A Division bench of the Bombay High Court has held that reopening of Income Tax assessment on the sole basis of change of opinion is invalid when the same is barred by limitation.
The petitioner is engaged in information technology consulting, software development and business process services. Respondent no.1 is the Assistant Commissioner of Income Tax and Jurisdictional Assessing Officer (JAO), who issued the impugned notice of reassessment to the petitioner.
The Bench of Justices Dr Neela Gokhale and Justice K R Shriram reckoned the issue “Whether the notice dated 27th August 2022 issued under Section 148 of the Act is barred by limitation as per the first proviso to Section 149 of the Act” and held that the same was barred by limitation.
The first proviso to Section 149 of the Act provides that no notice under Section 148 shall be issued at any point of time in a case for a relevant assessment year beginning on or before the 1st day of April 2021, if a notice under Section 148 could not have been issued at that time on account of being beyond the time limit specified under the provision of clause (b) of sub-section (1) of this Section, as it stood immediately before the commencement of the Finance Act, 2021.
The term ‘at that time’ has to refer to the term ‘at any time’ used earlier in the said proviso. The reference to ‘at any time’ is to the date of the notice to be issued by the Assessing Officer and, therefore, the term ‘at that time’ would also refer to the said date.
On the said date, if a notice could not have been issued under the erstwhile provision of Section 149(1)(b) of the Act, for any assessment year beginning on or before the 1st day of April 2021, the notice cannot be issued even under the new provisions.
It was further noted that, “When the language in the statute is clear, it has to be so interpreted and there is no scope for interpreting the provision on any other basis. The taxing statute should be strictly construed.”
It was submitted on behalf of Revenue that the period of limitation for the purposes of Section 149 of the Act has to be seen with respect to the original notice under Section 148 of the Act, which was issued to petitioner on 8th April 2021 and as the said notice was issued within the period of six years from the end of the relevant assessment year, which was expiring on 31st March 2022, the reassessment proceedings are within the period of limitation prescribed in Section 149 of the Act.
The bench remarked that it was not acceptable.
The Division Bench of the Bombay High Court thus noted that, “Once the notice dated 8th April 2021 has been treated as having been issued under Section 148A(b) of the Act, the said notice is no longer relevant for the purpose of determining the period of limitation prescribed under Section 149 or the restriction as per the first proviso below Section 149 of the Act.”
Therefore, for considering the restriction on issue of a notice under section 148 of the Act prescribed in the first proviso to Section 149 of the Act, the fresh/presently impugned notice dated 27th August 2022 issued under Section 148 of the Act is required to be considered, the bench observed.
The Bombay High Court also noted that, “The original stay granted by this Court was not with respect to the proceeding under Section 148A of the Act, but with respect to the proceeding initiated as per the erstwhile provision of Section 148 of the Act and, hence, such stay would not extend the period of limitation as per the fifth proviso to Section 149 of the Act.”
Thus, it was held that, “The question of applicability of the sixth proviso does not arise on the facts of the present case. We find support for this in Godrej Industries Ltd.
In result, it was concluded that, the impugned notice dated 27th August 2022 is clearly barred by the law of limitation.
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