Reassessment Notice Not Time-Barred In Case Where Delay Caused By Taxpayer's Adjournment Requests: Delhi High Court

The Delhi High Court has held that a reassessment notice issued under Section 148 of the Income Tax Act cannot be treated as time-barred when the delay occurred due to adjournments sought by the taxpayer during proceedings under Section 148A.

A Division Bench of Justices Dinesh Mehta and Vinod Kumar dismissed writ petitions filed by two private companies challenging notices issued for Assessment Year (AY) 2017–18 on the ground that they were issued after the limitation period had expired.

The petitioners argued that the impugned notice dated April 15, 2024, was issued beyond the prescribed six-year limitation period, which ended on March 31, 2024, under the then-applicable provisions of Section 149 of the Income Tax Act.

However, the Court noted that the reassessment proceedings had been initiated within the limitation period through a show cause notice issued under Section 148A(b) on March 21, 2024.

The petitioners had sought adjournments on the dates fixed for filing their reply, resulting in the matter being deferred until April 13, 2024.

After considering the reply, the Assessing Officer passed an order under Section 148A(d) and simultaneously issued the notice under Section 148 on April 15, 2024.

The Court held that the time consumed in granting opportunity to the assessee must be excluded while computing limitation in view of the fifth proviso to Section 149(1) of the Act.

“The proceedings under Section 148A of the Act of 1961 in the present case were undeniably initiated well within limitation on 21.03.2024. The delay occurred because the petitioner sought adjournments. The AO, acting bonafidely and in compliance with principles of natural justice, granted reasonable opportunity to the petitioner to file its reply,” it said.

The Court added, “The Assessing Officer, having granted adjournments in order to adhere to the principles of natural justice on the basis of bona-fide construction of the Fifth Proviso, cannot be said to have acted in defiance of the prescribed period of limitation.”

Even otherwise, the Court held that the notice dated 15.04.2024 is not barred by limitation in face of the first proviso to Section 149(1) of the Income Tax Act, 1961, which clearly postulates that for assessment years beginning on or before 01.04.2021, a notice under Section 148 can be issued only if, on the relevant date, the proceedings had not already become time barred under the old law as it stood prior to the Finance Act, 2021.

Accordingly, the Court dismissed both writ petitions.

For Petitioners: Advocate Mukul Katyal

For Respondent: Advocates Ruchir Bhatia, SSC with Anant Mann, JSC; Mr. Sunil Agarwal, SSC, with Monica Benjamin, JSC, Gibran Naushad, JSC & Advocate Rohit Chakraborty.