Bombay High Court annuls belated Section 148 reassessment notice for AY 2015-16
Background of the dispute
In Polypeptide Laboratories Pvt. Ltd. Vs ACIT (Bombay High Court), the assessee approached the Bombay High Court through a writ petition challenging reassessment proceedings initiated for Assessment Year 2015-16.
The core challenge was directed against:
- The notice dated 29.07.2022 issued under
Section 148of the Income Tax Act 1961, and - The order dated 28.07.2022 passed under
Section 148A(d)of the Act
Both actions emanated from a reassessment attempt by the Revenue which, according to the assessee, was hit by limitation and therefore without jurisdiction.
The writ petition was filed under Article 226 and Article 227 of the Constitution of India, with a prayer to call for the records, examine the legality of the reassessment, and quash the impugned notice and order.
Chronology of reassessment proceedings
Initial Section 148 notice in April 2021
- The Revenue originally issued a notice under
Section 148on 05.04.2021 for AY 2015-16. - This notice was part of the batch of reassessment notices issued during the period impacted by the pandemic-related relaxation law, namely, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
Impact of Supreme Court ruling in Union of India vs. Ashish Agarwal
Subsequently, the legal landscape relating to reassessment changed significantly after the Supreme Court’s decision in:
- Union of India vs. Ashish Agarwal (2022) 138 taxmann.com 64 (SC)
In this judgment, the Supreme Court held that:
Notices issued under the unamended
Section 148between 01.04.2021 and 30.06.2021 would be deemed to be show cause notices underSection 148A(b), under the modified reassessment regime introduced by the Finance Act, 2021.
In compliance with this ruling:
- The notice dated 05.04.2021 for AY 2015-16 was treated by the Revenue as a show cause notice under
Section 148A(b). - After considering the assessee’s response, the Assessing Officer passed an order under
Section 148A(d)on 28.07.2022, deciding to proceed with reassessment. - Consequent to this order, a fresh notice under
Section 148was issued on 29.07.2022.
These two dates—28.07.2022 (order under Section 148A(d)) and 29.07.2022 (fresh Section 148 notice)—became the focus of the limitation challenge.
Limitation issue and the relevance of Union of India vs. Rajeev Bansal
Supreme Court’s later pronouncement in Union of India vs. Rajeev Bansal
After Ashish Agarwal, the Supreme Court revisited limitation and validity of reassessment notices in:
- Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)
In this decision, the Court examined how far TOLA and the newly substituted reassessment provisions could extend the time for completing reassessments.
Crucially, in paragraph 19 of the judgment, the Revenue, through the learned Additional Solicitor General, made an explicit concession regarding notices for AY 2015-16. The relevant extract reads as under:
“19. Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue:
…
- The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA.”