Section 148 Notice Uploaded Post March 31, 2021 Is Time-Barred: Calcutta High Court

Overview of the Case

In ACIT Vs Radhakrishna Bimalkumar Private Limited, the Calcutta High Court was called upon to adjudicate a Revenue appeal directed against a Single Judge's order that had upheld the assessee's writ petition. The writ petition had successfully challenged a notice issued under Section 148 of the Income-tax Act, 1961 on the ground that it was barred by limitation. The Division Bench, while condoning a substantial delay of 426 days in filing the appeal on the basis that a question of law was involved, ultimately dismissed the Revenue's appeal and affirmed the view that the impugned notice could not be sustained.

Background and Procedural History

The assessee, Radhakrishna Bimalkumar Private Limited, had filed a writ petition before the Calcutta High Court challenging a notice issued under Section 148 of the Income-tax Act, 1961. The Single Judge allowed the writ petition after examining the records and concluding that although the notice was physically signed and dated 31 March 2021, it was actually uploaded onto the electronic communication system only after 31 March 2021.

The Single Judge treated the date of upload as the effective date of issuance and relied on two prior decisions of the Calcutta High Court:

  • Bagaria Properties and Investment (P.) Ltd. v. Union of India, (2022) 134 taxmann.com 196 (Calcutta High Court)
  • Manoj Jain v. Union of India, (2022) 134 taxmann.com 173 (Calcutta High Court)

Aggrieved by the Single Judge's order dated 27th April, 2022 in WPO No. 1706 of 2022, the Revenue filed the present appeal before the Division Bench — albeit with a delay of 426 days. While the explanation tendered for the inordinate delay was acknowledged as being less than fully satisfactory, the Division Bench exercised its discretion and condoned the delay solely on the ground that the appeal raised a question of law warranting judicial consideration.

Whether the notice issued under Section 148 of the Income-tax Act, 1961, signed on 31 March 2021 but uploaded for electronic communication only after that date, was barred by limitation?

This deceptively simple question carried significant implications for thousands of reassessment proceedings initiated across the country during the transitional period following the amendments introduced by the Finance Act, 2021.

Supreme Court's Direction in Union of India v. Ashish Agarwal

The Calcutta High Court noted that the two decisions of the Single Judge — Bagaria Properties and Investment (P.) Ltd. v. Union of India and Manoj Jain v. Union of India — had subsequently been considered by the Supreme Court in Union of India v. Ashish Agarwal, (2022) 138 taxmann.com 64 (Supreme Court).

In paragraph 10 of the said judgment, the Supreme Court, while allowing the Revenue's appeals in part and modifying the High Court decisions, issued the following binding directions (sub-paragraphs (i) to (iv) being directly relevant):