In a notable judgment, the Bombay High Court held that the extended period for reopening of Income Tax Assessment cannot be done following a period of 10 months from the expiry of the statutory period of limitation for the reopening.
The Decision was rendered by the Bombay High Court in a Writ Petition filed by Wavy Construction LLP challenging an order dated 14 October 2021 passed by the Assessing Officer ( AO ), rejecting the petitioner’s objections against the reopening of assessment under Section 147 of the Income Tax Act, 1961 and consequent assessment order dated 30 September 2022 relevant to the Assessment Year (A.Y.) 2012-13.
Wavy Construction LLP had filed their returns of income of A.Y. 2012-13 on 29 September, 2012 but was served with an intimation under Section 143 ( 1 ) of the Income Tax Act, 1961. Following a period of almost 4 years, the Petitioner was issued a Notice under Section 133(6) on 12 November, 2018 by the DDIT (I & CI), Unit-2(2) calling for details such as share of the petitioner in sale proceeds from the sale of land and computation of capital gains, all of which were duly provided by the Petitioner.
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Following numerous affiliated notices, the Petitioner was served a notice under Section 148 of the Income Tax Act, 1961 alleging that an income of Rs. 4,13,05,930/- from the sale of land, and chargeable to tax for A.Y. 2012-13 had escaped assessment within the meaning of Section 147 of the Act and that such income was required to be re-assessed.
Petitioner’s objections towards the same were summarily rejected by the Assessing Officer against which the present Petition was preferred.
J. D. Mistri, B. V. Jhaveri and Bhargavi Raval appearing for the Petitioner submitted that the Assessment Order passed is bad in law and without jurisdiction, further contending that any such order may have been passed within nine months from the end of the financial year in which the Section 148 Notice was served as per Section 153(2) of the Income Tax Act, 1961.
Opposing Counsel, Akhileshwar Sharma for the Revenue appealed in terms of the extended period of limitation as per Section 153(6) of the Act, paving grounds for a fresh order to be passed.
The Division Bench of Justice G. S. Kulkarni and Justice Advait M. Sethna referred to the Supreme Court Decision in Income-tax Officer vs. Murlidhar Bhagwan Das (1964) held that the Revenue cannot subvert the provisions of Section 153(6)(i) of the Act.
The notice for reassessment under Section 148 was issued on March 29, 2019. Under Section 153(2) of the IT Act, the Assessing Officer was required to complete the reassessment within nine months from the end of the financial year in which the notice was served. Even after accounting for the exclusion of the period during which proceedings were stayed by the court between December 13, 2019 and September 21, 2021, the reassessment order dated September 30, 2022, was issued nearly 10 months beyond the extended deadline.
In light of such observations, the Bombay High Court allowed the Petition granting relief to Wavy Construction LLP.
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