The Delhi High Court has ruled that the Income Tax Department cannot issue a fresh reassessment notice beyond the prescribed limitation period if the initial notice under Section 148 of the Income Tax Act, 1961, was issued without following due procedure.
The court noted that the time spent on earlier litigation cannot be excluded for computing the limitation period.
The Division Bench comprising Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela stated, “The fact that the Revenue had not taken the steps in accordance with law cannot possibly be construed as a factor in favor of the Revenue for extending the limitation.” The bench was addressing a petition challenging a reassessment notice as time-barred.
Under Section 149 of the Income Tax Act, a reassessment notice under Section 148 must be issued within six years from the end of the relevant assessment year. In this case, the Revenue argued that the notice should be considered timely because the court had stayed proceedings in an earlier round of litigation. They cited the *Abhinav Jindal v. Assistant Commissioner of Income Tax* case, claiming that the stay should benefit the Revenue.
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However, the High Court rejected this argument, noting that the Assessing Officer had initially issued a notice under Section 148 within the limitation period, but it was invalidated as it followed the pre-April 2021 statutory regime. The court clarified that the petitioner’s successful challenge to the earlier notice could not justify excluding the litigation period from the limitation calculation.
The court emphasized that the Revenue must adhere to legal procedures and initiate reassessment proceedings within the prescribed time frame. It also noted that no stay order prevented the Revenue from issuing a fresh notice within the limitation period.
The petition was thus allowed, with the court ruling in favor of the assessee.
Advocates Dr. Kapil Goel and Mr. Sandeep Goel represented the petitioner, while the Revenue was represented by Mr. Sanjay Kumar, Senior Standing Counsel, along with Ms. Monica Benjamin and Ms. Easha Kadian, Junior Standing Counsels.
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