Three-Years Limitation Period For Tax Reassessment Assessment Notice on Concealed Income Below Rs. 50 Lakh: Jharkhand High Court

The Jharkhand High Court has held that any notice under Section 148 of the Income Tax Act, 1961, is normally three years from the end of the relevant assessment year and extendable beyond three years to 10 years, provided the income that has escaped assessment is Rs. 50,00,000 or more.

The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan have observed that the reassessment notice issued under Section 148 is barred by the limitation period prescribed under Section 149, is illegal, unsustainable, and void ab initio, and is liable to be set aside; consequently, all subsequent actions, notices, and orders are also liable to be quashed.

The petitioner is a private limited company registered under the Companies Act, 2013. One notice dated June 30, 2021, under Section 148 for the Assessment Year 2016–17 was issued to the petitioner. The petitioner asked the department for reason to believe. The department issued a letter on May 30, 2022, deemed to be a notice under Section 148A(b). However, no information or material relied upon by the respondent department was provided to the petitioner. The petitioner gave a detailed reply, raising objections and pointing out major discrepancies.

The respondent department had issued a fresh notice to show cause, in which the petitioner was requested to provide certain documents. In compliance with the notice dated June 22, 2022, the petitioner replied, submitted relevant documents, and compiled the required notice to show cause. However, the respondent department had passed the order under Section 148A(d), and on the same date, notice under Section 148 was also issued for reassessment for the assessment year 2016–17.

The assessee contended that the entire reassessment proceeding be quashed and set aside as it was issued beyond the limitation period prescribed under Section 149 of the Income Tax Act, 1961.

The department argued that the Income Tax Act has provided a strict time-line to complete the assessment or reassessment proceedings under Section 147 of the Income Tax Act, 1961, once initiated under Section 148 of the Income Tax Act, 1961. If the proceedings are not completed within the stipulated time line, they will be barred by limitation. There is no illegality in the assessment order passed under Section 147 of the Income Tax Act.

The court, while allowing the writ petition, held that if the foundation of any proceeding is illegal and unsustainable in law, then all consequential proceedings or orders are also bad in law.

Counsel For Petitioner: Rahul Lamba and Aditya Mohan Khandelwal

Counsel For Respondent: R.N.Sahay

Case Title: M/s Sevensea Vincom Private Limited vs The PCIT, Central Circle-I, Ranchi & Ors.

LL Citation: 2024 LiveLaw (Jha) 29

Case No.: W.P.(T)/2815/2023

Click Here To Read The Order