No Notice u/s 148 to be issued if Four to Six years have passed since Relevant Assessment: Delhi HC quashes Assessment Order [Read Order]

The re-opening of the assessment was unsustainable due to the limitations set by the pre-amendment version of Section 149(1) (b) of the Finance Act
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The Delhi High Court quashed assessment order, stating that no notice under Section 148 can be issued if four to six years have passed since the relevant assessment. The court addressed the assessment order issued under Section 148A (d) and the subsequent reassessment notice under Section 148. The bench held that the re-opening of the assessment was unsustainable due to the limitations set by the pre-amendment version of Section 149(1)(b) of the Finance Act, 1994.

On April 29, 2024, a notice was issued under Section 148 of the Income Tax Act, 1961, initiating reassessment proceedings for the Assessment Year 2016-17. This action marks the third attempt by the writ petitioner following the annulment of a previous reassessment, as determined in the case of Twylight Infrastructure (P) Ltd. v. CIT. The petitioners argued that the reassessment should not proceed in light of Section 149(1).

The petitioner Manju Somani filed its return of Income for the assessment year in question on October 17, 2016, which was accepted through an intimation dated May 20, 2017, as per Section 143(1)(a) of the Act. However, on June 29, 2021, the respondents issued a notice to initiate reassessment under Section 148. The writ petitioners contested this notice through W.P.(C) 4428/2022, claiming that the reassessment was being conducted under outdated procedural rules despite significant changes that came into effect after April 1, 2021.

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It is noteworthy that prior to the statutory amendments introduced by the Finance Act, 2021, the reassessment process was governed by the Supreme Court’s ruling in GKN Driveshafts (India) Ltd. v. Income Tax Officer and Others. However, following the amendment, the provisions in Section 148A, including clauses (b), (c), and (d), require that the assessee be given an opportunity to contest a proposed reassessment.

The writ petition, along with others, was ultimately upheld on March 16, 2022, as ruled in Mon Mohan Kohli v. Assistant Commissioner of Income-tax and another. The Division Bench of the court recognized that the legislative amendments effective from April 1, 2021, require compliance with the newly substituted provisions in Sections 147 to 151 of the Income-tax Act for any reassessment notices issued under Section 148 after March 31, 2021.

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The court noted that while the power of reassessment prior to March 31, 2021, remained valid until June 30, 2021, the Finance Act, 2021, altered the procedures necessary for issuing reassessment notices. Furthermore, the Relaxation Act does not grant the government authority to extend previous provisions or defer the application of newly enacted laws.

The court concluded that the Proviso to Section 149 necessitates a review of reassessments concerning periods before April 1, 2021, based on the previous timelines. This Proviso explicitly states that no notice under Section 148 shall be issued if the time limits, as they stood before the Finance Act, 2021, have elapsed.
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Specifically, Section 149(1)(b) prior to the 2021 amendments prohibited issuing reassessment notices if more than six years had passed since the end of the relevant assessment year. For AY 2016-17, this six-year period concluded on March 31, 2023, making the reassessment notice dated April 29, 2024, legally impermissible.
Importantly, the respondents did not cite any other statutory provision to justify the initiation of this action or to extend the applicable time limit. Additionally, the court found that Twylight Infrastructure did not authorize the reopening of assessments that would contravene Section 149’s provisions.
Consequently, the Division Bench, comprising Justice Yashwanth Varma and Justice Ravinder Dudeja, granted the writ petition and quashed the notice under Section 148A (d) dated April 29, 2024, along with the corresponding Section 148 notice.

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