Section 148 dated 29.07.2022 was barred by limitation in light of the Supreme Court decision in Rajeev Bansal, whether the Assessing Officer exceeded the surviving period of limitation available after 30.06.2021, and whether the reassessment proceedings were valid in law.

Petitioner’s Arguments

The assessee contended that as per the Supreme Court ruling in Rajeev Bansal, the Assessing Officer was required to issue a fresh notice under Section 148 within the surviving limitation period available as on 30.06.2021 after excluding the time granted to the assessee to reply to the notice under Section 148A(b). It was submitted that only two days of limitation survived as on 30.06.2021, which stood extended to seven days under the proviso to Section 149(1). Since the assessee was granted time up to 22.06.2022 to file a reply, the outer limit for issuance of notice under Section 148 expired on 29.06.2022. The notice issued on 29.07.2022 was therefore barred by limitation and void ab initio.

Respondent’s Arguments

The Revenue supported the reassessment proceedings and contended that the notice issued under Section 148 was validly issued pursuant to the procedure laid down in Ashish Agarwal and that the reassessment was within time.

Court Order / Findings

The ITAT Kolkata held that in view of the Supreme Court decision in Rajeev Bansal, the Assessing Officer was required to issue the notice under Section 148 within the surviving limitation period available as on 30.06.2021. The Tribunal observed that even after applying the statutory extension of seven days under the proviso to Section 149(1), the outer limit for issuance of notice expired on 29.06.2022. Since the order under Section 148A(d) and the notice under Section 148 were issued on 29.07.2022, the same were barred by limitation. The Tribunal relied on several judicial precedents including Communist Party of India (Marxist) vs Income-tax Department and other High Court decisions following Rajeev Bansal. Accordingly, the reassessment proceedings were held to be invalid.

Important Clarification

The Tribunal clarified that reassessment notices issued pursuant to Ashish Agarwal must strictly adhere to the surviving limitation period as clarified by the Supreme Court in Rajeev Bansal. Any notice issued beyond such period is void and unenforceable, and limitation provisions cannot be relaxed on equitable considerations.

Final Outcome

The appeal filed by the assessee was allowed. The notice issued under Section 148 dated 29.07.2022 and the consequential reassessment proceedings for Assessment Year 2016-17 were quashed as being barred by limitation and void ab initio.

Source Link- https://itat.gov.in/public/files/upload/1767676401-CKjUCK-1-TO.pdf

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