ITO WD 11(3)(1), MUMBAI, AAYAKAR BHAVAN MUMBAI vs. VALEE DEVELOPERS PRIVATE LIMITED, PLOT NO. , PARK ESTATE,

On the other hand, ld. DR stated that as per the provision of Section 148A, 30 days period is given if assessee has filed the reply in June 2022 and ld. AO has one month from the end of the month in which reply has been filed and therefore, the time limit was up till 31/07/2022.

We have heard both the parties and also perused the relevant facts and dates for adjudicating the issue of limitation. The concept of “surviving time” to be counted from the earlier notice issued u/s.148 prior to 30/06/2021 has been discussed and elaborated by the Hon‟ble Supreme Court in the case of (A.Y. 2013-14) Valee Developers Pvt. Ltd. Rajeev Bansal, wherein their Lordships have also explained the ratio laid down in the judgment of Union of India vs. Ashish Agrawal and how to count the limitation period for issue of notice u/s 148 issued prior to 30th June 2021. The Hon‟ble Supreme Court exercising its discretionary jurisdiction under Article 142 of the Constitution of India while explaining the old law and new law u/s 148, has created a legal fiction and balancing act on the existing legal framework of procedure of re-assessment. Wherever the notice u/s.148 were issued under the old regime for which time limit was extended up to 30/06/2021, the Hon‟ble Apex Court held that it would be deemed that re-assessment notice issued under the old regime shall be treated as show- cause notice issued u/s. 148A(b) of the new regime. Further the Court directed the Revenue to provide all the relevant material / information to the assessee and thereafter, allowed the assessee to respond to the show-cause notice and raised its objection or availing any kind of defenses including available u/s.149. Thus, the Hon‟ble Supreme Court balanced the equities between the Revenue and the assessee by giving effect to the legislative scheme of re-assessment as contained under the new regime. The Court thus supplemented the existing legal framework of the procedure of re-assessment under the Income Tax Act with the principles grounded in equitable standards. For the sake of ready reference para 108 & 109 of the judgment in the case of Rajeev Bansal is reproduced hereunder:- 108. The Income-tax Act read with TOLA extended the time limit for issuing reassessment notices under section 148, which fell for (A.Y. 2013-14) Valee Developers Pvt. Ltd. completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. [Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021.

If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction.

Thus, the Hon‟ble Supreme Court had explained the concept of surviving or balance time limit which is to be calculated by computing number of days between dates of issuance of deemed notice and 30/06/2021. Thereafter, the Hon‟ble Supreme Court has elaborated the effect of the legal fiction propounded in the case of UOI vs. Ashish Agarwal which has been explained in para 110 to 112 which is reproduced hereunder:- 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.

The clock started ticking for the Revenue only after it received the response of the assessees to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a (A.Y. 2013-14) Valee Developers Pvt. Ltd. decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime.

Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on 18 August 2022.”

The sequitor of the aforesaid observation and the judgment of the Hon‟ble Supreme Court are that-  Firstly, exclusion of the period has been explained; a) the date of issuance notice u/s 148 under the old regime reckoned to be the date of issuance of the deemed notices u/s 148A(b); b) the period from the date of the issuance of the deemed notices till the supply of relevant information and material (A.Y. 2013-14) Valee Developers Pvt. Ltd. by the assessing officers to the assessees is to be excluded from the computation of the period of limitation; c) further, period of two weeks granted to the assessee to reply to the show-cause notice is also to be excluded in terms of third proviso to Section 149;  Secondly, once the response of the assessee to the show- cause notice has been received, then “the clock starts ticking for the Revenue”, that is, after the receipt of reply, ld. AO has to; (a) consider the reply of the assessee u/s.148A(c); (b) take a decision u/s.148A(d) based on the available material and the reply of the assessee; and (c) issue a notice u/s.148 if it was a fit case for re- assessment. Once it is found to be a fit case for re-assessment, the limitation clock starts ticking and it is mandatory for the ld. AO to comply with these procedures within the surviving time limit which was available to the ld. AO to issue re-assessment notice u/s.148 of the new regime; and  Lastly, the Hon‟ble Supreme Court has given an example as how to calculate the surviving time. Calculation of surviving time has been laid down from the period when the first notice u/s.148 was issued under old regime till the last date of limitation for issuance of notice u/s.148 of the old regime; (A.Y. 2013-14) Valee Developers Pvt. Ltd. and that period has been reckoned as the surviving time period left for the ld. AO while issuing notice u/s.148 under the new regime. So whatever surviving time is left the AO has to issue notice within that surviving time.

Applying the aforesaid principle from the facts of the present case, the relevant dates in the calculation of time is as under:-  Original Notice u/s. 148 issued on 3-6-2021.  Surviving Period- 27 Days- i.e. 30-6-2021 (-) 3-6-2021.  Material Provided to the assessee Fresh 148A (b)-Dt. 30-5-2022.  Assessee filed reply on 4-6-2022.  The clock starts ticking from 4-6-2022 - The AO could have issued 148 Notice within surviving period from 4-6- 2022 i.e. 27 Days 1 July 2022.  Notice u/s. 148 issued on 30-7-2022-Beyond Surviving Period.

Thus, here in this case, the surviving time was 27 days because original notice u/s.148 was issued on 03/06/2021 under the old regime and the last date of which notice could have been issued under the old regime was up till 30/06/2021 and therefore, the surviving time left was only 27 days. For issuance of notice under the new regime after completion of the procedure laid down u/s. 148A (a) to 148A (d), the principle has been summarized in para 114 (g) & (h) of the Judgment which for the sake of ready reference is reproduced hereunder:-

Ergo, ld. AO was required to issue notice u/s.148 under the new regime within the time surviving under the Income Tax Act read with TOLA and any notices issued beyond the surviving period was declared to be time barred by the Hon‟ble Supreme Court.

Thus, time limit for AO for surviving time had expired on 01/07/2022 i.e. 27 days after the reply filed by the assessee on 04/06/0222, accordingly, we hold that impugned notice (A.Y. 2013-14) Valee Developers Pvt. Ltd. u/s.148A dated 30/07/2022 does not fit in the „surviving time limit‟ as laid down by the Hon‟ble Supreme Court in the case of Rajeev Bansal and accordingly, the same is barred by limitation. Consequently, the notice as well as the entire re-assessment proceeding and the re-assessment order u/s.147 are void ab initio. Thus, notice u/s.148 and re-assessment order is quashed. Thus, grounds raised