Delhi HC Sets Aside Notice u/s 149(1)(a) of Income Tax Act Issued Beyond Period of Limitation [Read Order]

Baba Global Ltd,petitioner-assessee,filed its return of income for AY 2019-20 on 08.11.2019, and later revised it on 10.06.2020, declaring a total income of ₹1,63,07,320/-. On 31.03.2023, a show cause notice under Section 148A(b) of the Act was issued, alleging that the petitioner had made remittances through its savings accounts not commensurate with the income declared.

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In response, the petitioner explained on 12.04.2023 that the transactions were business-related and properly accounted for in its books. It also clarified that some of the remittances did not pertain to the relevant previous year.

Based on this, the Assessing Officer ( AO ) passed an order dated 27.04.2023 under Section 148A(d), accepting the explanation and concluding that proceedings under Section 147 were not warranted. This order was approved by the Principal Commissioner of Income Tax (PCIT).

However, just past midnight on 28.04.2023, the petitioner received a manually signed notice under Section 148 without a DIN or notice number. Shortly after, at 12:22 AM, a corrigendum was issued, declaring the earlier letter null and void. Subsequently, at 12:31 AM, a new order under Section 148A(d) was issued, taking a contrary stance.

This impugned order rejected the earlier reasoning and concluded that income of ₹20,55,995/- on account of currency fluctuation had escaped assessment, thereby warranting proceedings under Section 147.

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The High Court observed that the AO had reviewed and reversed its earlier reasoned order through the impugned order, which could not be treated as a mere correction. It held that this was not a case of typographical or clerical error but a substantive review, rendering the impugned order untenable.

The Revenue explained that the AO had initially passed an order dropping the reassessment proceedings under Section 148A(d) after considering the petitioner’s reply. However, the AO later realised that this order was contrary to the PCIT’s approval for reopening the assessment.

To correct this, the AO issued a fresh order on the same date, treating it as a fit case for reassessment and issued notice under Section 148. A corrigendum was also issued the next day, declaring the earlier order as null and void.

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Justice Vibhu Bakhru and Justice Tejas Karia observed that the AO had already formed an opinion that reassessment was not required, and then changed it only to align with the PCIT’s approval. As per Section 148A(d), the AO was expected to take an independent decision after considering the material on record. Changing the decision just to match the approval was found to be against the law.

The Court held that the notice was issued beyond the limitation period under Section 149(1)(a) of the Income Tax Act. It noted that the case did not fall under clause (b), so the time limit to issue notice ended on 31.03.2023. The AO issued a notice under Section 148A(b) on the last date and gave time to respond till 20.04.2023.

As per the Fifth and Sixth provisions to Section 149(1), the response time had to be excluded and the AO was allowed seven days beyond 20.04.2023 to pass an order, i.e., till 27.04.2023. Still, the final notice was found to be time-barred. It also referred to its earlier decision in Raminder Singh v. ACIT and set aside the impugned notice and order.

Accordingly, the petition was allowed and pending applications were disposed of.

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