Notice u/s 148 cannot be issued for AY 2014-15 as per old 148 provision after 01.04.2021 – Hon’ble Bombay High Court
The above judgement has been passed in the case of Godrej Industries Ltd. V. The Assistant Commissioner of Income Tax, Circle 14(1)(2), Mumbai and Other, WRIT PETITION NO.450 OF 2023 Dt. 28.02.2024
This petition challenges show cause notice dated 24th May 2022 issued under Section 148A(b) of the Income Tax Act, 1961 (the Act), order dated 31st July 2022 passed under Section 148A(d) of the Act (the impugned order) and notice dated 31st July 2022 issued under Section 148 of the Act (the impugned notice). According to petitioner the same are without jurisdiction inasmuch as they have been issued without complying with the jurisdictional pre-conditions referred to in Sections 147, 148, 148A, 149 and 151 of the Act.
Petitioner had raised two major issues:
The impugned notice is issued beyond the period of limitation provided for in Section 149 of the Act and hence, the impugned notice is bad in law.
As no Writ Petition was filed by petition, judgement of Hon’ble Supreme Court in its judgment in Union of India V/s. Ashish Agarwal is not applicable in case of assessee and accordingly notice under Section 148 of the Act cannot be deemed to be a notice issued under Section 148A(b) of the Act.
Contention/ Argument of Assessee:
As per the unamended Section 149(1)(b) of the Act, the outer time limit to issue a notice under Section 148 of the Act was 6 years from the end of the relevant assessment year. Thus, for AY 2014-15, the time limit to issue a notice under Section 148 of the Act expired on 31st March 2021.
Under the amended provisions, notice under Section 148 of the Act can be issued within a period of 3 years or 10 years, the latter available only after fulfilling certain stipulated conditions.
The first proviso to Section 149(1) of the Act restricts the applicability of the aforesaid period of 10 years by providing that no notice under Section 148 can be issued at any time in a case for any assessment year, if a notice under Section 148 of the Act could not have been issued at that time on account of being beyond the time limit specified under the unamended Section 149(1)(b) of the Act, i.e., as it stood prior to the Finance Act, 2021.
Therefore, even under the amended provisions the time limit to issue a notice under Section 148 of the Act for AY 2014-15 expired on 31st March 2021 based on the first proviso to Section 149(1) of the Act and the impugned notice issued on 31st July 2022 is barred by limitation.
The Hon’ble Calcutta High Court in Ved Prakash Mittal V/s. Union of India & Ors. [Writ Petition No.2450 of 2022 dated 26th August 2022] applied the first proviso to Section 149(1) of the Act and held that the notice issued under Section 148 of the Act for AY 2014-15 in July 2022 was barred by limitation. The Hon’ble Rajasthan High Court in Sudesh Taneja V/s. Income Tax Officer, Ward 1(3), Jaipur4 held that no notice under Section 148 of the Act would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149 of the Act and the notice issued after 1st April 2021 would be in terms of the substituted Section 149(1) of the Act without breaching the upper time limit provided in the original Section 149(1) of the Act which stood substituted.
Sections 147 to 151 of the Act are procedural laws and the provisions as existing on the date when such notices are issued are to be considered. It is a settled position that the validity of a notice issued under Section 148 of the Act must be seen on the basis of the law existing on the date on which the notice is issued. Therefore, the validity of the impugned notice must be tested on the basis of the law which exists at the time when the notice was issued i.e. 31st July 2022.
Issuance of a notice under Section 148 of the Act after 1st April 2021 is permissible only after complying with the newly introduced provisions under Finance Act, 2021. If an assessee had a vested right in him that no proceedings could be initiated after 31st March 2021 for the AY 2014-15 in terms of the unamended provisions, the same notices which became time barred could not be revived by virtue of the application of the extended period provided for in Section 149(1)(b) of the Act from 1st April 2021.
This Court in The New India Assurance Company Limited [2024 SCC Online Bom 146] at paragraphs 23 and 36 has agreed with this view.
The purpose of Section 3(1) of TOLA was to enable the Central Government to issue notification for extending limitation periods as provided in the specified Act but not to postpone applicability of the amended provisions. The provisions of TOLA and the subsequent notifications issued thereunder cannot apply post 1st April 2021 when the new reassessment provisions were introduced by Finance Act, 2021.
Further, the Revenue cannot seek to take shelter of TOLA as a subordinate legislation cannot override any statute enacted by the Parliament.
Revenue contended as under:
The AY is 2014-15. The time to issue notice was extended under TOLA by Notification No.20 of 2021 dated 31st March 2021 and further by Notification No.38 of 2021 dated 27th April 2021 upto 30th June 2021. (Mr. Pardiwalla did not dispute this).
notice issued under Section 148 of the Act in this case was issued on 21st May 2021, thus the same was within time as per Section 148 of the Act read with Notification Nos.20 and 38 of 2021.
The Hon’ble Supreme Court in case of Ashish Agarwal [(2022) 444 ITR 1 (SC)] vide order dated 4th May 2022 issued direction and the same was complied with and final notice under Section 148 of the Act was issued on 31st July 2022. The sanction was granted by authority under Section 151(ii) of the Act being notice issued beyond 3 years.
Since the issuance of notice under Section 148 of the Act was within the time limit provided in Notification referred above and as per direction of Hon’ble Supreme Court the notice issued under Section 148 and 148A(d) of the Act was deemed to be issued within the time granted by Hon’ble Supreme Court. The proviso (5) to Section 149 do provide for exclusion of certain periods. Thus period from 21st May 2021 read with Hon’ble Supreme Court’s judgment required to be considered. Thus the notice is in time and not barred by limitation.
The first proviso to section 149 speaks about issuing of notice, if issuing of notice is time barred as on 1st April 2021 then notice can not be issued for relevant assessment year. For AY 2014-15, the time to issue notice was extended upto 30th June 2021. Thus the proviso is not applicable in this case of assessment year where time to issue notice under Section 148 of the Act is available beyond 1st April 2021, i.e., upto 30th June 2021.
Judgement of Hon’ble Bombay High Court:
In view of our findings in The New India Assurance Company Limited (Supra) for AY 2013-14 where we have held that the notice issued under Section 148 of the Act was barred by limitation and all the submissions other than the two submissions noted above of Mr. Suresh Kumar have been dealt with, we see no reason to deal with those submissions again. We have to now only consider whether the submissions made by Mr. Suresh Kumar, as noted above, make any difference. In our view, it does not, and the notice issued for AY 2014-15 is barred by limitation.
The fifth proviso enacts that for computing the period of limitation under Section 149 of the Act, the following should be excluded:
(i) the time or extended time allowed to an assessee as per the show cause notice issued under Section 148A(b) of the Act; or
(ii) the period during which the proceedings under Section 148A of the Act is stayed by an order or injunction of any Court.
The second limb of the fifth proviso to Section 149 of the Act will apply when the proceedings under Section 148A of the Act is stayed by an order or injunction of any Court. Since, petitioner has not filed a writ petition it has not received any stay or injunction from any Court till the date of the impugned notice, i.e., 31st July 2022, and hence, there can be no period which can be excluded as per the second limb of the proviso.
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.
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 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.
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