Reassessment Notice Not Invalid Merely Because Reply Period Extends Beyond Limitation: Delhi High Court

The Delhi High Court has held that a notice issued under Section 148A(b) of the Income Tax Act does not become invalid merely because the minimum seven-day period granted to an assessee for filing a reply extends beyond the limitation period prescribed for issuance of reassessment notices.

A Division Bench of Justices Dinesh Mehta and Vinod Kumar observed that Parliament consciously provided for exclusion of the time granted to an assessee for filing a reply while computing limitation under Section 149, and that any contrary interpretation would defeat the legislative scheme.

“According to us, if the intention of the Parliament was not to extend the limitation period for the time elapsed in filing the reply, then they would certainly have provided separate limitation for issuance of notice under Section 148A(b) of the Act of 1961. But instead of doing so, the Fifth proviso has been stringed/appended with Section 149, which stipulates that the time taken for filing the reply shall be excluded from the limitation period,” it observed.

The court made the observations while examining a challenge to reassessment proceedings initiated against an assessee for the assessment year 2017-18.

Although the Court ultimately quashed the reassessment proceedings as being barred by limitation, it rejected the broader contention that proceedings are vitiated merely because the minimum seven-day period for responding to a notice under Section 148A(b) extends beyond the normal limitation period.

The petitioner argued that since the notice under Section 148A(b) was issued on March 29, 2024, granting time till April 8, 2024 to submit a reply, the proceedings were invalid because the limitation period for issuing a notice under Section 148 expired on March 31, 2024.

It was contended that the Assessing Officer could not validly invoke Section 148A(b) when the minimum seven-day reply period extended beyond the limitation date.

Rejecting this submission, the High Court held that the minimum seven-day period prescribed under Section 148A(b) is not the maximum period available for filing a reply, which can extend up to 30 days.

"We are firmly of the view that simply because on 29.03.2024, 7 days' time was not available, the proceeding cannot be alleged to be vitiated. Because 7 days' time is not the maximum time allowable for filing reply. In a given case it can extend to 30 days," the Court observed.

The Court further observed that accepting the petitioner's interpretation would effectively render every notice issued under Section 148A(b) after March 1 invalid.

It noted that since the time available for filing a reply may range from seven to thirty days, making the validity of a notice dependent upon the actual time taken by an assessee to respond would introduce uncertainty and frustrate the purpose of the provision.

However, applying the fifth and sixth provisos to Section 149 to the facts of the case, the Court found that although the period taken by the assessee to file the reply had to be excluded while computing the limitation, the Assessing Officer nevertheless failed to issue the notice within the statutorily extended period.

The Court held that after excluding the period between March 29, 2024 and April 21, 2024, the Assessing Officer had seven days from April 21, 2024 to pass the order under Section 148A(d) and issue the notice under Section 148.

Since the Section 148A(d) order and the Section 148 notice were issued on April 30, 2024 instead of by April 28, 2024, the Court held them to be barred by limitation and quashed both.

For Petitioner: Senior Advocate Salil Aggarwal, with Advocate Madhur Aggarwal

For Respondent: Puneet Rai, SSC Shlok Chandra, SSC, Advocates Naincy Jain and Madhavi Shukla, JSCs and Udit Dad