ARYA BUILDWELL PRIVATE LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-28, NEW DELHI

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W.P.(C)/7144/2024HC DelhiDLHC01029153202423 August 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE RAVINDER DUDEJA5 pages
AI SummaryAllowed

What did the High Court hold?

The Delhi High Court allowed the writ petitions and quashed the impugned notices. The Court relied on its previous decision in Manju Somani vs. Income-tax Officer and Ors. [2024 SCC OnLine Del 5292]. The Court reiterated that the First Proviso to Section 149(1) mandates an examination of whether a proposed reassessment for a period prior to April 1, 2021, would be sustainable based on the time frames existing before the Finance Act, 2021. The proviso contains a negative command preventing the issuance of a Section 148 notice if the time limit under the pre-amendment provisions had expired. The Court noted that Section 149(1)(b), prior to the Finance Act, 2021, prescribed a maximum period of six years from the end of the relevant assessment year for issuing a notice. Since the period of six years had elapsed for the assessment years in question before the notices were issued, the reassessment action could not be sustained. The Court found no other statutory provision that could extend the time limit, nor did it find the decision in Twylight Infrastructure Pvt. Ltd. v. ITO to empower reopening assessments contrary to the negative covenant in Section 149.

What were the facts?

The petitioners, Kayem Food Industries Private Limited and Arya Buildwell Private Limited, filed writ petitions challenging notices issued under Section 148 of the Income Tax Act, 1961. The challenge was based on the ground that these notices were barred by limitation. The assessment years involved were AY 2016-17, AY 2015-16, and AY 2014-15. The notices under Section 148A(b) were issued on January 27, 2024, and January 25, 2024, respectively. The petitioners argued that based on the erstwhile provisions of Section 149(1)(b) of the Act, the reassessment actions were time-barred by the time the notices were issued.

What were the issues?

1. Whether the notices issued under Section 148 of the Income Tax Act, 1961, for the assessment years AY 2016-17, AY 2015-16, and AY 2014-15 are barred by limitation, considering the provisions of Section 149(1)(b) as they stood prior to the Finance Act, 2021? Assessee's Contentions: The learned senior counsel for the petitioners argued that the impugned notices were issued after the expiry of the time limits prescribed by the erstwhile Section 149(1)(b) of the Act. The chart provided indicated that the limitation as per the erstwhile provisions had already elapsed before the notices were issued. Revenue's Contentions: The judgment does not record any specific contentions made by the revenue's counsel to counter the limitation argument. The revenue was represented by learned senior standing counsel.

Which sections of the Income-tax Act were involved?

Section 148,Section 149(1),Section 149(1)(b)

AI-generated summary — verify with the full judgment below

Heard together (3 matters)

W.P.(C) 6255/2024
W.P.(C) 6257/2024
W.P.(C) 6259/2024

Read from the judgment's own cause title. This page is filed under one of them.

$~46 to 50 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 6255/2024 & CM APPL. 26073/2024 (stay) KAYEM FOOD INDUSTRIES PRIVATE LIMITED .....Petitioner Through: Mr. Ajay Vohra, Sr. Adv. with Mr. Gaurav Jain and Mr. Shubham Gupta, Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX, .....Respondent Through: Mr. Siddhartha Sinha, Sr. Standing Counsel with Ms. Dacchita Shahi and Ms. Anuja Pethia, Advocates. 47. + W.P.(C) 6257/2024 & CM APPL. 26076/2024 (stay) KAYEM FOOD INDUSTRIES PRIVATE LIMITED .....Petitioner Through: Mr. Ajay Vohra, Sr. Adv. with Mr. Gaurav Jain and Mr. Shubham Gupta, Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX, .....Respondent Through: Mr. Siddhartha Sinha, Sr. Standing Counsel with Ms. Dacchita Shahi and Ms. Anuja Pethia, Advocates. 48. + W.P.(C) 6259/2024 & CM APPL. 26078/2024 (stay) KAYEM FOOD INDUSTRIES PRIVATE LIMITED .....Petitioner Through: Mr. Ajay Vohra, Sr. Adv. with Mr. Gaurav Jain and Mr. Shubham Gupta, Advocates. This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/09/2024 at 12:46:56

versus ASSISTANT COMMISSIONER OF INCOME TAXCENTRA CIRCLE 28 .....Respondent Through: Mr. Siddhartha Sinha, Sr. Standing Counsel with Ms. Dacchita Shahi and Ms. Anuja Pethia, Advocates. 49. + W.P.(C) 7144/2024 & CM APPL. 29766/2024 (stay) ARYA BUILDWELL PRIVATE LIMITED .....Petitioner Through: Mr. Ajay Vohra, Sr. Adv. with Mr. Gaurav Jain and Mr. Shubham Gupta, Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-28, NEW DELHI .....Respondent Through: Mr. Siddhartha Sinha, Sr. Standing Counsel with Ms. Dacchita Shahi and Ms. Anuja Pethia, Advocates. 50. + W.P.(C) 7145/2024 & CM APPL. 29768/2024 (stay) ARYA BUILDWELL PRIVATE LIMITED .....Petitioner Through: Mr. Ajay Vohra, Sr. Adv. with Mr. Gaurav Jain and Mr. Shubham Gupta, Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX, CENTRA CIRCLE-28, NEW DELHI .....Respondent Through: Mr. Siddhartha Sinha, Sr. Standing Counsel with Ms. Dacchita Shahi and Ms. Anuja Pethia, Advocates. CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE RAVINDER DUDEJA This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/09/2024 at 12:46:56

O R D E R %

23.08.2024 1. The present writ petitions assail the notices passed under Section 148 of the Income Tax Act,1961 [“Act”] on the ground of the same being barred by limitation. Mr. Vohra, learned senior counsel, has placed for our consideration the following chart encapsulating the relevant Assessment Years [“AYs”] in challenge:- Kayem Industries Private Limited Item No Writ Petition No. Assessment Year Date of issue of Notice u/s 148A(b) Limitation as per erstwhile provisions 46 6255/2024 AY 2016-17 27.01.2024 31.03.2023 47 6257/2024 AY 2015-16 27.01.2024 31.03.2022 48 6259/2024 AY 2014-15 27.01.2024 31.03.2021 Arya Buildwell Pvt. Ltd. Item No Writ Petition No. Assessment Year Date of issue of Notice u/s 148A(b) Limitatio n as per erstwhile provisions 49 7144/2024 AY 2015-16 25.01.2024 31.03.2022 50 7145/2024 AY 2016-17 25.01.2024 31.03.2023 2. Mr. Vohra draws our attention to First Proviso of Section 149(1) of the Act to contend that on the date when the impugned notices were issued, the reassessment action in respect of the aforementioned AYs would be barred by limitation by virtue of the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/09/2024 at 12:46:56

timeframes applying in terms of Section 149(1)(b) of the Act, as it stood at the relevant time. 3. The ambit of the First Proviso to Section 149(1) was an aspect which had arisen for our consideration in Manju Somani vs. Income- tax Officer and Ors. [2024 SCC OnLine Del 5292]. Dealing with a similar challenge based on the prescription of limitation we had in Manju Somani held as under:- “12. As is manifest from the above, the proviso to section 149 clearly bids us to go back in point of time and examine whether a proposed reassessment pertaining to a period prior to April 1, 2021 would sustain based on the time frames as they existed prior to the promulgation of the Finance Act, 2021. The proviso embodies a negative command restraining the respondents from issuing a notice under section 148 in respect of an assessment year prior to April 1, 2021, if the period within which such a notice could have been issued in accordance with the provisions as they existed prior thereto had elapsed. This is manifest from the provision using the expression “no notice under section 148 shall be issued” if the time limit specified in the relevant provisions “… as they stood immediately prior to the commencement of the Finance Act, 2021” had expired. A reassessment which is sought to be commenced post April 1, 2021 would thus have to abide by the time limits prescribed by section 149(1)(b), 153A or 153B as may be applicable. 13. Undisputedly, section 149(1)(b) as it stood prior to the introduction of the amendments by way of the Finance Act, 2021 ([2021] 432 ITR (St.) 52 ) prescribed that no notice under section 148 shall be issued if four years “but not more than six years” have elapsed from the end of the relevant assessment year. Thus the period of six years stood erected as the terminal point which when crossed would have rendered the initiation of reassessment impermissible in law. 14. Viewed in the light of the above, the impugned notice when tested on the anvil of the pre-amendment section 149(1)(b) in order to be sustained would have to meet the prescription of six years. Undisputedly that period in respect of the assessment year 2016- 2017 came to an end on March 31, 2023. We thus find ourselves unable to sustain the impugned action of reassessment and which was commenced pursuant to the notice dated April 29, 2024. This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/09/2024 at 12:46:56

15.

It would be important to note that the respondents also do not attempt to sustain the initiation of action on any other statutory provision and which could be read as extending the time limit that applied. We also find ourselves unable to read Twylight Infrastructure [Twylight Infrastructure Pvt. Ltd. v. ITO, (2024) 463 ITR 702 (Delhi); 2024 SCC OnLine Del 330.] as empowering them to reopen assessments contrary to the negative covenant which forms part of section 149 of the Act.” 4. When tested on the aforesaid principles, it becomes apparent that the impugned action of reassessment cannot be sustained. 5. In view of the aforesaid, we allow the present petitions and quash the impugned notices dated 31 March 2024 referable to Section 148 of the Act. YASHWANT VARMA, J RAVINDER DUDEJA, J AUGUST 23, 2024/sk This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 11/09/2024 at 12:46:56

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