In a significant ruling, the Delhi High Court observed that the action of reassessment in relation to search undertaken on or after 1st April 2021 should meet tests under First Proviso to Section 149(1) of Income Tax Act, 1961.
The writ petition has impugned the initiation of reassessment action under Section 148 of the Income Tax Act, 19611 pertaining to Assessment Year2 2013-14. The aforesaid action was founded upon a search which was conducted in the case of M/s Proform Interiors Private Limited. The action for reassessment commenced upon the issuance of a notice dated 30 March 2023 under Section 148 of the Income Tax Act.
Appearing for the petitioner, the counsel, drew the attention of the Court to the order passed in Filatex India Ltd. vs. Deputy Commissioner of Income Tax & Anr , and where while dealing with an identical question, upon taking note of the manner in which the relevant period under Section 153C is liable to be reckoned.
The counsel appearing for the respondents, contended that even if the reassessment action were to be tested based on the First Proviso to Section 149(1) of the Income Tax Act, the petitioner would not be entitled to any relief for the following reasons. According to the counsel, since the search took place after 01 April 2021, undoubtedly it would be the provisions of Section 148 alone which would apply and the timeframe within which a notice could have been issued would consequently be governed by the First Proviso to Section 149(1).
A Division Bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav observed that “Viewed in that light, it is manifest that AY 2013-14 would fall beyond the block period of ten years. It becomes pertinent to note that the First Proviso to Section 149(1) compels us to test the validity of initiation of action for reassessment commenced pursuant to a search, based upon it being found that the proceedings would have sustained bearing in mind the timelines prescribed in Sections 149, 153A and 153C, as they existed prior to the commencement of Finance Act, 2021. This necessarily requires us to advert to the timeframes comprised in both Section 149(1)(b) as well as Section 153C as it existed on the statute book prior to 01 April 2021, which undisputedly was the date from when Finance Act, 2021 came into effect.”
“Undisputedly, and if the validity of the reassessment were to be tested on the anvil of Section 153C, the petitioner would be entitled to succeed for the following reasons. It is an undisputed fact that the proceedings under Section 148 commenced on the basis of the impugned notice dated 30 March 2023. This date would be of seminal importance since the period of six AYs’ or the “relevant assessment year” would have to be reckoned from the date when action was initiated to reopen the assessment pertaining to AY 2013-14” the Court noted.
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