HC Strikes Down Section 148 Notice Issued Beyond Statutory Deadline

The Delhi High Court held that a reassessment notice issued under Section 148 of the Income Tax Act, 1961 beyond the limitation period prescribed under Section 149 is invalid and liable to be quashed. A Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar set aside the order passed under Section 148A(d) and the consequential notice issued under Section 148 against Shailendra Nath Rai for AY 2017-18.

The dispute arose after the Assessing Officer issued a notice under Section 148A(b) on 29 March 2024, calling upon the assessee to furnish a reply by 8 April 2024. The assessee sought adjournments and eventually filed a reply on 21 April 2024, contending that the reassessment proceedings had become time-barred under the first proviso to Section 149. Thereafter, the Assessing Officer passed an order under Section 148A(d) and issued a notice under Section 148 on 30 April 2024.

Before the High Court, the petitioner argued that the outer limitation for issuance of a notice under Section 148 for AY 2017-18 expired on 31 March 2024. It was contended that since the initial notice under Section 148A(b) was issued only on 29 March 2024, when less than seven days remained before the limitation period expired, the reassessment proceedings were without jurisdiction and barred by limitation.

The Revenue, on the other hand, relied upon the fifth and sixth provisos to Section 149 and argued that the period allowed to the assessee for filing a reply, including any extended time, was required to be excluded while computing limitation.

“For the purpose of computing the period of limitation, the time or extended time allowed to the assessee as per show cause notice issued under clause (b) of Section 148A is required to be excluded.”

The High Court observed that the period between 29 March 2024, when the notice under Section 148A(b) was issued, and 21 April 2024, when the assessee filed his reply, had to be excluded while calculating limitation. The Court rejected the assessee’s contention that proceedings automatically become invalid merely because seven clear days were not available when the notice under Section 148A(b) was issued.

However, the Court noted that after excluding the period taken for filing the reply, the Assessing Officer had only seven days available under the sixth proviso to Section 149 for passing an order under Section 148A(d) and issuing a notice under Section 148. Since the reply was filed on 21 April 2024, the reassessment notice ought to have been issued by 28 April 2024.

“The notice under Section 148 was required to be issued within maximum of 7 days from the date when reply was filed i.e. 21.04.2024.”

The Bench found that the Assessing Officer issued the notice only on 30 April 2024, beyond the permissible period. Holding that the reassessment proceedings were initiated after expiry of limitation, the Court quashed both the order passed under Section 148A(d) and the notice issued under Section 148.

Thus, the writ petition filed by the assessee was allowed.

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