ACIT CIRCLE 34(1) , DELHI vs. SUNIL GOYAL (HUF), DELHI

आदेश /O R D E R PER C.N. PRASAD, J.M.

“2. That the CIT(A) has erred in law and on facts in upholding the validity of the reassessment notice dated 28.07.2022 issued u/s 148, despite the same being time-barred in light of the decision of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC).”

However, since the assessee did not file reply to the said notice, the Assessing Officer passed order u/s 148A(d) on 28.07.2022 which is barred by limitation in view of the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (supra), and the Assessing Officer ought to have issued notice under 148A(d) of the Act and notice u/s 148 on or before 22.06.2022.

“105. A direction issued by this court in exercise of its jurisdiction under article 142 is an order of a court. The third proviso to section 149 of the new regime provides that the period during which the proceedings under section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under section 148A(b) and the date of the decision of this court in Union of India v. Ashish Agarwal, the Assessing Officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show-cause notices were deemed to have been stayed by order of this court from the date of their issuance (some-where from April 1, 2021 till June 30, 2021) till the date of decision in Union of India v. Ashish Agarwal, that is, May 4, 2022.

“HELD The question that falls for consideration of this court is whether the impugned order and the impugned notice were issued beyond the period as stipulated for passing such an order or issuance of such a notice. [Para 14] Section 149(1) of the Act as in force with effect from 01-04-2021 and prior to its substitution with effect from 01-09-2024 by the Finance (No.2) Act, 2024, expressly provided that no notice under Section 148 of the Act can be issued for the relevant assessment year if three years had elapsed from the end of the relevant assessment year unless the case fell within Clause (b) of the said sub-section. Clause (b) proscribed issuance of notice if three years, but not more than ten years, had elapsed from the end of the relevant assessment year unless the AO had in its possession books of account, other documents, or evidence, which revealed that the income chargeable in the form as stipulated, had escaped assessment. And, such income amounted to or was likely to 750 lacs or more. Thus, no notice under Section 148 of the Act could be issued beyond the period of ten years from the end of the relevant assessment year. However, in terms of the first proviso to Section 149(1) of the Act, no notice under Section 148 of the Act could be issued in respect of the relevant assessment year beginning on or before 01-04-2021, if such a notice could not be issued, inter alia, under Section 148 of the Act. [Para 15] Concededly, no notice under Section 148 of the Act could be issued under the provisions of Section 149(1) of the Act as was in force prior to 01-04-2021 if, (i) four years had elapsed from the end of 10 the relevant assessment year, (ii) four years but not more than six years had elapsed from the end of the relevant assessment year if the income chargeable to tax, which had escaped assessment, amounted to or was likely to amount to 1 lac or more for that year, or (iii) four years but not more than sixteen years had elapsed from the end of the relevant assessment year if the income in relation to any asset (including financial interest) in any entity located outside India and chargeable to tax had escaped assessment. [Para 16] In the present case, there is no allegation that the Assessee's income that had escaped assessment in respect of assessment year 2013-14 was in relation to 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. [Para 17] In view of the above, 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, [Para 18] However, it is the Revenue's case that the impugned notice is within the time as extended by virtue of the TOLA Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020] and the decision of the Supreme Court in Union of India v. Ashish Agarwal [2022] 138 tasmann.com 64/286 Taxman 183/444 ITR 1. The Revenue contends that the impugned notice has been issued within the time as prescribed under Section 149(1) of the Act computed in accordance with the third and fourth proviso to Section 149 of the Act as was in force at the material time. [Para 19] Thus, the central question to be addressed is whether the impugned notice was issued within the extended time as available to the Assessing Officer by virtue of the provisions of the TOLA, the directions issued under Article 142 of the Constitution of India by the Supreme Court in the case of Ashish Agarwal (supra) and the timelines as in force with effect from 01-04-2021 but prior to 01-04- 2023[Para 20] In terms of Section 147 of the Act as in force prior to 01.04.2021, an AO would assess/reassess the income of an assessee for the relevant assessment year if he had reason to believe that the income chargeable to tax for the said relevant AY had escaped assessment. However, this power was not open ended and the period, which an officer could travel back for reopening the assessment was not indefinite. Section 149(1) of the Act proscribed the issuance of notice under Section 148 of the Act-which was necessary for initiating the assessment/re-assessment proceedings under Section 147 of the Act-beyond the period of four years from the end of the relevant assessment year. This period was extended to six years if the amount, that has, escaped assessment was ?1 lac or more, and to sixteen years if the income that has escaped assessment was in relation to any asset located outside India. Additionally, the Assessing Officer could assume jurisdiction to reopen assessments under Section 147 of the Act only where he had reason to believe that the income had escaped assessment. The reason to believe was not construed expansively. It was necessarily required to be based on tangible material having nexus with the view that an assessee's income had escaped assessment [Para 31] The procedure for reassessment was substantially amended by virtue of the Finance Act, 2021. Section 148A of the Act was introduced, which included the procedure for providing the assessee an opportunity to address any information available with the Assessing Officer, which was suggestive of the assessee's income escaping assessment for any, relevant year. The procedure enabled the AO to take an informed decision whether it was a fit case for issuance of a notice under Section 148 of the Act after considering the material on record including responses furnished by the assessee. [Para 33] Subsequent to the Finance Act, 2021, the Finance Act, 2023 was brought into force with effect from 01-04-2023, wherein two additional provisos were added before the third and fourth proviso to Section 149(1) of the Act, making the existing third and fourth provisos to fifth and sixth. In addition, by the Finance Act, 2023, the words "is less than seven days" were replaced by the words "does not exceed seven days" in the sixth proviso to Section 149(1) of the Act. [Para 35] In exercise of the powers under section 3(1)(a) of the TOLA, the Government of India issued three notifications successively extending the time for completion of the specified acts. In terms of the Notification No.93/2020 dated 31.12.2020, the time limit for completion of the specified acts which fell within the period of 20- 03-2020 to 31-12-2020 was extended till 31-03-2021. The said period thereafter was extended till 30.04.2021 by the Notification No.20/2021 dated 31.03.2021 and further stood extended till 30.06.2021 by the notification No.38/21 dated 27.04.2021. [Para 37] Thus, by virtue of the provisions of the TOLA and the notifications issued by the Government of India, the time limit for completion of the specified acts [as defined under Section 3(1)(a) of the TOLA] stood extended till 30.06.2021. [Para 38] Clause (b) of Section 148A of the Act expressly provides that the Assessing Officer is required to give a notice to the assessee to show cause why a notice under Section 148 of the Act not be issued, within such time as may be specified in the notice. This time is required to be not less than seven days but not more than thirty days. This time can be further extended by the Assessing Officer, if an application is made by the assessee in this regard. [Para 40] In terms of Sub-clause (c) of Section 148A of the Act, the Assessing Officer is required to consider the response to the show cause notice furnished by the Assessee. [Para 41] Clause (d) of Section 148A of the Act requires the Assessing Officer to decide on the basis of the material on record, including the response furnished by the assessee to the notice issued under Section 148A(b) of the Act, whether it is a fit case for issuance of notice under Section 148 of the Act. The said clause also stipulates that such a decision is required to be made within one month from the end of the month in which a reply referred to Clause (c) is received by the Assessing Officer or in case where no reply is furnished by the assessee, within one month from the end of the month in which time or extended time to furnish the reply expires. Section 148 requires the Assessing Officer to serve a copy of the notice under Section 148 along with an order passed under Clause (d) of Section 148A. As is apparent from the above, the procedures as prescribed under Section 148A including holding of inquiry as contemplated under Clause (a) of Section 148A; issuance of a show cause notice under Section 148A(b); considering the reply of the assessee under Clause (c) of Section 148A; and deciding in terms of Clause (d) of Section 148A, whether it is a fit case for issuance of notice under Section 148, is required to be completed prior to issuance of notice under Section 148. [Para 43] Section 149(1) of the Act prohibits issuance of notice beyond the time period as specified. In terms of Clause (a) of Section 149(1) of the Act, a notice cannot be issued for relevant assessment year if more than three years had elapsed from the end of the relevant assessment unless the case falls under Clause (b) of the said sub- section. [Para 44] In terms of Clause (b) of Section 149(1) of the Act, the following conditions are required to be satisfied: (i) that the Assessing Officer has in its possession books of account or other documents or evidence, which reveal that the income had escaped assessment, (ii) that such income chargeable to tax, which is revealed from the material available with the Assessing Officer is in the form of (a) an asset; or (b) expenditure in respect of transaction or in relation to an event or occasion, or (c) an entry of entries in the books of account, (iii) that the income which has escaped assessment amounts to or is likely to amounts to ?50 lacs or more. [Para 45] If the aforesaid conditions are satisfied, a notice under Section 148 can be issued beyond the period of three years but not beyond the period of ten years. [Para 46]

The opening sentence of Section 149(1) clearly indicates that the time limit as prescribed under Section 149(1) is a hard stop. Therefore, the procedure that is required to be completed for issuance of notice under Section 148 is required to be completed prior to the expiry of the time limit as prescribed under Section 149(1). Such time limit cannot be breached on account of the Assessing Officer not completing the procedure required for issuance of notice under Section 148. There is no ambiguity in this regard given the construct of Section 149(1), which is not in the nature of enabling provision but a provision that proscribes an action. [Para 47] Having stated the above, it is also important to note the provisos to Section 149(1) of the Act also provide for exclusion of that certain time periods for the purposes of computing the period of limitation as prescribed under Section 149(1) of the Act as well as for extending the period of limitation. [Para 481 As is apparent from the above, third proviso to Section 149(1), provides for exclusion of time in computing of the limitation period to the aforesaid extent: (i) the time or extended time allowed to the assessee in the show cause notice issued under Section 148A(b) of the Act; and (ii) the period during which proceedings under Section 148A of the Act are stayed by an order or injunction by any court, are required to be excluded. Thus the period of three years or ten years from the end of the relevant assessment year, as the case may be, is required to be computed after excluding the time allowed to an assessee as per the show cause notice issued under Section 148A(b) of the Act or if there is a stay order or injunction passed by any court staying the proceedings under Section 148A of the Act, the period during which the proceedings are so stayed. [Para 51] As is apparent from the plain language of the fourth proviso to Section 149(1) of the Act, it extends the period of limitation for issuing a notice under Section 148 of the Act so as to provide the AO a minimum of seven days to pass an order under Section 148A(d) of the Act. If the time available to the AO to decide whether it is a fit case for issuance of notice under Section 148 of the Act in terms of Section 148A(d) of the Act is less than seven days after excluding the period a provided under the third proviso, then the period of three years or ten years as prescribed is required to be extended by such period so as to make available to the AO at least seven days to pass an order u/s 148A(d) of the Act and issue a notice u/s 148 of the Act. Illustratively, if the show cause notice under Section 148A(b) of the Act is led to an assessee, on the last date on which issuance of such a notice under Section 145 of the Act is permissible, that is, on the last day of expiry of three years from the end of the relevant assessment year of ten 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 se as provided in the notice plus such farther time as extended pursuant to an excluded for the calculation of the period of three years or ten years as the case may be. And, an additional ten years period of seven days is made available for the AD to pass an order. Thus, the period of limitation in such seven days but not exceeding thirty days case would be three years (after excluding the time provided to the assessee to respond to the notice under Section 148A(b) of the Act) and seven days, or an application), is required to be the assessee to respond to the notice under Section 148A(b) of the Act) and seven days as the case way be. [Para 53] It is obvious, that in such a case, the AO would not have a time for passing an order under Section 148Aid) of the Act as stipulated under the said Clause, that is, one month from the end of the month in which the assessee furnishes a reply to the notices issued under Section 148A(b) of the Act. As noted above, 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 [Para 54] The Supreme Court had in unambiguous terms held that (a) the date of notices issued under Section 148 of the Act, under the old regime which was subject matter of challenge in Ashish Agarwal (supra), has not been struck off and further notices and orders issued under Section 148 of the Act were in continuance of the proceedings that had commenced on the date of issuance of such notices; (b) the period from the date of issuance of such notices till the date of the decision in the case of Ashish Agarwal (supra), that is 04.05.2021, was required to be excluded for the period of calculation of limitation by virtue of the third proviso to Section 149(1) of the Act. The AO could not continue any proceeding till the Supreme Court rendered its decision to treat the notices issued under Section 148 of the Act as notices issued under Section 148A(b) of the Act, and, (c) the period from the date of the decision in Ashish Agarwal (supra), that is 04-05-2022, to the date when the material was supplied by the AO to the Assessee, as was required under Section 148A(b) of the Act, was also required to be excluded. The Supreme Court reasoned that the AO could not proceed further till the said material was supplied. Therefore, the said period is also required to be excluded by virtue of the third proviso to Section 149(1) of the Act [Para 63] It is material to note that the Supreme Court had also explained that provision of TOLA would be applicable to notices which were subject matter of challenge in Ashish Agarwal (supra). [Para 64]

The last date for issuance of notice under section 148 for assessment year 2013-14 under the statutory framework, as was existing prior to 1-4-2021 was 31-3-2020, that is, six years from the end of the relevant assessment year. [Para 65] By virtue of section 3(1) of TOLA time for completion of specified acts, which fell during the period 20-3-2020 to 31-12-2020 were extended till 30-6-2021. Thus, the notice dated 1-6-2021 was issued twenty-nine days prior to the expiry of period of limitation for issuing a notice under section 148 as was extended by TOLA. As noted above, the period from 1-6-2021, the date of issuance of notice, and 4-5-2022, being the date of decision of the Supreme Court in Ashish Agarwal (supra) is required to be excluded by virtue of the third proviso to section 149(1). [Para 66] Additionally, the period from the date of decision in Ashish Agarwal (supra) till the date of providing material, as required to the accompanied with a notice under section 148A(b), is required to be excluded. Thus, the period between 4-5-2022 to 30-5-2022, the date on which the Assessing Officer had issued the notice under section 148A(b) in furtherance of his earlier notice dated 1-6-2021, is also required to be excluded by virtue of the third proviso to section 149(1). [Para 67] In addition to the above, the time granted to the petitioner to respond to the notice dated 30-5-2022 the period of two weeks is also required to be excluded by virtue of the third proviso to section 149(1). The petitioner had furnished its response to the notice u/s 148A(b) on 13.6.2022. Thus, the period of limitation began running from that date. [Para 68] As noted above, by virtue of TOLA, Assessing Officer had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings, which began on 1.6.2021, to issuea notice u/s 148. The said notice was required to be accompanied by an order u/s 148A(d). Thus, the Assessing Officer was required to pass an order u/s 148A(d) within the said twenty nine days notwithstanding the time stipulated u/s 148A(d). This period expired on 12.7.2022. [Para 69] Since the period of limitation, as provided u/s 149(1), had expired prior to issuance of the impugned notice on 30-7-2022. The said is squarely beyond the period of limitation. (Para 70] It is contended on behalf of the revenue that the Assessing Officer is required to pass an order u/s 148A(d) by the end of the month following the month on which the reply to the notice u/s 148A(b) was received. Thus, the order u/s 148A(d) was well as the notice u/s 148 (both dated 30.7.2022) are within the prescribed period. This contention is without merit as it does not take into account that proceedings u/s 148A necessarily required to be completed within the period available for issuing notice u/s 148, as prescribed under section 149. Thus, the time available to the AO to pass an order u/s 148A(d) was necessarily truncated and the same was required to be passed on or before 12-7-2022) The fourth proviso to section 149 did not come into play as the time period available for the AO to pass an order under section 148A(d) was in excess of the seven days. [Para 71] In view of the above, the impugned notice dated 30-7-2022 has been issued beyond the period of limitation [Para 72] The petition is accordingly allowed and the impugned order dated 30-7-2022 passed under section 148A(d); the impugned notice dated 30-7-2022 issued under section 148, and the assessment order dated 30-5-2013 framed under section 147 pursuant to the notice dated 30-7-2022 for assessment year 2013-14, are set aside (Para 73]”

Order pronounced in the open court on 13.08.2025