Gujarat HC Quashes 2016-17 Tax Reopening: Section 148 Notice Was Issued After June 9, 2022 Deadline

The petitioner challenged the order under Section 148A(d) of the Income-tax Act, 1961, and the consequential notice under Section 148, both dated 31 July 2022, concerning Assessment Year 2016–17, on the ground that reassessment was time-barred.

The petitioner had appealed the reassessment order dated 11 May 2023 to the Commissioner of Income Tax (Appeals).

Following Union of India v. Ashish Agarwal, the earlier notice under Section 148 was treated as a notice under Section 148A(b).

The Assessing Officer supplied the relevant information on 28 May 2022; allowing 15 days for a response, the response period expired on 12 June 2022. The original notice had been issued on 25 June 2021, and the High Court determined that the surviving time for issuing the new-regime notice expired on 9 June 2022.

1. Whether the notice under Section 148 dated 31 July 2022 was issued within the surviving limitation period applicable under the Income-tax Act read with TOLA and the Supreme Court’s directions in Ashish Agarwal and Rajeev Bansal.

2. Whether the order under Section 148A(d) and consequential reassessment proceedings were liable to be quashed as time-barred.

Section 148A of the Income-tax Act governs the pre-notice procedure for reassessment under the new regime, while Section 148 provides for issuance of the reassessment notice.

TOLA extended specified tax-related time limits during the relevant period.

Under Union of India v. Ashish Agarwal, certain notices issued under the former reassessment regime were treated as show-cause notices under Section 148A(b), with the Assessing Officer required to provide relevant information and afford the assessee an opportunity to respond.

Under Union of India v. Rajeev Bansal, the period during which those deemed notices were treated as stayed—including the time for supplying information and the two weeks allowed to respond—must be accounted for in calculating the surviving limitation period; a notice issued beyond that surviving period is time-barred and liable to be set aside.

The Court also relied on Dhanraj Govindram Kella v. ITO for applying the surviving-time calculation to the dates and circumstances of the individual case.

The Court applied the surviving-time rule to the relevant dates. It found that, given the original notice dated 25 June 2021, the limitation period for issuing the notice under the new regime expired on 9 June 2022.

Although the Assessing Officer supplied information on 28 May 2022 and the petitioner’s 15-day response period ran until 12 June 2022, the impugned order and Section 148 notice were not issued until 31 July 2022—after the Court-determined deadline.

The respondent’s counsel verified the dates and did not controvert them.

Applying Rajeev Bansal, the Court held the notice to be beyond the surviving time and therefore invalid.

The rule was made absolute to that extent, and the pending appeal before the Commissioner of Income Tax (Appeals) was to become infructuous.