Reassessment Notice Issued Beyond Seven Days of Receiving Assessee’s Reply is Barred by Limitation

In brief

The question

1. Whether a notice issued under Section 148A(b) is void if the minimum seven-day response period extends beyond the limitation date of March 31st

The court held

The Court held that the notice issued under Section 148 was time-barred. Since the reply was filed on 21.04.2024, the AO was required to issue the notice by 28.04.2024

It also directed

The writ petition was allowed, and both the order under Section 148A(d) and the notice under Section 148, dated 30.04.2024, were quashed as being issued beyond the period of limitation

01Facts

The petitioner challenged an order dated 30.04.2024 passed under Section 148A(d) and a consequential reassessment notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2017-18

pp. 1-2

The Revenue issued a notice under Section 148A(b) on 29.03.2024, providing a response deadline of 08.04.2024—a date falling after the statutory limitation expiry of 31.03.2024

p. 2

The petitioner sought two adjournments and ultimately filed a reply on 21.04.2024, contending the proceedings were time-barred

p. 2

The Assessing Officer (AO) passed the final order and issued the Section 148 notice on 30.04.2024

p. 2

02Issues

i.1. Whether a notice issued under Section 148A(b) is void if the minimum seven-day response period extends beyond the limitation date of March 31st

¶ 17

ii.2. Whether the notice issued under Section 148 on 30.04.2024 was barred by limitation under the provisos to Section 149 of the Act

¶ 23-24

03Law Applied

The court primarily applied Section 149 of the Income Tax Act, 1961, specifically the fifth and sixth provisos

¶ 18

The fifth proviso stipulates that the time or extended time allowed to an assessee to file a reply to a show-cause notice under Section 148A(b) must be excluded when computing the limitation period

p. 8 · ¶ 20

The sixth proviso mandates that if, after such exclusion, the remaining limitation period for the AO to act is less than seven days, the period shall be extended to a full seven days

p. 8 · ¶ 22

The court also referenced the precedent in BKR Capital Private Limited v. Income Tax Officer, clarifying that the initiation is valid if the notice is issued prior to the expiry of the limitation, provided the exclusion rules are followed

¶ 5-7

Provisions in the judgment · 10

Income Tax Act, 1961 10 provisions

Section 148Section 148ASection 149Section 131Section 132Section 132ASection 133ASection 151Section 153ASection 153C

04Reasoning

The Court first rejected the petitioner's argument that the 148A(b) notice was void ab initio simply because the seven-day reply window closed after 31.03.2024; it held that the fifth and sixth provisos were specifically designed to handle such overlaps by extending limitation based on the time taken to reply

¶ 17-21

Applying these rules to the facts, the Court noted the notice was issued on 29.03.2024 and the reply was filed on 21.04.2024. Under the fifth proviso, the entire period from 29.03.2024 to 21.04.2024 is excluded from the limitation calculation

¶ 20-22

Consequently, per the sixth proviso, the AO was granted a mandatory 7-day window from the date of the reply (21.04.2024) to issue the Section 148 notice

¶ 22-24

This placed the ultimate deadline at 28.04.2024

¶ 24

05Holding

The Court held that the notice issued under Section 148 was time-barred. Since the reply was filed on 21.04.2024, the AO was required to issue the notice by 28.04.2024

¶ 24

The writ petition was allowed, and both the order under Section 148A(d) and the notice under Section 148, dated 30.04.2024, were quashed as being issued beyond the period of limitation

¶ 25

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