High Court Quashes Reassessment Notice and Section 148A(d) Order as Time-Barred

The petitioner came to the High Court questioning the legitimacy of the order issued pursuant to Section 148A(d) of the Income Tax Act, 1961, and the notice under Section 148 dated 31 August 2024 for AY 2015-16. It was argued that the entire reassessment proceeding was barred by limitation by virtue of the first proviso to Section 149 of the Act and that the AO had no jurisdiction to issue any such notice after the allowed period. Reliance was placed on the decision of the same court in Manju Somani v. Income Tax Officer, where it was held that for reassessments pertaining to assessment years prior to 1 April 2021, the time limits as they existed before the Finance Act, 2021, would continue to apply. It was further recorded in paragraph 5.3 of the assessment order that the AO had acknowledged the Manju Somani ruling but proceeded to continue the proceedings since the department was still in the process of examining whether to accept the decision or file a Special Leave Petition against it.

The respondent, Revenue, did not produce any material to show that the judgment in Manju Somani had been stayed or overruled. The Court, while referring to the record, noted that the same legal question had been conclusively settled in Manju Somani, wherein paragraphs 12 to 16 elaborated that the proviso to Section 149 constitutes a negative command prohibiting reopening of assessments for any assessment year before 1 April 2021 if the limitation prescribed under the pre-amended law had expired. The Court also noticed the ruling of the Supreme Court in Union of India & Ors. v. Rajeev Bansal, which upheld this legal interpretation. Since AY 2015-16 was earlier than AY 2016-17 and involved Manju Somani, the principle applied with greater force to the present case.

Issue Raised: Whether the reassessment proceedings initiated under Sections 148 and 148A(d) for AY 2015-16 were barred by limitation under the first proviso to Section 149 of the Income Tax Act, 1961.

HC Held: The Court observed that the AO‘s reasoning could not survive in light of the binding precedent of Manju Somani and the affirmation by the Supreme Court in Rajeev Bansal. It was categorically held that the proviso to Section 149 forbids issuance of reassessment notices for assessment years where the limitation under the pre-amendment provisions had already expired. The Bench again made it clear that the wording of the proviso reflects an unmistakable negative injunction, holding the Revenue back from reviving cases after the limitation period under the previous regime has expired. As in the present case, the concerned six-year limitation for AY 2015–16 had already passed at the time the impugned notice dated 31.08.2024 was issued; the proceedings were legally not possible.

Thus, the Court set aside both the order dated 31.08.2024 issued under Section 148A(d) and the consequent notice issued under Section 148 of the Act. It was observed that once the governing limitation had elapsed, any further proceedings would be without jurisdiction and contrary to law. Following the judicial precedents cited, the writ petition was allowed, and all pending applications were disposed of as infructuous.

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