VIMAL TRADING vs. INCOME TAX OFFICER WARD 3(1) KALYAN AND ANR

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WP/1248/2023HC BombayHCBM01003898202303 September 2024Author: HON'BLE SHRI JUSTICE G. S. KULKARNI,HON'BLE SHRI JUSTICE SOMASEKHAR SUNDARESAN4 pages
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What did the High Court hold?

The High Court held that the notice dated July 27, 2022, issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2014-15 is barred by limitation. The Court relied on its previous ruling in Godrej Industries Ltd. v. The Assistant Commissioner of Income Tax, Circle 14 (1)(2), Mumbai & Ors. The Court reasoned that the validity of a notice under Section 148 must be judged based on the law existing on the date of its issuance. By July 27, 2022, the amended Section 149 of the Act was in force, and the deadline for issuing notices for AY 2014-15 had expired on March 31, 2021. Therefore, the notice was hopelessly barred by limitation. The Court quashed and set aside the impugned notice and the underlying prior notices/orders under Sections 148A(b) and 148A(d). The Court explicitly stated that it expressed no opinion on any other issues raised in the Writ Petition as it was not necessary to do so.

What were the facts?

The Petitioner, Vimal Trading, challenged a notice dated July 27, 2022, issued under Section 148 of the Income Tax Act, 1961, for reassessment of its returns for Assessment Year 2014-15. The Petitioner contended that the notice was barred by limitation as it was issued beyond the period stipulated under Section 149 of the Act. The returns for AY 2014-15 were filed on November 28, 2014. The impugned notice was issued approximately one year and four months after the expiry of six years from the end of AY 2014-15. The Revenue was represented by the Income Tax Officer-Ward 3(1) Kalyan & Ors.

What were the issues?

1. Whether the notice dated July 27, 2022, issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2014-15 is barred by limitation under Section 149 of the Act? Assessee's Contentions: The Petitioner argued that the reassessment proceedings are barred by limitation as the notice under Section 148 was issued beyond the period stipulated under Section 149 of the Act. Specifically, the notice was issued more than six years after the end of AY 2014-15, and the intervening period was not excludable as per the Supreme Court's ruling in Ashish Agarwal (Supra). Revenue's Contentions: The Revenue did not record specific arguments in the judgment, but their participation in the proceedings implies a defense against the Petitioner's claim of limitation.

Which sections of the Income-tax Act were involved?

Section 148,Section 149,Section 148A

AI-generated summary — verify with the full judgment below

927.

WP.1248.2023.DOC IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.1248 OF 2023 Vimal Trading …. Petitioner Vs. Income Tax Officer-Ward 3(1) Kalyan & Ors. …. Respondents _________ Ms Radha Halbe for the Petitioner. Mr. Akhileshwar Sharma for the Respondents. _________

CORAM : G. S. KULKARNI & SOMASEKHAR SUNDARESAN, JJ. DATE : 03 SEPTEMBER, 2024 PC:

1.

Rule. Rule made returnable forthwith. Learned Counsel for the Respondents waives service. By consent of the parties, heard finally.

2.

This Writ Petition under Article 226 of the Constitution of India has been filed to challenge a notice dated 27th July, 2022 (“impugned notice”) issued to the Petitioner under Section 148 of the Income Tax Act, 1961 (“the Act”) for reassessment of the returns filed for Assessment Year 2014-15. The essential ground of challenge is that the proceedings are evidently barred by limitation inasmuch as they have AARTI GAJANAN PALKAR GAJANAN PALKAR Date: 2024.09.06 11:53:55 +0530

927.

WP.1248.2023.DOC been initiated well beyond the period of limitation stipulated under Section 149 of the Act. The Assessment Year in question is 2014-15 for which the tax returns had been filed by the Assessee on 28th November, 2014. The impugned notice under Section 148 has evidently been issued one year and four months after the expiry of six years since the end of the Assessment Year 2014-15 – the applicable period of limitation under Section 149. 3. We find that the matter at hand is squarely covered by the ruling by a Division Bench of this Court in the case of Godrej Industries Ltd. v. The Assistant Commissioner of Income Tax, Circle 14 (1)(2), Mumbai & Ors.

1 (“Godrej”). The facts of the case in Godrej were quite similar – the Assessment Year was 2014-15; the show cause notice under Section 148A(b) came to be issued for the first time on 24th May, 2022; and the Section 148 notice came to be issued on 31st July, 2022. In the instant case, the notice under Section 148 was issued on 27th July, 2022 – just about a three days before the notice in Godrej. The Division Bench which dealt with the issue of limitation, in Godrej, held as follows:-

14.

The Hon'ble Supreme Court in Ashish Agarwal (Supra) only deemed the first notice issued under Section 148 of the Act to be a show cause notice under Section 148A(b) of the Act and left all defences available to the assessee under Section 149 of the Act. The Hon'ble Supreme Court in Ashish Agarwal (Supra) did not grant any stay and the period from 21st May 2021 till the notice under Section 148A(b) of the Act is issued cannot be excluded under the second limb of the fifth proviso or even under the first limb. 1 2024 (3) TMI 109 Bombay High Court 927.WP.1248.2023.DOC

15.

The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued under Section 148 of the Act, which in the present case is 31st July 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under Section 148 of the Act for AY 2014-15 could be issued on or after 1st April 2021 based on the first proviso to Section 149 of the Act. Therefore, the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under Section 148 of the Act could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices. The fifth proviso can only apply where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached.

16.

The sixth proviso to Section 149 of the Act has no impact as it only provides a situation where after exclusion of the time period referred to in the fifth proviso, the time available with the Assessing Officer for passing an order under Section 148A(d) of the Act is less than 7 days, then the remaining time frame shall be extended to 7 days and limitation also stands extended by 7 days.

17.

The notice under Section 148 of the Act issued on 31st July 2022, therefore, is barred by limitation. As per the fifth proviso to Section 149 of the Act only the period from 24th May 2022 to 8th June 2022 can be excluded since the notice under Section 148A(b) of the Act has been issued for the first time on 24th May 2022 providing time to petitioner till 8th June 2022 to furnish a reply. The Revenue is seeking to exclude a period from 21st May 2021 to 4th May 2022 relying on Ashish Agarwal (supra) which, as explained earlier, cannot apply. Hence, the impugned notice dated 31st July 2022 is bad in law. [Emphasis Supplied]

4.

A plain reading of the foregoing would make it clear that the ruling in Godrej explicitly rules that the validity of a notice under Section 148 must be judged on the basis of the law as existing on the date of which the notice is issued. In the instant case, the notice was first issued on 27th July, 2022, by which time the new version of Section 149 had been introduced more than a year earlier. The deadline for issuance of notices for Assessment Year 2014-15 had expired on 31st March, 2021. Consequently and evidently, the notice issued in the instant case was hopelessly barred by limitation. Therefore, the 148 927.WP.1248.2023.DOC Notice indeed issued deserves to be quashed as being barred by limitation.

5.

Learned Counsel for both Petitioner-Assessee as well as the Respondent-Revenue confirm the factual position found above. Consequently, in reliance upon the law declared in Godrej, the reassessment proceedings being barred by limitation, cannot be permitted to be continued, calling for interference by this Court. Therefore, we hereby quash and set aside the impugned notice under section 148 of the Act dated 27th July, 2022 and also the underlying prior notice and order under section 148A(b) and section 148A(d) of the Act, respectively.

6.

Since we are disposing of this Petition on the basis of the reassessment being barred by limitation under Section 149 of the Act, we express no opinion on any other issues raised in the Writ Petition. Such questions are not being answered since it is not necessary to do so.

7.

Rule is made absolute in the aforesaid terms and the Writ Petition is hereby disposed of. No costs. (SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)

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