Jharkhand High Court: Reopening Notice U/S 148 IT Act Should Be Quashed If Barred By Limitation Period Prescribed Under Section 149

Jharkhand High Court: Reopening Notice U/S 148 IT Act Should Be Quashed If Barred By Limitation Period Prescribed Under Section 149

The Jharkhand High Court has determined that the initiation of reassessment proceedings lacks jurisdiction, as the notice issued under Section 148 is time-barred according to the limitation period prescribed in Section 149 of the Income Tax Act, 1961.

The Division Bench, consisting of Justices Rongon Mukhopadhyay and Deepak Roshan, noted that the notice issued on 21.07.2022 under Section 148 exceeded the three-year time limit for the assessment year 2016-17, which ended on 31.03.2020. Furthermore, the alleged escaped income amounted to Rs. 39,21,450/-, falling below the Rs. 50,00,000/- threshold required for an extended limitation period.

In the writ application, the petitioner, a private limited company registered under the Companies Act, 2013, received a notice under Section 148 for the assessment year 2016-17. Despite the petitioner's detailed objections and highlighting of major discrepancies, the Department rejected the submissions and passed the order under Section 148A(d), issuing a demand notice.

The Bench determined that the Department issued the Reassessment Notice under Section 148 on July 21, 2022, following the impugned order dated July 21, 2022, under Section 148A(d). This action was taken regarding the alleged income amounting to Rs.39,21,450/- that had escaped assessment for the assessment year 2016-17. Notably, both the notice under Section 148A(b) and the order passed under Section 148A(d) explicitly indicated that the alleged income, which had escaped assessment, amounted to only Rs.39,21,450/-.

The Bench observed that any notice issued under Section 148 typically has a limitation period of three years from the end of the relevant assessment year. However, this period can be extended up to ten years if the income that has escaped assessment amounts to Rs.50,00,000/- or more. The bench noted that this condition was absent in the impugned notices.

Furthermore, the court emphasized the well-established legal principle that if the foundation of any proceeding is illegal and unsustainable in law, then all consequential proceedings or orders stemming from it are also invalid in law.

Consequently, the court declared that since the impugned notice issued under Section 148 is deemed illegal and unsustainable, all consequential proceedings, including the re-assessment order under Section 147 and the Notice of Demand issued under Section 156 of the Income Tax Act, 1961, are considered invalid and unsustainable.

The ITAT, while allowing the assessee's petition, stated that the Reassessment Order and the Notice of Demand should be quashed because the initiation of reassessment proceedings was beyond jurisdiction.