Gujarat High Court Quashes Reassessment Notice Issued Beyond COVID-Era TOLA Deadline

The Gujarat High Court has quashed a reassessment notice issued under Section 148 of the Income Tax Act, holding that it was issued beyond the "surviving time" available under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), as interpreted by the Supreme Court in Union of India v. Rajeev Bansal.

TOLA was enacted to extend statutory timelines for tax and other legal proceedings during the COVID-19 pandemic.

A Division Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati held that the reassessment notice dated August 31, 2022 issued to Wealth First Portfolio Managers Limited for Assessment Year 2016-17 was time-barred and liable to be quashed.

The court observed, "In the facts of the case, the respondent Assessing Officer has provided information pursuant to the directions issued by the Hon'ble Apex Court in case of Ashish Agarwal (supra) on 27.07.2022 and therefore, considering 15 days' time to file reply by the assessee, the due date would be 10.08.2022."

The petitioner had contended that the reassessment notice was barred by limitation. An earlier notice under the old reassessment regime had been issued on June 29, 2021 during the extended period under TOLA. Following the Supreme Court's decision in Union of India v. Ashish Agarwal, that notice was deemed to be a notice under Section 148A(b).

The petitioner argued that the fresh notice issued after completion of the Section 148A procedure fell outside the "surviving time" recognised by the Supreme Court in Rajeev Bansal.

The revenue defended the reassessment proceedings initiated pursuant to the directions in Ashish Agarwal. However, during the hearing, the Revenue verified and did not dispute the dates relied upon by the petitioner for computing the surviving period of limitation.

The High Court referred to its earlier decision in Dhanraj Govindram Kella v. Income Tax Officer, where it had applied the Supreme Court's ruling in Rajeev Bansal to determine whether reassessment notices issued under the new regime were within the surviving period available after TOLA.

Applying the same principle, the Court noted that the Assessing Officer supplied the information under Section 148A(b) on 27 July 2022, the assessee filed its reply on 5 August 2022, and after allowing the statutory response period, the last permissible date for issuing the reassessment notice was 10 August 2022. Since the impugned notice was issued only on 31 August 2022, it was beyond the surviving time and therefore invalid.

The Court therefore observed "The impugned notice dated 31.08.2022 issued under section 148 of the Act would be invalid notice as the said notice is issued after 10.08.2022 as per the decision of Hon'ble Apex Court in case of Ashish Agarwal (supra). Therefore, the impugned notice having been issued beyond the 'surviving time' would be invalid notice as held by the Hon'ble Apex Court in case of Rajeev Bansal."

Accordingly, the High Court quashed the notice dated 31 August 2022 along with the consequential proceedings initiated pursuant to it.

For Petitioner: Advocate Vaibhavi K. Parikh

For Revenue: Aaditya D. Bhatt, Senior Standing Counsel