Reassessment Action U/S 148 ITA Beyond Ten Year Block Period U/s 153C & 153A ITA: Delhi HC Quashes Reassessment Proceedings
The Delhi High Court quashed a notice initiating the reassessment action under Section 148 of the Income Tax Act, 1961 (ITA) observing that it was beyond the ten-year block period under Section 153C read with Section 153-A of the ITA.
A Division Bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed, “It is therefore ex facie evident that AY 2013-14 falls beyond the ten-year block period as set out under Section 153C read with Section 153A of the Act. Consequently, the impugned notice dated 30 March 2023 has been issued beyond limitation and is liable to be quashed and set aside on this score alone. All consequential actions pursuant to the impugned notice would thus meet a similar fate.”
Advocate Ved Jain represented the petitioner, while Sr. SC Prashant Meharchandani appeared for the respondent.
M/s Proform Interiors Private Limited (petitioner) challenged the initiation of reassessment action under Section 148 of the Income Tax Act, 1961 (ITA) pertaining to Assessment Year (AY) 2013-14.
The petitioner argued that the reassessment action fell foul of Section 149(1) of the ITA due to the expiration of the prescribed limitation period for reopening assessments. The revenue on the other hand contended that the reassessment notice was issued within the permissible timeframe as per the amended provisions of the ITA after the Finance Act, 2021 (the Act).
The Court referred to its previous judgment in Filatex India Ltd. v. Deputy Commissioner of Income Tax (2023), where it dealt with an identical question regarding the computation of the relevant period under Section 153C of the ITA. The Court reiterated that the reassessment action, based on the search conducted could not be sustained due to the timelines specified in the old provisions of Sections 149, 153A, and 153C of the ITA, which were applicable before the commencement of the Act.
“Viewed in that light, it is manifest that AY 2013-14 would fall beyond the block period of ten years. It becomes pertinent to note that the First Proviso to Section 149(1) compels us to test the validity of initiation of action for reassessment commenced pursuant to a search, based upon it being found that the proceedings would have sustained bearing in mind the timelines prescribed in Sections 149, 153A and 153C, as they existed prior to the commencement of Finance Act, 2021. This necessarily requires us to advert to the timeframes comprised in both Section 149(1)(b) as well as Section 153C as it existed on the statute book prior to 01 April 2021, which undisputedly was the date from when Finance Act, 2021 came into effect,” the Court remarked.
Consequently, the Court quashed the impugned notice and stated, “in cases where a search is conducted after 31 March 2021, the said Proviso would have to be construed and tested with reference to the date when the AO decides to initiate action against the non-searched entity..”
Accordingly, the High Court allowed the petition.
Cause Title: Dinesh Jindal v. Assistant Commissioner Of Income Tax (Neutral Citation: 2024:DHC:4554-DB)
Appearance:
Petitioner: Advocates Ved Jain, Nischay Kantoor and Soniya Dodeja
Respondents: Sr. SC Prashant Meharchandani; Jr. SC Akshat Singh; Advocates Ritika Vohra and Utkarsh Kandpal
