SC's Judgement In Abhisar Buildwell Case Doesn't Permit Reopening Of Assessments Beyond Limitation Period U/S 149(1) Of IT Act: Delhi HC

The Delhi High Court has reiterated that the Supreme Court's judgment in Abhisar Buildwell does not permit reopening of assessments under Section 147/148 of the Income Tax Act, 1961 beyond the period stipulated under Section 149(1). Section 149 lays down the time limit for issuing a notice to a taxpayer under various provisions of the Income Tax Act. Normally, no notice of reopening of assessment can be issued after 3 years from the end of the Assessment Year. In Specific cases (where the department has information that income escaped assessment is Rs 50 lakh or more) no notice of reopening assessment can be issued after 10 years. Reassessment proceedings initiated after Apr 1, 2021 would have to meet the foundational tests as specified in the first proviso to Section 149(1), i.e. the reassessment action would not only have to meet the time frames constructed in terms of Section 149, but also the time frames under Section 153A & 153C (as they stood prior to the commencement of Finance Act, 2021). In the case at hand, Petitioner was aggrieved by reassessment notice issued under Section 148 this year, proposing to initiate proceedings in respect of assessment year (AY) 2015-16, following setting aside of search assessment under Section 153A of the Act. The Assessing Officer (AO) had initially issued notice to the Petitioner under Section 153A, following search operations conducted on one Sharp Group and an assessment order was passed determining Petitioner's income at ₹11,43,11,530/-. However, this order came to be set aside by the Commissioner of Income Tax (Appeals). The Revenue and later High Court, dismissed Revenue's appeals. It is following this that the imputed notices were issued to the Petitioner. Petitioner contended that the notice under Section 148A(b), preceding reassessment notice under Section 148, was issued beyond the period as stipulated under Section 149. The Revenue on the other hand argued that the impugned notices were within the prescribed time period by virtue of the non-obstante clause under Section 150. It relied on Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell Private Limited (2024) to contend that in cases where the proceedings under Section 153A of the Act could not be initiated, the Revenue was not remediless and could take recourse to Sections 147 and 148. At the outset, the division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma observed that the Revenue's contention was premised on the assumption that the High Court's decision, dismissing its appeal against setting aside of Section 153A proceedings, is to be construed as containing findings and directions for commencing proceedings under Section 147 of the Act. “We are unable to accept that the decision of this court in ITA No. 807/2023 [order dated 22.12.2023 dismissing the Revenue's appeal] can be read as findings and directions within the meaning of Section 150 of the Act, to permit the Revenue to issue notices under Section 148 of the Act, beyond the period as stipulated under Section 149(1) of the Act,” it observed. It then proceeded to peruse the Supreme Court's observations in Abhisar Buildwell and said it does not permit reopening of assessments, even in cases where necessary conditions for invoking Sections 147 and 148 of the Act are not satisfied. “The said decision also does not permit reopening of assessments beyond the period as stipulated under Section 149(1) of the Act,” the bench added. Reliance was placed on ARN Infrastructures India Ltd. v. Assistant Commissioner of Income Tax Central Circle-28 Delhi & Ors. (2024) where it was held that the liberty granted by the Supreme Court in Abhisar Buildwell to initiate reassessment was subject to being compliant with the provisions pertaining to reassessment. “The observations of the Supreme Court in Abhisar Buildwell were thus intended to merely convey that the annulment of the search assessments would not deprive or denude the Revenue of its power to reassess and which independently existed. However, the Supreme Court being mindful of the statutory prescriptions, which otherwise imbue the commencement of reassessment, qualified that observation by providing that such an action would have to be in accordance with law. ” Thus, the High Court held that Revenue's contention that the time period, within which a notice can be issued under Section 148 of the Act as stipulated under Section 149(1) of the Act, is not applicable in the facts of the case, is unmerited. The plea was thus allowed and reassessment proceedings were set aside. Appearance: Advocates Shreya Jain and Gaurav Tanwar for Petitioner; SSC Debesh Panda with JSCs Zehra Khan and Vikramaditya Singh for Revenue Case title: Sanjay Singhal v. Assistant Commissioner Of Income Tax, Central Circle 15, Delhi Case no.: W.P.(C) 16459/2024 Click Here To Read/Download ...

SC's Judgement In Abhisar Buildwell Case Doesn't Permit Reopening Of Assessments Beyond Limitation Period U/S 149(1) Of IT Act: Delhi HC

Kapil Dhyani

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