INCOME TAX : Where alleged escaped income was less than Rs. 50 lakhs, reopening notice issued on 21-7-2022 upon assessee in respect of assessment yea 2016-17 being issued beyond three years was barred by limitation as per section 149 and consequently, reassessment order and demand notice being bad in law were liable to be quashed

HIGH COURT OF JHARKHAND

Sevensea Vincom (P.) Ltd.

v.

Principal Commissioner of Income-tax, Central Circle

RONGON MUKHOPADHYAY AND DEEPAK ROSHAN, JJ.

W.P. (T) NO. 2815 OF 2023

DECEMBER  11, 2023 

Section 149, read with sections 148 and 148A, of the Income-Tax Act, 1961 – Income escaping assessment – Time limit for issuance of notice (Reassessment) – Assessment year 2016-17 – A notice under section 148A was issued on 21-7-2022 for alleged escaped income of Rs. 39 lakhs – Whether since alleged escaped income was less than Rs. 50 lakhs, impugned notice issued on 21-7-2022 upon assessee in respect of assessment yea 2016-17 being issued beyond three years was barred by limitation as per section 149 – Held, yes – Whether, consequently, reassessment order and demand notice being bad in law were liable to be quashed – Held, yes [Para 11, 12 and 13] [In favour of assessee]

FACTS

  • A notice under section 148 was issued to the assessee on 21-7-2022 for the alleged escaped income of Rs. 39 lakhs and finally reassessment order was passed on 31-5-2023 against the assessee and consequential notice of demand was also issued. 
  • In instant writ petition to the High Court, the assessee contended that entire reassessment proceeding be quashed and set aside and all consequential orders passed pursuant to issuance of notice under section which had been issued beyond limitation period prescribed under section 149 be also quashed

HELD

It appears that the Deputy Commissioner has issued the impugned reassessment notice, dated 21-7-2022, under section 148 pursuant to passing of the impugned order dated 21-7-2022, under section 148A(d), for the alleged income, which has escaped assessment, amounting to Rs.39 lakhs for the assessment year 2016-17.

  • It is evident that the notice dated 30-5-2022, under section 148A(b), clearly indicates that the alleged income, which has escaped assessment, is only Rs. 39 lakhs. Further, from the impugned order dated 21-7-2022, under section 148A(d), it is also evident that the alleged income, which has escaped assessment, is only Rs. 39 lakhs. As per section 149, the limitation period for issuance of notice under section 148 is normally three years from the end of the relevant assessment year (in instant case assessment year 2016-17) and extendable beyond 3 years till 10 years provided the income which has escaped assessment is Rs. 50 lakhs or more and the permission of the concerned authority is taken. The three-year time period of assessment year 2016-17 had ended on 31-3-2020. Accordingly, the impugned notice, dated 21-7-2022, is beyond 3 years’ time period. Further, the said notice is for alleged escaped income of Rs. 39 lakhs which is less than Rs. 50 lakhs and thus, the said notice cannot take the benefit of extended period of limitation which is beyond three years till ten years. [Para 10]
  • Thus, it is to be held that the very initiation of reassessment proceeding is wholly without jurisdiction. [Para 12]
  • Accordingly, the impugned notice dated 21-7-2022, issued under section 148, is barred by the limitation period prescribed under section 149 and is illegal, unsustainable and void ab initio and is liable to be set-aside. It is a well-established principle of law that if the foundation of any proceeding is illegal and unsustainable in law, then all consequential proceedings or order are also bad in law. Since the impugned notice dated 21-7-2022, under section 148, is illegal and unsustainable in law, accordingly, the impugned reassessment order dated 31-5-2023 passed under section 147 and the notice of demand dated 31-5-2023 issued under section are also bad in law and unsustainable and the same, is to be quashed and set aside. [Para 13]

Rahul Lamba and Aditya Mohan, Advs. for the Petitioner. R.N. Sahay and Anurag Vijay, Jr. S.C’s for the Appellant.