Section 148 Reopening After Lapse of Six-Year Limitation Set Aside for AY 2013-14

Background of the Dispute

The Bombay High Court, in Bhoomi Viral Shah Vs ITO, dealt with a writ petition invoking Article 226 of the Constitution of India. The assessee challenged a chain of reassessment and penalty proceedings initiated under the Income Tax Act 1961 for Assessment Year 2013-14, including:

  • Notice under Section 148
  • Proceedings under Section 148A(b) and order under Section 148A(d)
  • Reassessment order under Section 147 read with Section 144 and Section 144B
  • Demand notice under Section 156
  • Penalty orders under Section 271(1)(b), Section 271(1)(c) and Section 271F

The central issue was whether the Section 148 notice for AY 2013-14, issued on 25 July 2022, was within the statutory time limit prescribed by Section 149 as applicable to that assessment year.

Reliefs Sought by the Petitioner

The assessee approached the Court seeking:

1. Writ of Certiorari

To quash and set aside the following:

  • Notice dated 07.04.2021 issued under Section 148 (treated as a deemed show cause notice under Section 148A(b) by letter dated **26.05.2022`)
  • Order dated 25.07.2022 passed under Section 148A(d)
  • Notice dated 25.07.2022 issued under Section 148
  • Assessment order dated 26.05.2023 passed under Section 147 r.w.s. Section 144 and Section 144B
  • Demand notice dated 26.05.2023 under Section 156
  • Penalty order dated 19.02.2024 under Section 271(1)(b)
  • Penalty order dated 20.02.2024 under Section 271(1)(c)
  • Penalty order dated 20.02.2024 under Section 271F

2. Writ of Mandamus

Directing the Revenue authorities to:

  • Formally quash and refrain from acting upon the above notices, reassessment order, demand notice and penalty orders
  • Forbear from taking any further coercive steps or issuing any further notices in continuation of these actions

3. Writ of Prohibition

A prohibition against the Revenue from proceeding further in any manner to implement or enforce:

  • The assessment order dated 26.05.2023 under Section 147 r.w.s. Section 144 and Section 144B
  • The consequential demand notice under Section 156
  • The penalty orders under Section 271(1)(b), Section 271(1)(c) and Section 271F

Applicable Statutory Framework

For AY 2013-14, the limitation period governing reassessment notices was contained in the unamended Section 149(1)(b), which provided:

“149. Time limit for notice. – (1) No notice under section 148 shall be issued for the relevant assessment year, –

  1. if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);
  2. if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.”

For AY 2013-14, the end of the relevant assessment year was 31 March 2014. Under Section 149(1)(b), the outer six-year limit expired on 31 March 2020.