The Bombay High Court has nullified reassessment notices directed at Godrej due to their issuance beyond the prescribed limitation period, being time-barred in result.
Justices K. R. Shriram and Neela Gokhale, on evaluating the notice’s validity, emphasized the necessity to consider the applicable law at the issuance date under Section 148 of the Income Tax Act. In this case, dated July 31, 2022, falls within the enactment of the Finance Act, 2021, and under the first proviso to Section 149, no notice for AY 2014–15 could be validly issued post April 1, 2021.
The court clarified that the fifth proviso cannot be invoked if the first proviso applies, as it restricts the issuance of notices under Section 148 of the Income Tax Act beyond the stipulated time frame. The fifth proviso is relevant only when determining if the time limits in Section 149(1) have been exceeded, i.e., three years and ten years.
Distinguishing the Ashish Agarwal case, the bench noted that it deemed the initial Section 148 notice as a show cause notice under Section 148A(b) but did not grant a stay. Consequently, the period from May 21, 2021, to the issuance of the Section 148A(b) notice on July 31, 2022, cannot be excluded under the second or first limb of the fifth proviso.
The first part of the fifth proviso excludes the time between issuing the Section 148A(b) notice and the granted duration for the assessee to respond. The second limb applies when proceedings under Section 148A are court-stayed, which did not occur until the petitioner filed a writ petition on September 16, 2022.
The petitioner argued that only the period from May 24, 2022, to June 8, 2022, should be excluded under the first limb, as this was the time given to respond to the Section 148A(b) notice. Even if the subsequent letter of June 28, 2022, and the reply on July 2, 2022, are considered, at most, the period from June 8, 2022, to July 8, 2022, could be excluded.
The bench concluded that the reassessment notice is time-barred, as per the first proviso to Section 149, rejecting the department’s attempt to exclude the period from May 21, 2021, to May 4, 2022, based on Ashish Agarwal. Consequently, the notice issued on July 31, 2022, is legally flawed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
