ITAT Delhi Quashes Reassessment as Section 148 Notice Issued Beyond Limitation Period

The Income Tax Appellate Tribunal (ITAT) Delhi held that once the jurisdictional notice itself is invalid, the reassessment proceedings become void and are liable to be quashed.

The assessee challenged the order passed by the CIT(A) / National Faceless Appeal Centre (NFAC) which arose out of reassessment proceedings initiated under Sections 147, 144 and 144B of the Income Tax Act, 1961 for assessment year 2015-16. The AO concluded the reassessment proceedings on 26 May 2023 and calculated the total income at Rs. 2.30 crore. The reassessment was based on a notice issued under Section 148.

The assessee contended that the notice was issued beyond the prescribed period under the amended provisions of Section 149(1) and was therefore void in law. Although the CIT(A) accepted that the assumption of jurisdiction was defective, it granted liberty to the AO to proceed afresh instead of invalidating the proceedings. Aggrieved by which, the assessee approached the Tribunal and contended that the original notice issued on 30 June 2021 stands converted into a show-cause notice under Section 148A(b) in accordance with the decision of the Supreme Court in Union of India v. Ashish Agarwal. It was further argued that the subsequent notice issued under Section 148 in July 2022 was time-barred in view of the Supreme Court’s judgement in Union of India v. Rajeev Bansal, and therefore the entire reassessment proceedings should be held as void ab initio.

The Revenue based the argument in accordance with the orders passed by the AO and the CIT(A)/NFAC supporting the action taken in the reassessment proceedings.

The Tribunal noted that the assessment year involved was 2015-16 and that the impugned notice under Section 148 had been issued on 27 July 2022. The Tribunal relied on the Supreme Court judgement in Union of India v. Rajeev Bansal and observed that the Revenue had expressly acknowledged before the Supreme Court that all notices issued on or after 1 April 2021 for assessment year 2015-16 would have to be dropped, as they were beyond the permissible limitation period.

The Tribunal held that in view of the Revenue’s own acknowledgement and the legal position as settled by the Supreme Court in its decision, the notice dated 27 July 2022 is clearly barred by limitation under Section 149(1) of the Act. Accordingly, the Tribunal quashed the notice issued under Section 148 and held that the reassessment proceedings could not be sustained in law.