Notices issued under Section 148 of the Income Tax Act beyond statutory timelines are invalid, leading to quashing of the assessment order.

JUDGMENT :

(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)

1. Heard learned advocate Mr. Jimi Patel, for learned advocate Mr. Manish Shah for the petitioner and learned Senior Standing Counsel Mr. Karan Sanghani for the respondents.

2. Having regard to the controversy involved which is in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.

3. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Karan Sanghani waives service of notice of rule.

4. By this petition under Article 226/227 of the Constitution of India, the petitioner has challenged assessment order dated 30.5.2023 passed by Respondent No.1 under Section 147 read with Section 144B of the INCOME TAX ACT , 1961 (For short “the Act”) and subsequent demand notice dated 30.5.2023 issued to the petitioner.

5. The brief facts are as under:

6. The petitioner filed return of income for the Assessment Year 2014-2015 on 30.7.2014.

7. A notice dated 29.06.2021 was issued under Section 148 of the Act under the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (For short “TOLA”).

8. Pursuant to the decision of the Hon’ble Supreme Court in case of Union of India vs. Ashish Agarwal reported in [2022] 138 taxmann.com 64 , the respondent issued notice dated 27.5.2022 under Section 148A(b) of the Act. The respondent thereafter passed an order dated 27.7.2022 under Section 148A(d) of the Act alleging that income to the extent of Rs.62,98,345/- had escaped assessment.

9. Being aggrieved, the petitioner preferred Special Civil Application No. 20516 of 2022 challenging the action of the respondent No.2 for issuance of the notice under Section 148 of the Act dated 27.7.2022 as well as order of same date passed under Section 148 A(d) of the Act.

10. This Court by order dated 21.11.2022, issued the notice for final disposal in the said petition and the notice issued to the petitioner under Section 148 of the Act was quashed by order dated 29.3.2023 relying upon the decision of this Court in case of Keenara Industries Pvt. Ltd. v. ITO , reported in [2023] 147 taxamann.com 585 Guj.

11. The respondent- revenue preferred a Special Leave Petition before the Hon’ble Apex Court challenging the order passed by this Court in Keenara Industries Pvt. Ltd. v. Income Tax Officer (Supra), wherein the Hon’ble Apex Court stayed the judgment and order passed by this Court. The respondent No.1, relying upon the stay granted by the Hon’ble Apex Court, issued a show-cause notice dated 20.5.2023 to the petitioner, which was objected by the petitioner for reactivating the reassessment proceedings though the notice under Section 148 issued to the petitioner was quashed by this Court. It appears that thereafter the Assessment Order under Section 147 read with Section 144B of the Act was passed on 30.5.2023 making addition of Rs.62,98,345/- being long term Capital Gain for year under consideration. Subsequently demand notice under Section 156 of the Act was also issued against the petitioner wherein Rs. 39,01,201/- was held to be payable by petitioner for Assessment Year 2014-15.

12. Being aggrieved, the petitioner has preferred this petition.

13. Learned advocate Mr. Jimi Patel, at the outset, submitted that during the pendency of this petition, the Apex Court in case of Union of India v. Rajeev Bansal , reported in 469 ITR 46 (SC) has reversed the decision tendered by this Court in Keenara Industries Pvt. Ltd. v. Income Tax Officer (Supra) and has prescribed the modalities to consider validity of the notice issued under TOLA between 31.3.2021 and 30.6.2021.

14. It was submitted that as held by the Hon’ble Apex