10 year limit applies only prospectively, meaning it does not apply retroactively to assessment years where the old six-year limit has already expired: Delhi HC
In the case of Sheetal International (P.) Ltd. v. CIT [2024] 168 taxmann.com 308 (Delhi), the Court dealt with a critical issue regarding the issuance of a reassessment notice under Section 148A of the Income Tax Act.
The reassessment notice for AY 2017-18 was issued on May 1, 2024, and the assessee challenged its validity in a writ petition. The core argument centered on the contention that the notice was issued beyond the limitation period established by the first proviso to Section 149(1).
The Supreme Court’s ruling in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 was pivotal for this case. In this ruling, the Supreme Court articulated that the first proviso to Section 149(1)(b) effectively determines if the time limits under the old regime (specifically, prior to the new tax regime introduced) still apply. According to the interpretation provided by the Court, the notice under Section 148 of the new regime could not be issued if the six-year limitation period had expired as of the date of issuing the notice. The ruling clarified that the ten-year period established under the new regime applies prospectively, meaning that for assessment years for which this period may have elapsed (e.g., AY 2012-13), the issuance of notices would be constrained by limitations established under the old regime.
Key takeaways from the observations made by the Supreme Court include:
1. Limitation Period Applicability: No notice under Section 148 of the new regime can be issued after the limitation period prescribed for the old regime has lapsed for assessment years up to and including AY 2021-22.
2. Prospective Application of New Provisions: The ten-year limit applies only prospectively, meaning it does not apply retroactively to assessment years where the old six-year limit has already expired.
3. Protection for Assessees: The purpose of these limitations is to provide protection for assessees by preventing reopening of assessments beyond the specified timeframes without proper legal grounds.
Given these interpretations, the Delhi High Court concluded that the notice and the order dated May 1, 2024, pertaining to AY 2017-18 were invalid and thus set aside the reassessment proceeding. This judgment reinforces the importance of adhering to prescribed time limits in tax reassessment matters and underscores the protective intent of the legislative provisions for taxpayers.
