Reassessment proceedings for the AY 2013-14 is not time-barred – Delhi High Court

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Reassessment proceedings for the AY 2013-14 is not time-barred – Delhi High Court

 

Delhi High Court in the case of Touchstone Holdings Pvt. Ltd vs. ITO has held that the Reassessment proceedings for the AY 2013-14 are not time-barred.

Petitioner submitted that as per the first proviso to Section 149 of the Act (as amended by Finance Act, 2021), no notice for re-assessment can be issued for assessment year 2013-14, as the time limit for initiating the proceedings expired on 30th March, 2020, as per the provisions of Section 149 (as it stood prior to its amendment by Finance Act, 2021). He, therefore, contends that the present proceedings initiated by the respondent in pursuance of the initial notice dated 29th June, 2021, and judgment of the Supreme Court in Union of India Vs. Ashish Agarwal reported in 2022 SCC OnLine SC 543 are time barred.

It may be noted that section 149 provides for the time limit for issue of the proceeding U/s 148 as under:

“Time Limit for notice – Section 149.

 (1) No notice under section 148 shall be issued for the relevant assessment year,-

(a)if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b)if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:

The High Court noted as under:

With respect to the petitioner’s challenge to the initiation of the reassessment proceedings on the merits of the allegation, it would be relevant to refer to the judgment in the case of Raymond Woollen Mills Ltd. vs. ITO And Ors., [1999 236 ITR 34 SC] wherein the Supreme Court had held as under:-

“3. In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs.”

The court further observed as under:

“The initial notice in the present proceedings was issued on 29th June, 2021 i.e. extended time limit. The said notice was quashed by this Court following its judgment in Mon Mohan Kohli Vs. Assistant Commissioner of Income Tax and Another, reported in 2021 SCC OnLine Del 5250 as the mandatory procedure of Section 148A of the Act was not followed before issuing the said notice. In the said judgment, this Court struck down the Explanations A(a)(ii) and A(b) to the said notifications. However, the relevant portion of the notification which extended the time limit for issuance of time barring reassessment notices until 30th June, 2021 was not struck down by this Court and in fact, this Court categorically held at paragraph 98 that power of re-assessment that existed prior to 31st March 2021 stood extended till 30th June 2021.

The said paragraph reads as under:-

“98. It is clarified that the power of reassessment that existed prior to 31st March, 2021 continued to exist till the extended period i.e. till 30th June, 2021; however, the Finance Act, 2021 has merely changed the procedure to be followed prior to issuance of notice with effect from 1st April, 2021.” Subsequently, Supreme Court in Ashish Agarwal (supra) held that the Section 148 notices issued between 1st April 2021 to 30th June, 2021, will be deemed to have been issued under Section 148A of the Act and therefore the notice dated 29th June, 2021, issued to the petitioner stood revived.”

In the concluding part, the court observed that the contention of the petitioner that the assessment for AY 2013-14 became time barred on 31st March, 2020 is incorrect. The time period for assessment stood extended till 30th June, 2021. The initial reassessment notice for AY 2013-14 has been issued to the petitioner within the said extended period of limitation. The Supreme Court has declared that the said reassessment notice be deemed as a notice issued under Section 148A of the Act and permitted Revenue to complete the said proceedings.

In this case, the income alleged to have escaped assessment is more than 50 lakhs and therefore, the rigour of Section 149(1)(b) of the Act (as amended by the Finance Act, 2021) has been satisfied.

The court concluded with following observation in Para 16 & 17 as under:

  1. The petitioner’s challenge to the paragraph 6.2. (i) of the CBDT Instruction No. 1/2022 dated 11th May, 2022 is not maintainable. The contention of the petitioner that assessment for AY 2013-14 became time barred on 31st March, 2020 is incorrect. The time period for assessment stood extended till 30th June, 2021. The initial reassessment notice for AY 2013-14 has been issued to the petitioner within the said extended period of limitation. The Supreme Court has declared that the said reassessment notice be deemed as a notice issued under Section 148A of the Act and permitted Revenue to complete the said proceedings. In this case, the income alleged to have escaped assessment is more than 50 lakhs and therefore, the rigour of Section 149(1)(b) of the Act (as amended by the Finance Act, 2021) has been satisfied.
  2. Accordingly, the present writ petition along with the pending application is dismissed. However, this Court clarifies that the Assessing Officer shall decide the matter on its own merits without being influenced by any observation made in the present order except the issue of limitation.

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