Time limit for issue of notice prescribed in section 149

CA V.K. Subramani

It is normal to file the ITR by taxpayers every year and the tax administration based on information in its possession may check the correctness of ITR. This could be done under section 143(3) by issuing a notice under section 143(2) within 3 months from the end of the financial year in which the ITR was furnished. Also, where the said time limit under section 143(2) has expired, the Revenue may, based on the information in its possession may revisit the ITR of the assessee which is known technically as 'reassessment'.

Section 149 provides the time limit for reassessment by prescribing some monetary limits for the income which might have escaped assessment. No notice under section 148 shall be issued if 3 years have elapsed from the end of the relevant assessment year except in cases where, instead of 3 years it would be 10 years if the income which have escaped assessment amounts to or is likely to amount to Rs.50 lakh or more (in aggregate).

The extended period of 10 years from the end of the relevant assessment year is possible where the Assessing Office has in his possession books of account or documents or evidence which reveal that the income chargeable to tax in the form of (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, and which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs or more (in aggregate).

The first proviso to section 149(1) says that no notice shall be issued at any time in a case for the relevant assessment year beginning before 1st day of April, 2021 if a notice under section 148 could not have been issued at that time on account of it being beyond the time limit specified under section 149(1)(b).

This proviso requires some imagination in the sense that one should assume that he is viewing the situation as on 1st April, 2021 and make reference to the old clause (b) of section 149(1). This erstwhile section 149(1) had 3 sub-clauses and provided in the case of residents for a maximum time limit of 6 years from the end of the relevant assessment year if the income chargeable to tax which has escaped assessment amounts to or is likely to amount Rs.1 lakh or more for that year.

Thus, if one assumes that he is judging the validity of section 148 notice issued on or after 1st April, 2021, such notice cannot be issued for any assessment year 2014-15 and preceding assessment years.

In Keenara Industries (P) Ltd. v. ITO (2023) 453 ITR 51 (Guj) : 2023 TaxPub(DT) 1316 (Guj-HC) the Gujarat High Court quashed the reassessment proceedings of the assessment year 2013-14 and 2014-15 when issued after 1st day of April, 2021. It clearly held that the 6-year time period would end on 31st March, 2020 for the assessment year 2013-14 and by 31st March, 2021 for the assessment year 2014-15. Any notice issued after 31st March, 2021 for the assessment year 2014-15 and the preceding assessment years would be barred by limitation. Readers may note, a contrary decision in Touchstone Holdings (P) Ltd. v. ITO (2023) 451 ITR 196 (Del.) : 2022 TaxPub(DT) 6318 (Del-HC).