A taxpayer cannot challenge a reassessment order as time-barred if their own request for a personal hearing caused the order to be passed after the initial one-month time limit.
Issue
Is an order passed under Section 148A(d) of the Income-tax Act, 1961, barred by limitation if it is passed more than one month after the end of the month in which the assessee’s reply was received, especially when the assessee themselves had requested a personal hearing?
Facts
- The Assessing Officer (AO) issued a notice under Section 148A(b) to initiate reassessment proceedings.
- In response, the assessee filed a written reply and also made a specific prayer for an opportunity of being heard in person.
- The AO accepted this prayer and fixed a date for a personal hearing. This hearing date was scheduled within one month from the end of the month in which the assessee’s reply was submitted.
- After the hearing, the AO passed the final order under Section 148A(d), but by this time, the one-month period (calculated from the date of the reply) had expired.
- The assessee challenged the order, arguing it was time-barred because it was not passed within the one-month limit.
Decision
The court ruled in favour of the revenue.
- It held that since the assessee themselves had requested a personal hearing, an action which extends the timeline of the proceedings, they could not then turn around and contend that the order passed after granting them that very hearing was barred by limitation.
- The court found that the AO had acted reasonably by scheduling the hearing within the initial one-month period, and the subsequent order was therefore valid.
Key Takeways
- A Taxpayer Cannot Benefit from Their Own Action: A taxpayer who requests a personal hearing, which necessarily extends the adjudication process, is effectively stopped from later arguing that the time taken to grant that hearing has made the final order time-barred.
- The Intent of the Law: The time limit in Section 148A is intended to ensure swift proceedings, but it must be read in a practical manner that accommodates the principles of natural justice, which include granting a personal hearing when requested.
The COVID-related exclusion period is applicable when calculating the three-year time limit for reopening an assessment, which in turn determines the correct sanctioning authority.
Issue
For the purpose of determining the correct sanctioning authority under Section 151 of the Income-tax Act, 1961, should the special exclusion of time granted due to the COVID-19 pandemic be taken into account when calculating whether three years have passed since the end of the relevant assessment year?
Facts
- Reassessment proceedings were initiated for the Assessment Year 2020-21 by a notice issued on September 25, 2024.
- The assessee challenged the proceedings on the ground that since more than three years had passed from the end of the relevant assessment year (March 31, 2021), the sanction for the reopening should have been obtained from the higher authority (PCCIT) under Section 151(ii).
- The sanction in this case was obtained from the lower authority (the PCIT) under Section 151(i).
- The court noted that the relevant assessment year fell within the COVID period, for which special time limit extensions were applicable.
Decision
The court ruled in favour of the revenue.
- It held that while calculating the three-year limitation period, the specific period from April 1, 2021, to March 20, 2022, must be excluded as per the relevant relaxation provisions.
- When this period is excluded from the calculation, the notice issued on September 25, 2024, is legally deemed to have been issued within the three-year limit.
- Therefore, the sanction that was required was the one for cases falling within three years. The sanction granted by the Principal Commissioner (PCIT) under Section 151(i) was held to be correct and in accordance with the law.
Key Takeways
- COVID Relaxations Impact Limitation Calculations: The special laws and notifications that extended various timelines during the COVID-19 pandemic have a direct and significant impact on the calculation of limitation periods for actions like reassessment.
- Determining the Correct Sanctioning Authority: The level of the authority from whom sanction is required (PCIT vs. PCCIT) depends entirely on whether the case is being reopened within three years or after three years. This calculation must take into account any applicable extensions or exclusions of time.
- A Jurisdictional Prerequisite: Obtaining sanction from the correct authority is a fundamental jurisdictional requirement. The court’s finding that the sanction was correct in this case was crucial for upholding the validity of the entire reassessment proceeding.
HIGH COURT OF PATNA
Healing Touch Hospital
v.
Principal Chief Commissioner of Income-tax
Rajeev Ranjan Prasad and Ashok Kumar Pandey, JJ.
Civil Writ Jurisdiction Case No.19373 of 2024
AUGUST 8, 2025
Section 149, read with section 148A, of the Income-tax Act, 1961 – Income escaping assessment – Time limit for issuance of notice (General) – Assessment year 2020-21 – Assessee-firm filed its income tax return for year relevant to assessment year 2020-21 – A survey under section 133A was conducted upon assessee – Thereafter, Assessing Officer issued a notice under section 148A on ground that information received from insight portal suggested that income chargeable to tax for assessment year 2020-21 had escaped assessment – In response, assessee submitted its reply and also prayed for grant of opportunity of being heard in matter in person – This prayer of assessee was accepted and it was informed of a date for personal hearing – Thereafter, an order under section 148A(d) was passed and notice under section 148 was issued – Assessee filed a writ petition on ground that in terms of clause (d) of section 148A, Assessing Officer was obliged to take a decision as to whether or not it was a fit case for issuance of notice under section 148 within one month from end of month in which reply was received by him, thus, impugned notice issued after one month would be barred by limitation – It was noted that it was evident that assessee sought a personal hearing before passing an order under clause (d) of section 148A and Assessing Officer accepted said prayer and fixed date of personal hearing within one month from end of month in which reply was submitted by assessee – Whether, therefore, assessee could not contend that order passed after one month would be barred by limitation – Held, yes [Paras 37] [In favour of revenue]
Section 151, read with section 148, of the Income-tax Act, 1961 – Income escaping assessment – Sanction for issue of notice (Illustrations) – Assessment year 2020-21 – Assessee-firm, engaged in business, filed its income tax return for assessment year 2020-21 – A survey under section 133A was conducted upon assessee – Thereafter, a notice under section 148A(b) was issued to assessee on 29-3-2024 that there was information which suggested that income chargeable to tax for assessment year 2020-21 had escaped assessment within meaning of section 147 – On 25-9-2024 an order under section 148A(d) was passed and on same day, a notice under section 148 was issued – Assessee filed instant writ application on ground that since more than three years had elapsed from end of relevant assessment year, sanction was required to be obtained from Principal Chief Commissioner of Income Tax or Director General of Income Tax, Investigation, however, in this case, sanction had been obtained from Principal Commissioner – It was noted that relevant assessment year would fall during Covid period – In ordinary course, period of limitation would have come to an end upon completion of three years subject to calculation of time-limit in terms of section 149, but period from 1-4-2021 to 20-3-2022 would be liable to be excluded while counting period of limitation – Whether if that period was excluded from counting of limitation, notice under section 148 issued on 25-9-2024 would not be barred by limitation – Held, yes – Whether, therefore, sanction granted by Principal Commissioner, Patna in accordance with section 151(i) was in accordance with law – Held, yes [Paras 40 and 41] [In favour of revenue]