Reopening Notice Issued U/s 148 Merits To Be Quashed If Barred By Limitation Period Prescribed U/s 149: Jharkhand High Court

Finding that the notice issued u/s 148 is barred by the limitation period prescribed u/s 149 of the Income tax Act, 1961, the Jharkhand High Court (Ranchi Bench) ruled that the very initiation of reassessment proceeding is wholly without jurisdiction.

The Division Bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan observed that “The three-year time period of A.Y 2016-17 had ended on 31.03.2020. Accordingly, the Impugned Notice, dated 21.07.2022, is beyond 3 years' time period. Further, the said notice is for alleged escaped income of Rs. 39,21,450/- which is less than Rs. 50,00,000/- and thus, the said notice cannot take the benefit of extended period of limitation which is beyond three years till ten years”. (Para 10)

As per the brief facts of the case, the assessee company was issued notice u/s 148. Pursuant thereto, the assessee asked the department for reason to believe, in response to which the Revenue issued a letter deemed to be a notice under Section 148A(b) of the Act. However, no information and material relied upon by the Department were provided to the assessee. Although, the assessee submitted a detailed reply raising objection and pointed out major discrepancies. Rejecting those submissions, the Department passed the order u/s 148A(d) and issued demand notice.

The Bench found that the Department has issued the Reassessment Notice dated July 21, 2022, u/s 148 pursuant to passing of impugned order dated July 21, 2022 u/s 148A(d) for the alleged income, which has escaped assessment, amounting to Rs.39,21,450/- for the Assessment Year 2016-17.

The Bench observed that the notice u/s 148A(b) as well as the order passed u/s 148A(d) clearly indicates that the alleged income, which has escaped assessment, is only Rs. 39,21,450/-.

“Any notice under Section 148 of the I.T Act, 1961 is normally three years from the end of the relevant assessment year (in this case A.Y 2016-17) and extendable beyond 3 years till 10 years, provided the income which has escaped assessment is Rs. 50,00,000/- or more which is absent in the impugned Notices”, added the Bench.

The Bench highlighted the 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.

The ITAT therefore allowed the assessee's petition and concluded that Reassessment Order and the Notice of Demand are liable to be quashed for the sole reason that the very initiation of reassessment proceeding is beyond jurisdiction.

Counsel for Petitioner/ Taxpayer: Rahul Lamba & Aditya Mohan

Counsel for Respondents / Revenue: R.N. Sahay & Anurag Vijay,

Case Title: M/s. Sevensea Vincom Private Limited Verses Principal Commissioner of Income Tax

LL Citation: 2024 LiveLaw (Jha) 30

Case Number: W.P. (T) No. 2815 of 2023

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