ACCOLADE HOLDINGS PRIVATE LIMITED (FORMERLY KNOWN AS BLUE EYE ENTERTAINMENT PRIVATE LIMITED) vs. INCOME TAX OFFICER, WARD 2(1), DELHI & ORS.

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W.P.(C)/7170/2023HC DelhiDLHC01020483202328 May 2025Author: HON'BLE MR. JUSTICE VIBHU BAKHRU,HON'BLE MR. JUSTICE TEJAS KARIA4 pages
AI SummaryAllowed

What did the High Court hold?

The Delhi High Court allowed the petition and set aside all proceedings. The Court reasoned that the initial notice under Section 148, deemed a notice under Section 148A(b), was issued four days before the expiry of the limitation period. After accounting for exclusions as per the fifth proviso to Section 149(1) (period from notice issuance to the Ashish Agarwal decision, and time granted to the assessee to reply), and considering the sixth proviso to Section 149(1) which grants seven days for the AO to issue notice if less than seven days are available after the assessee's reply, the last day to issue notice was 14.06.2022. The impugned notice dated 31.07.2022 was therefore issued beyond this extended period. The Court noted that this controversy was covered in favour of the Assessee by its own decision in Ram Balram Buildhome Pvt. Ltd. v. Income Tax Officer and Anr. Consequently, all proceedings were quashed.

What were the facts?

The petitioner, Accolade Holdings Private Limited, challenged an order dated 31.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961, and a notice dated 31.07.2022 issued under Section 148 of the Act for Assessment Year 2013-14. The initial notice under Section 148 was issued on 26.06.2021, which was later deemed a notice under Section 148A(b) following the Supreme Court's decision in Union of India & Ors. v. Ashish Agarwal. The Assessing Officer (AO) provided material on 24.05.2022, and the Assessee replied on 07.06.2022. The Assessee contended that the impugned order and notice were issued beyond the prescribed period of limitation.

What were the issues?

1. Whether the impugned order under Section 148A(d) and notice under Section 148 of the Income Tax Act, 1961, for AY 2013-14 were issued within the prescribed period of limitation, considering the interplay of Section 149(1) and the provisos thereto, as well as the directions in Union of India & Ors. v. Ashish Agarwal and Union of India v. Rajeev Bansal. Assessee's contentions: The Assessee argued that the period of six years for issuing a notice under Section 148 expired on 31.03.2020. While extended by TOLA to 30.06.2021, the subsequent proceedings, including the order under Section 148A(d) and the notice under Section 148, were beyond the permissible time limits, even after accounting for exclusions mandated by the Supreme Court and the fifth and sixth provisos to Section 149(1). Revenue's contentions: The judgment does not record specific contentions from the Revenue regarding the limitation period. However, the Revenue was represented by counsel, indicating their participation in the proceedings.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 149(1)

AI-generated summary — verify with the full judgment below

$~77 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Decision : 28.05.2025 + ACCOLADE HOLDINGS PRIVATE LIMITED (FORMERLY KNOWN AS BLUE EYE ENTERTAINMENT PRIVATE LIMITED) .....Petitioner Through: Mr Ved Jain, Mr Nischay Kantoor, Ms Soniya Dodeja, and Mr Sarthak Abrol, Advocates. versus INCOME TAX OFFICER, WARD 2(1), DELHI & ORS. .....Respondent Through: Mr Sanjay Kumar, SSC, Ms Monica Benjamin and Ms Easha Kadian, JSCs for the Revenue. CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRU HON'BLE MR. JUSTICE TEJAS KARIA VIBHU BAKHRU, J. (ORAL) CM APPL. 32476/2025(early hearing)

1.

For the reasons stated in the application, the early hearing is allowed.

2.

The petition is taken up for hearing today.

3.

The hearing scheduled on 04.07.2025 is cancelled.

4.

The application stands disposed of. W.P.(C) 7170/2023 W.P.(C) 7170/2023 & CM APPL. 32477/2025

5.

The petitioner [Assessee] has filed the above-captioned petition, inter alia, impugning an order dated 31.07.2022 [impugned order] passed under Section 148A(d) of the Income Tax Act, 1961 [the Act] along with the notice dated 31.07.2022 [impugned notice] issued under Section 148 of the Act; in respect of assessment year [AY] 2013-14. 6. It is the Assessee’s case that the impugned notice has been issued beyond the prescribed period of limitation.

7.

The initial notice under Section 148 of the Act for AY 2013-14 was issued on 26.06.2021. The said notice was unsustainable as it was issued in accordance with the statutory regime regarding reassessment as in force prior to 31.03.2021. This Court in the case of Mon Mohan Kohli v. Assistant Commissioner of Income Tax & Anr.: Neutral Citation No.: 2021:DHC:4181-DB had set aside such notices that were issued after 31.03.2021 without following the procedure as prescribed under Section 148A of the Act.

8.

However, the Supreme Court in the case of Union of India & Ors. v. Ashish Agarwal: (2023) 1 SCC 617, issued directions for considering the said notices as notices issued under Section 148A(b) of the Act, and granting time to the Assessing Officer [AO] to supply the material on the basis of which such notices were premised. Therefore, in compliance with the directions issued by the Supreme Court in the case of Union of India & Ors. v. Ashish Agarwal (supra), the AO in the present case, provided information and material to the Assessee on 24.05.2022 and directed the Assessee to furnish the reply within two (2) weeks that is by 07.06.2022. The Assessee responded to the said notice dated 24.05.2022 on 07.06.2022. W.P.(C) 7170/2023 9. The AO passed an order under Section 148A(d) of the Act on 31.07.2022. According to the Assessee, the same was beyond the period as stipulated.

10.

In the present case, the period of six years from the end of the assessment year available for issuing a notice under Section 148 of the Act expired on 31.03.2020. Thus, in terms of the first proviso to Section 149(1) of the Act, a notice under Section 148 of the Act could not be issued. However, the said period was extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [TOLA]. Consequently, the time limit for issuing such a notice under Section 148 was extended to 30.06.2021. 11. The original notice under Section 148 of the Act was issued on 26.06.2021, which was four (4) days before the expiry of period of limitation.

12.

As noted above, the said notice was deemed to be a notice under Section 148A(b) of the Act by virtue of the decision of Union of India & Ors. v. Ashish Agarwal (supra). The Supreme Court also granted further time to provide the material, which was required to accompany such a notice. As explained by the Supreme Court in the case of Union of India v. Rajeev Bansal: 2024 SCC OnLine SC 2693, the period from the date of the issuance of the notice till 04.05.2022, the date on which the Supreme Court had rendered the decision in Union of India & Ors. v. Ashish Agarwal (supra) was required to be excluded in terms of the fifth proviso to Section 149(1) of the Act. Additionally, the time provided till the date of providing the material, which should have accompanied a notice under Section 148A(b) of the Act, as well as the time allowed to the assessee to respond to W.P.(C) 7170/2023 the said notice was also required to be excluded by virtue of the fifth proviso to Section 149(1) of the Act, as applicable at the material time.

13.

Since the initial notice under Section 148 of the Act – subsequently construed as a notice under Section 148A(b) of the Act – was issued four (4) days before the expiry of period of limitation; there were four (4) days available for the AO to issue notice under Section 148 of the Act after the Assessee had furnished its reply to the said notice. Since this period available to the AO to issue notice under Section 148 of the Act was less than seven (7) days, in terms of the sixth proviso to Section 149(1) of the Act, the AO had seven (7) days to issue notice under Section 148 of the Act. Therefore, the last day to issue notice was 14.06.2022, that is seven days from 07.06.2022. The impugned notice was issued on 31.07.2022, which is after the period for issuing such a notice had expired.

14.

Concededly, the said controversy is covered in favour of the Assessee by the decision of this Court in Ram Balram Buildhome Pvt. Ltd. v. Income Tax Officer and Anr.: Neutral Citation No.: 2025:DHC:547-DB.

15.

The present petition is, accordingly, allowed and all proceedings initiated pursuant thereto are set aside. The pending application is also disposed of. VIBHU BAKHRU, J TEJAS KARIA, J MAY 28, 2025 M Click here to check corrigendum, if any

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