Delhi HC: Fresh Reassessment Notice Invalid if Issued Beyond Limitation Without Following Due Process

The Delhi High Court carried that if the Revenue issues a reassessment notice to a taxpayer under section 148 of the Income Tax Act, 1961 without following procedure, then later it cannot issue a fresh reassessment notice beyond the specified period, claiming that time spent on earlier litigation is to be excluded for computing limitation.

A division bench of Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela noted, “Notice issued under Section 148 of the Act in the earlier round was set aside on the ground that the AO had not followed the mandatory requirement of seeking approval from the competent authority…The fact that the Revenue had not taken the steps by law cannot possibly be construed as a factor in favour of the Revenue for extending the limitation.”

The applicant has contested the reassessment notice furnished to it as it is limited in time.

It was mentioned under section 149 that the highest period within which the notice u/s 148 of the act can have been furnished is 6 years from the finish of the pertinent assessment year.

It was claimed by the revenue that the impugned notice must be regarded in the mentioned time as in the earlier round, the court had stayed the proceedings. It claimed that under Abhinav Jindal v. Assistant Commissioner of Income Tax Circle, the benefit of the stay granted by the court needed to be construed in favour of the Revenue.

The HC marked that the assessing officer before issuing the impugned notice furnished another notice u/s 148 (within the limitation period) which arrived faulted as it was furnished under the erstwhile regulatory regime (as existing before 01.04.2021).

“The fact that the petitioner had succeeded in its challenge to the said notice cannot be a ground for exclusion of the period spent by the assessee in pursuing the said litigation. The time spent by the petitioner in pursuing the challenge can neither be excluded nor can be claimed as resulting in an extension of the period of limitation,” the Court stated.

It moves to note that the revenue should opt for all the required measures as per the law for the initiation of the assessment proceedings within the said duration.

The court towards the stay order has cited that there was no order impeding the revenue from issuing another notice to the taxpayer within the said time.

As per that the petition is permitted.