In this case, Godrej Industries had challenged the show cause notice issued by the income tax department on May 22, 2022, with the arguments that the notice was issued during the pendency of reassessment proceedings under an earlier notice and, therefore, is illegal.
“Having decided in favour of assessee/petitioner (Godrej Industries) on this issue of limitation, we are not discussing the other grounds of challenge raised in the petition,” observed the division bench of Justice KR Shriram and Justice Neela Gokhale in its order of February 28.
Mumbai-headquartered conglomerate, through senior counsel PJ Pardiwalla, argued that as per the unamended Section 149(1)(b) of the Act, the outer time limit to issue a notice under Section 148 was six years from the end of the relevant assessment year and, thus, for the assessment year 2014-15, hence, the time limit to issue a notice expired on March 2021.
Section 148 of the Income Tax Act 1961 gives authority to the Assessing Officer to send notice to a taxpayer whose income has not been properly assessed. This implies that if the Assessing Officer suspects that a taxpayer has not disclosed complete income or has provided an inaccurate representation of it.
While, under the amended provisions, notice under Section 148 of the Act can be issued within three years or ten years, the latter available only after fulfilling certain stipulated conditions.While challenging this, the revenue department, through counsel Suresh Kumar argued that the time to issue notice was extended under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisins) Act, 2020 also known as TOLA on March 2021. Also, the tax department argued that the notice issued under Section 148 of the Act in this case was issued on 21st May 2021, thus the same was within time as per Section 148 of the Act.
However, allowing a petition filed by Godrej Industries, the high court had observed that the validity of notice must be judged based on the law existing as on the date on which the notice is issued under Section 148 of the Act, which in the present case is July 31, 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under Section 148 of the Act for AY 2014-15 could be issued on or after April 1, 2021 based on the first proviso to Section 149 of the Act.