Gujarat High Court Quashes Reopening Notice Beyond Ten-Year Limitation After Search

A search under Section 132 of the Income-tax Act was conducted on the Ratnamani Group on 23.11.2021. Pursuant to the search, the petitioner was issued a notice dated 29.03.2023 under Section 148 seeking to reopen the assessment for AY 2012-13, along with notices for other years.

Despite filing objections, the petitioner’s objections were summarily rejected, and an assessment order was passed on 02.06.2023, raising a demand exceeding Rs. 37 crore, without granting any personal hearing or issuing a draft assessment order.

Aggrieved, the petitioner approached the High Court, contending that the reopening notice was barred by limitation, as the outer limit of ten assessment years had already expired when computed from the date of search.

Main Issue: Whether a notice issued under Section 148 for AY 2012–13 pursuant to a search conducted in FY 2021-22 is barred by limitation when the ten years under Explanation 1 to Section 153A is computed from the end of the assessment year relevant to the year of search.

HC’s Order: The Hon’ble High Court allowed the writ petition and quashed the reopening notice. The Court held that where a search is conducted in FY 2021-22, the assessment year 2022-23 becomes the first year for computing the ten-year block under Explanation 1 to Section 153A. The ten-year period would extend only up to AY 2013-14. Since AY 2012-13 fell beyond this outer limit, the impugned notice under Section 148 was held to be barred by limitation.

The Court held that the statute clearly prescribes distinct and unambiguous modes of computation. Relying on Ojjus Medicare (P) Ltd. and A.R. Safiullah, the Court reaffirmed that taxing statutes must be strictly construed and cannot be stretched beyond their express limits. The reopening proceedings were therefore set aside in their entirety.

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