Gujarat High Court Rules Section 148 Income Tax Notices from April to June 2021 as Time-Barred

Gujarat High Court Rules Section 148 Income Tax Notices from April to June 2021 as Time-Barred

The Gujarat High Court has stated that any initial notifications issued under Section 148 of the Income Tax Act, dated between April 1, 2021, and June 30, 2021, concerning the previous regulations and associated with either Assessment Year 2013-14 or Assessment Year 2014-15, will be deemed as exceeding the permissible time limit.

In this particular case, the petitioner contested the validity of a notice dated July 26, 2022, issued by the Income Tax Officer under Section 148 of the Income Tax Act. This notice aimed to reinitiate the assessment process for the fiscal year 2014-15. Additionally, the petitioner raised objections against the decision made under Section 148A(d) of the Income Tax Act.

The primary argument put forth by the petitioner revolved around the assertion that both the notice and the ensuing order exceeded the allowable time frame, as they were issued more than six years after the conclusion of the pertinent assessment year.

The Bench, comprising Justices N.V. Anjaria and Niral R. Mehta, determined that original notices issued under Section 148 of the Income Tax Act between April 1, 2021, and June 30, 2021, falling under the jurisdiction of the previous system, would exceed the allowable timeframe of six years from the culmination of Assessment Year 2013-14 and Assessment Year 2014-15. Consequently, any such notices pertaining to these assessment years would be deemed time-barred in accordance with the regulations outlined in the Act that were in effect in the previous regime before April 1, 2021.

The Bench drew upon the precedent established in the case of Keenara Industries Private Limited v. The Income Tax Officer, Ward 1(1)(3), Surat [LQ/GujHC/2023/1040]. In this case, the High Court's division bench ruled that it is legally impermissible for the Revenue to retroactively invoke Section 148 of the Income Tax Act to initiate assessments for years that have already exceeded the allowable time frame for reopening assessments. The Court further clarified that the Taxation and Other Laws Act does not support such a concept, and any notifications extending deadlines under the previous regulations would lose their validity following the repeal of those regulations.

Considering the Court's conclusions and the understanding of the pertinent regulations, the contested notice issued under Section 148 of the Income Tax Act for Assessment Year 2014-15 was determined to have exceeded the allowable time frame. As a result, the Notice dated July 26, 2022, which aimed to reopen the assessment for Assessment Year 2014-15 under Section 148 of the Income Tax Act, along with the subsequent Order issued under Section 148A(d) of the Act, were invalidated and nullified by the bench.