Bombay High Court quashes Section 148 notice for AY 2015–16 issued in April 2022 relying on Supreme Court’s Rajeev Bansal decision

Overview

In Devendra Jaswantrai Shah Vs ITO, the Bombay High Court examined whether a reassessment notice under Section 148 dated 18.04.2022 for A.Y. 2015–16 could survive in law, in light of the limitation framework under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the binding precedent of the Supreme Court in Union of India vs. Rajeev Bansal.

The High Court concluded that, given the clear concession by the Revenue before the Supreme Court in Union of India vs. Rajeev Bansal, any reassessment notice for A.Y. 2015–16 issued on or after 01.04.2021 must be dropped. Consequently, the notice dated 18.04.2022, the reassessment order, and all consequential demand and penalty proceedings were declared void and quashed.

This judgment reiterates two crucial principles:

  • Time-barred reassessment notices cannot be validated by TOLA beyond the conceded limits.
  • Participation by the assessee (such as filing a return or not objecting in time) does not cure a fundamental lack of jurisdiction.

Core facts of the case

Background of the reassessment proceedings

  1. A show cause notice under Section 148A(b) of the Income Tax Act 1961 was issued to the assessee on 24.03.2022.
  2. The notice alleged that acquisition of an immovable property by the assessee indicated that income chargeable to tax represented in the form of an asset had escaped assessment for A.Y. 2015–16.
  3. The assessee did not respond to the Section 148A(b) notice. The non-response was explained as an oversight.
  4. On 18.04.2022, the Assessing Officer passed an order under Section 148A(d), concluding that it was a fit case for reopening the assessment, and issued a reassessment notice under Section 148 on the same date for A.Y. 2015–16.

Subsequent compliance and assessment

  • The assessee, without initially questioning jurisdiction, filed a return of income in response to the Section 148 notice.
  • The reassessment culminated in an assessment order dated 04.12.2023 passed under Section 147 read with Sections 144 and 144B.
  • Along with the assessment order, a demand notice under Section 156 dated 04.12.2023 and a computation sheet were issued.
  • Thereafter, penalty proceedings were initiated, and Penalty Orders under Section 271(1)(c) and Section 271F were passed by the Department.

Challenge before the High Court

Aggrieved by:

  • the notice under Section 148 dated 18.04.2022,
  • the assessment order dated 04.12.2023,
  • the demand notice under Section 156, and
  • the penalty orders under Sections 271(1)(c) and 271F`,

the assessee approached the Bombay High Court through a writ petition.

The foundation of the challenge was that:

  • the Section 148 notice for A.Y. 2015–16 issued on 18.04.2022 was time-barred and beyond jurisdiction,
  • therefore, all consequential proceedings, including assessment and penalties, were void ab initio and unenforceable.

Submissions on behalf of the assessee

Counsel for the assessee placed strong reliance on the Supreme Court’s judgment in Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC). The key points urged were: