AO Cannot Grant Fresh Opportunity To Extend Reassessment Notice Deadline: ITAT Ahmedabad

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) on 7 July held that a reassessment notice issued after the expiry of the prescribed “surviving period” under the Income Tax Act, 1961 is barred by limitation.

Vice President Dr. B.R.R. Kumar and Judicial Member Rahul Chaudhary allowed the appeal filed by Scarlet Tradelink Private Limited against the order of the National Faceless Appeal Centre for Assessment Year 2016-17 and quashed the reassessment proceedings. The Bench observed:

"15/06/2022 would have to be taken as the date of reply filed by the Assessee... the 'surviving period' of 56 days lapsed on 10/08/2022. Since the notice under Section 148... was issued on 27/08/2022, the same is barred by limitation."

The case arose from a reassessment notice issued to Scarlet Tradelink on 5 May 2021 under the erstwhile reassessment regime.

Following the Supreme Court's ruling in Union of India v. Ashish Agarwal, the notice was treated as a notice under Section 148A(b) of the Income Tax Act, which requires the Assessing Officer to provide an opportunity to the taxpayer before issuing a reassessment notice.

Scarlet Tradelink filed its reply along with supporting documents on 15 June 2022. The Assessing Officer later issued another notice granting further time to respond, though the company had not sought any extension.

The Tribunal relied on the Supreme Court's decision in Union of India v. Rajeev Bansal and held that the 56-day surviving period started from 15 June 2022, when the company filed its reply. The period expired on 10 August 2022. It held that the Assessing Officer could not extend the surviving period by granting another opportunity to respond when the taxpayer had already filed its reply and had not requested additional time.

As the Assessing Officer issued the fresh notice under Section 148 on 27 August 2022, after the expiry of the limitation period, the Tribunal quashed the notice and the consequential reassessment order. It held that the remaining grounds raised by Scarlet Tradelink had become infructuous.

Accordingly, the ITAT allowed the appeal.