Time Extended to Seek Reply Excludes from Limitation Period, Validating Revenue’s Reassessment Notice

Time Extended to Seek Reply Excludes from Limitation Period, Validating Revenue’s Reassessment Notice

Issue

Whether the time allowed or extended for an assessee to reply to a Section 148A(b) show cause notice must be excluded when computing the limitation period for issuing a reassessment notice, and whether a notice issued within 7 days of the deemed reply date is legally valid under the fifth and sixth provisos to Section 149 of the Income-tax Act.

Facts

• The Assessing Officer (AO) issued a show cause notice to the assessee under Section 148A(b) on March 28, 2024, with an initial reply deadline of April 8, 2024.

• On April 5, 2024, the assessee requested an adjournment, and the AO subsequently deferred the hearing to April 15, 2024.

• On April 15, 2024, the assessee requested another adjournment, which the AO declined.

• Because no reply was actually submitted, the AO treated April 15, 2024, as the deemed date of the assessee filing their reply.

• The AO subsequently passed the assessment order under Section 148A(d) and issued the reassessment notice under Section 148 on April 16, 2024.

Decision

• Held, yes: The time or extended time granted to the assessee to reply to a show cause notice issued under Section 148A(b) must be excluded when calculating the overall limitation period.

• Held, yes: The entire duration between the date of the Section 148A(b) notice and the date the reply is submitted (or deemed submitted) is excluded. Following that, an additional 7-day buffer is provided to the AO under the sixth proviso to Section 149 to pass the final order and issue the reassessment notice.

• Held, yes: Since the assessee failed to file a reply and instead sought a second adjournment on April 15, 2024, that exact date was correctly treated by the AO as the deemed date of filing the reply.

• Held, yes: Consequently, both the Section 148A(d) order and the Section 148 reassessment notice issued on April 16, 2024—just one day after the deemed reply date—fall squarely within the legally permitted limitation period. The ruling stands in favor of the Revenue.

Key Takeaways

• No Limitation Premium for Delay: Assessees cannot use adjournment requests or delays in filing replies to run out the clock on the Tax Department’s statutory deadlines.

• The 7-Day Window Rule: Once a reply is submitted or a final adjournment is rejected (marking a deemed reply), the fifth and sixth provisos to Section 149 effectively grant the Assessing Officer a minimum of 7 days from that point to issue the final reassessment notice.

• Deemed Reply Date: If an assessee repeatedly asks for time and ultimately fails to submit a written response, the date on which the final adjournment is denied serves as the official baseline (“deemed date”) for calculations.