Reassessment Notice Issued Beyond Limitation Period is Invalid, Rules ITAT

The Income Tax Appellate Tribunal (ITAT), Hyderabad, has held that a notice under Section 148 issued after the limitation period under Section 149 cannot grant valid jurisdiction to the AO and set aside the assessment passed under Sections 147 read with 144 of the Income Tax Act, 1961.

The assessee had not filed her return of income for the assessment year 2015-16, and according to the information available on the Insight Portal regarding the sale of immovable property of around Rs 1.14 crore and interest income of Rs 21,134, the AO initiated reassessment proceedings under Section 147 and issued notice under Section 148 dated 12th April 2022. But the assessee failed to respond to the notices, so the AO completed the assessment under Sections 147 read with 144 and treated the entire sale consideration of Rs 1.14 crore as short-term capital gains. Interest income of Rs 21,134 was also added, calculating the total income at Rs 1.14 crore.

The appeal filed before the CIT(A) was delayed by 570 days and was dismissed on the grounds of limitation.

The Tribunal noted that the assessee had vacated the address used by the department in 2018 and, therefore, remained unaware of the assessment proceedings and the ex parte order. However, the Tribunal observed that remanding the matter to the CIT(A) would serve no useful purpose since the very assumption of jurisdiction by the AO was unsustainable in the eyes of law.

The Tribunal observed that under the unamended provisions of Section 149(1)(b), notice under Section 148 for the assessment year 2015-16 could have been issued only up to 31 March 2022. Since the impugned notice was issued on 12 April 2022, it was beyond the prescribed period and was hit by the first proviso to Section 149 introduced by the Finance Act, 2021.

Allowing the appeal of the assessee, the Tribunal held that a reassessment notice issued beyond the limitation period prescribed under Section 149 cannot be sustained and that all subsequent proceedings founded upon such an invalid notice are liable to be quashed. Accordingly, the notice issued under Section 148 was held to be time-barred and unsustainable. Consequently, the assessment order passed under Sections 147 and 144 dated 23 March 2024 was also quashed for want of a valid assumption of jurisdiction.