IT Reassessment Notice Received On April 1, 2021, Must Follow New Reassessment Regime: Bombay High Court

The Bombay High Court has held that an income tax reassessment notice dated and digitally signed on March 31, 2021, cannot be treated as having been issued on that date if it was actually dispatched through the Income Tax Business Application (ITBA) portal and reached the assessee only on April 1, 2021.

The court ruled that the notice would be deemed to have been issued on April 1, 2021, and the reassessment proceedings must continue under the framework introduced by the Finance Act, 2021.

A division bench of Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla delivered the ruling on a plea by Shreenath Finstock Pvt. Ltd., which challenged a reassessment notice and the consequential assessment order.

The company argued that although the notice was dated and digitally signed on March 31, 2021, it was dispatched through the Income Tax Business Application (ITBA) portal and received only on April 1, 2021.

During the hearing, the Income Tax Department, on instructions from the Assessing Officer, informed the court that the ITBA system recorded the "Notice Sent" timestamp at 5:51:42 a.m. on April 1, 2021 and the notice was delivered at 5:51:47 a.m.

The court therefore observed, "Thus, there is no doubt that the email dispatching the impugned Notice itself was triggered on 1st April 2021 from the ITBA Portal and subsequently received by the Petitioner at 5:51 a.m. on 1st April 2021. In view of these circumstances and in the light of the judgments cited at the Bar, we observe that the impugned Notice would be deemed to have been issued on 1st April 2021."

The dispute related to the assessment year 2013-14. Shreenath Finstock challenged the reassessment notice and the consequential assessment order, contending that although the notice was dated and digitally signed on March 31, 2021, it was received only through an email sent on April 1, 2021. The company argued that the reassessment proceedings therefore had to comply with the amended provisions that came into force on April 1, 2021.

The Revenue contended that the Assessing Officer had digitally signed and uploaded the notice on the ITBA portal on March 31, 2021, after which it was beyond the officer's control. It further argued that sending the email was a measure adopted out of abundant caution and that the date on which the notice was uploaded on the ITBA portal, rather than the date of the email, should determine when the notice was issued.

After directing the Department to disclose when the ITBA system actually triggered the email dispatch, the court recorded that the "Notice Sent" timestamp was 5:51:42 a.m. on April 1, 2021.

The court found that the company's case fit squarely into "Category C" from the Delhi High Court's ruling in Suman Jeet Agarwal v. Income-tax Officer. This specific category deals with notices that were dated and digitally signed on or before March 31, 2021, but were not actually sent and received until April 1, 2021, or later.

It also relied on its own earlier ruling in Jose Kattadyil Joseph v. Assistant Commissioner of Income Tax before applying the Supreme Court's landmark judgment in Union of India v. Ashish Agarwal. Consequently, the court threw out the assessment order and ordered that the contested notice be treated instead as a show-cause notice under Section 148A(b).

Finally, the court instructed the assessing officer to provide the company with all the evidence and materials being relied upon, review the company's objections, and then issue a fresh order under Section 148A(d).

For Petitioner: Advocate Sham V. Walve with Advocate Bhavik Chheda and Advocate Ruhi Konuri instructed by India Law Alliance;

For Respondents: Advocate Akhileshwar Sharma