Reassessment Notice for AY 2016-17 Issued After March 2023

Reassessment Notice for AY 2016-17 Issued After March 2023 Is Legally Void Due to Limitation

Issue

Whether a notice issued under Section 148 for Assessment Year 2016-17 is legally valid if it is issued on March 31, 2024, after the statutory six-year limitation period has expired.

Facts

Assessment Year: The proceedings concerned the Assessment Year 2016-17.
Statutory Deadline: For the relevant year, the six-year limitation period for issuing a reassessment notice under Section 149 expired on March 31, 2023.
Timeline of Action: The Revenue Department issued the notice on March 31, 2024, which was one year beyond the prescribed deadline.
High Court Ruling: The High Court held the notice to be time-barred and quashed the reassessment proceedings.
Supreme Court Appeal: The Revenue filed a Special Leave Petition (SLP) challenging the High Court’s decision to set aside the notice.

Decision

Dismissal of SLP: The Supreme Court found no merit in the Revenue’s challenge and refused to interfere with the High Court’s order.
Upholding Limitation: The Court confirmed that the notice was issued after the expiry of the mandatory six-year period from the end of the relevant assessment year.
Finality of Order: The SLP was dismissed, thereby confirming that the reassessment proceedings were invalid from their inception.

Key Takeaways

Strict Adherence to Timelines: The limitation periods prescribed under Section 149 are jurisdictional. A notice issued even a day late is void and cannot be used to reopen an assessment.
Calculation of Limitation: For AY 2016-17, the end of the relevant assessment year is March 31, 2017. The six-year period strictly ends on March 31, 2023.
Protection of Finality: These statutory limits are designed to provide finality to tax assessments and prevent the Revenue from initiating proceedings after an unreasonable lapse of time.

IN THE ITAT MUMBAI BENCH ‘B’

Breach Candy Hospital Trust

Assistant Commissioner of Income-tax (Exemption)^*

SAKTIJIT DEY, Vice President
and Prabhash Shankar, Accountant Member

IT Appeal No. 1087 (Mum.) of 2026
[Assessment year 2013-14]

APRIL 29, 2026

J.D. Mistry, Sr. Adv. and Fenil Bhatt for the Appellant. Subhas K.R., CIT (DR) for the Respondent.

ORDER

Saktijit Dey, Vice-President:– Captioned appeal by the assessee arises out of order dated 20.11.2025, passed by Additional Commissioner of Income Tax, Appeals-2, Gurugram pertaining to the assessment year (A.Y. for short) 2013-14.

2. Though multiple grounds have been raised in the appeal, however, at the very outset, Shri J. D. Mistry, learned Sr. Counsel appearing for the assessee submitted that the primary grievance of the assessee is against disposal of the appeal by ld. first appellate authority instead of keeping it in abeyance, as requested by the assessee.

3. Briefly the facts are, the assessee is a charitable Trust, registered with Charity Commissioner, Mumbai. The assessee is also registered u/s. 12A of the Income Tax Act, 1961 (‘the Act’ for short). Since, the assessee is running a hospital for providing medical care, it made an application seeking approval u/s. 10(23C)(via) of the Act for enabling it to claim exemption under the said provision. However, the said application was rejected by the Chief Commissioner of Income Tax vide order dated 15.04.2010. Challenging the said rejection order, the assessee filed a writ application before the Hon’ble Bombay High Court registered as Writ Petition No. 2462 of 2010. While admitting the said writ application, Hon’ble High Court granted certain interim relief to the assessee. Subsequently, the assessee filed another application for renewal of approval u/s. 10(23C)(via) of the Act. However, the said application was also rejected by Chief Commissioner of Income Tax vide order dated 28.09.2012. Challenging the said order, the assessee filed another writ application before the Hon’ble Bombay High Court registered as Writ Petition No. 1051 of 2013. While admitting the said writ petition, Hon’ble High Court granted similar interim relief as was granted in Writ Petition No. 2462 of 2010 filed by the assessee earlier.

4. Be that as it may, in the return of income filed for the impugned assessment year, the assessee claimed exemption u/s. 10(23C)(via) of the Act. Alternatively, the assessee also claimed exemption u/s. 11 of the Act on the strength of registration granted u/s. 12A of the Act.

5. In course of assessment proceeding, the Assessing Officer (A.O. for short) called upon the assessee to justify its claim of exemption u/s. 11 of the Act. In this context, the A.O. called for various information from the assessee and examined them. After verifying the details, the A.O. observed that the assessee is basically carrying out its activities like a business venture for attaining profit maximization. Though, he concluded that the assessee is entitled to exemption u/s. 11 of the Act but certain deductions claimed cannot be allowed.

6. Having held so, he proceeded to compute the income of the assessee. While doing so, he disallowed claim of depreciation and provision of gratuity and leave encashment. Ultimately, he determined the total income at Rs.40,73,35,146/-, against which, he allowed exemption u/s. 11(1)A of the Act for an amount of Rs.6,11,00,272/-. Having computed the income as such, he allowed exemption u/s. 10(23C)(via) of the Act for an amount of Rs.34,62,34,874/-.

7. Against the assessment order so passed, the assessee preferred an appeal before ld. First appellate authority.

8. In course of proceedings before ld. First appellate authority, the assessee specifically submitted that pending the final outcome in the writ applications, the appeal should be kept in abeyance. Though initially, the first appellate authority kept the appeal pending, however, ultimately, the appeal was disposed of by the impugned order.

9. Before us, ld. Sr. Counsel submitted, the A.O. has passed the assessment order in complete disregard to and in gross violation of the interim relief granted by Hon’ble High Court. Drawing our attention to interim orders passed by Hon’ble High Court, he submitted, though the Hon’ble High Court had specifically directed the A.O. to complete the assessment allowing assessee’s claim of exemption u/s. 10(23C)(via) of the Act, however, the A.O. has proceeded to consider the alternative claim u/s. 11 of the Act and, thereafter, has granted exemption u/s. 10(23C) of the Act. He submitted, though, the First appellate authority was made aware of the legal position and also the fact that writ applications are pending for disposal and also requested to keep the appeal pending, however, without taking note of the submissions made by the assessee, the First appellate authority has proceeded to dispose of the appeal based on a remand report obtained from A.O. which was never even confronted to the assessee. Thus, he submitted, the order of the first appellate authority should be set aside with a direction to wait for the final outcome of the writ application and, thereafter, proceed to decide the appeal.

10. Ld. Departmental Representative (ld. DR for short) relied upon the observations of the A.O.

11. We have considered rival submissions and perused the materials available on record. A reading of the impugned assessment order itself reveals that the assessee was initially availing exemption u/s. 10(22A) of the Act between A.Ys. 1970 -71 to 1995-96. Thereafter, the assessee was granted approval u/s. 10(23C) of the Act by the Central Board of Direct Taxes (CBDT for short) vide order dated 10.04.2003 and was availing exemption for the years 1999-2000 to 2001-02. It is a fact on record that assessee’s application for renewal of approval u/s.10(23C) of the Act for A.Y. 2010-11 was rejected by the competent authority vide order dated 15.04.2010, against which, the assessee had preferred a writ application in Hon’ble Bombay High Court registered as Writ Petition No. 2462 of 2010. In the said writ application, the assessee inter alia others sought the following relief:

(d)

That pending the hearing and final disposal of the present Petition, the Respondents be:

(i)

restrained from giving effect to the order dated 15^th April, 2010 (Exhibit ‘U’ hereto) or to bring the surplus earned by the Petitioner to tax under the Act, and

(ii)

complete assessments and all other proceedings under the Act on the basis that the Petitions applications under section 10(23C)(via) are approved.

12. Vide order dated 17.01.2011, the Hon’ble High Court granted interim relief qua prayer no.(d) reproduced above. The stay was made absolute vide order dated 13.06.2011. Seeking renewal of approval u/s. 10(23C) of the Act for subsequent assessment years, the assessee again made an application to the competent authority, however, the said application was rejected. Challenging the said rejection order, the assessee filed another writ application before the Hon’ble Bombay High Court registered as Writ Petition no. 1051 of 2013 with similar prayers as was made in Writ Petition no. 2462 of 2010. Vide order dated 25.04.2014 the Hon’ble High Court granted interim relief qua similar prayer made in the writ petition. Thus, as could be seen from the aforesaid facts, while granting interim relief to the assessee, the Hon’ble High Court had clearly directed the A.O. to complete the assessment on the basis that petitioners applications seeking approval u/s. 10(23C)(via) of the Act are approved.

13. However, while completing the assessment for the impugned assessment year, instead of carrying out the directions of Hon’ble High Court in letter and spirit, the A.O. has proceeded to examine assessee’s claim of exemption u/s. 11 of the Act and after computing the income of the assessee under the said provision has granted exemption u/s. 10(23C) of the Act at a much reduced amount. It is a fact on record that against the said assessment order, the assessee had filed an appeal before the First appellate authority. Materials placed on record demonstrate that in course of proceedings before the First appellate authority, the assessee repeatedly made request to keep the appeal pending awaiting final outcome in the writ application. In fact, the multiple requests made by the assessee to keep the matter pending have been chronicled in paragraph 3 of the appellate order. In all fairness, it must also needs to be mentioned that the First appellate authority indeed kept the proceedings in abeyance for some time. However, after change of incumbent in office, the successor first appellate authority without considering assessee’s request proceeded to dispose of the appeal fully relying upon a remand report of the A.O. without even confronting it to the assessee. While dismissing the appeal, the First appellate authority has completely overlooked the fact of assessee’s claim of exemption u/s. 10(23 C) of the Act as also the fact of pendency of writ application before Hon’ble Bombay High Court on the very same issue and the interim orders passed thereon.

14. Thus, upon consideration of material facts, we are of the view that the impugned order of the First appellate authority deserves to be set aside with a direction to proceed with the appeal after the final outcome in the writ applications pending before the Hon’ble Bombay High Court on the issue of assessee’s claim of exemption u/s. u/s. 10(23C)(via) of the Act. Accordingly, the impugned order of the First appellate authority is set aside. Once the writ application is disposed of, the assessee is directed to communicate the orders of Hon’ble High Court to the First appellate authority and in terms of which, the First appellate authority may proceed to dispose of the appeal.

15. In the result, the appeal is allowed for statistical purpose.