Supreme Court Upholds Income Tax Reopening Notice Within Limit

The Supreme Court of India recently upheld a Patna High Court judgment that validated a reopening notice issued under Section 148 of the Income Tax Act, 1961. The Court ruled that the notice was issued within the prescribed limitation period, dismissing the petitioner’s challenge. This decision clarifies the legal interpretation of Sections 148 and 149, which govern the reopening of income tax assessments.

Background of the Case

The matter originated from a writ petition filed by Chandra Shekhar before the Patna High Court. The petitioner challenged a notice dated 30 April 2024, issued under Section 148 for the Assessment Year (AY) 2020–21. Along with this, an order under Section 148A(d) was also issued by the Assessing Officer (AO).

The petitioner contended that the notice was time-barred under Section 149(1)(a) of the Income Tax Act. According to him, the limitation period should have been calculated from 22 April 2024, the date of the second notice issued by the AO. On this basis, he argued that the reopening was beyond the permissible period of three years.

To support his claim, the petitioner relied on the Supreme Court judgment in Union of India v. Rajeev Bansal, arguing that the same principle applied in his case.

Revenue’s Standpoint

The Revenue authorities opposed the petitioner’s arguments, maintaining that the initial notice dated 28 March 2024 under Section 148A(b) was the relevant date for determining limitation.

They clarified that:

• The first notice was issued within three years from the end of AY 2020–21.

• The second notice (22 April 2024) was only consequential, issued in response to the petitioner’s communication seeking more details.

Therefore, the Revenue argued that the reopening was well within the statutory time limit under Section 149(1)(a).

High Court’s Observation

After reviewing both sides, the Patna High Court examined the provisions of Sections 148 and 149, along with their fifth and sixth provisos. The Court concluded that the limitation must be counted from the first notice issued on 28 March 2024, as it initiated the reopening process.

The High Court observed that:

• The petitioner’s reliance on the Rajeev Bansal case was misplaced, as that case dealt with Section 149(1)(b), while the present one concerned Section 149(1)(a).

• Since the notice was issued within three years, the reopening was legally valid.

The Court dismissed the writ petition but allowed the petitioner to participate in the reassessment proceedings, stating that the challenge was premature.

Supreme Court’s Decision

Aggrieved by the High Court’s order, the petitioner filed a Special Leave Petition (SLP) before the Supreme Court. The apex court, however, refused to interfere with the findings of the Patna High Court.

A Bench comprising Justice Aravind Kumar and Justice N.V. Anjaria condoned the delay in filing but found no substantial reason to intervene. The Supreme Court emphasized that the reopening notice was issued within the statutory limitation period, and therefore, no grounds existed for judicial interference.

The SLP was dismissed, effectively upholding the Patna High Court’s judgment.

Legal Provisions Explained

• Section 148: Empowers the Assessing Officer to issue a notice for reassessment if income has escaped assessment.

• Section 148A: Introduced procedural safeguards requiring prior inquiry and the opportunity of being heard before issuing a notice.

• Section 149(1)(a): Provides that no notice under Section 148 shall be issued if three years have elapsed from the end of the relevant assessment year, except under specific conditions.

The core of the dispute revolved around which date should be considered for calculating the limitation — the initial notice or a subsequent communication. The courts consistently held that the first valid notice triggers the limitation period.

Key Takeaways

✅ The limitation period under Section 149(1)(a) is to be calculated from the first valid notice issued under Section 148A(b).
✅ Reliance on precedents dealing with Section 149(1)(b) is not applicable to cases under Section 149(1)(a).
✅ Procedural notices or follow-up communications do not reset or extend the limitation period.
✅ The Supreme Court reaffirmed the validity of reopening notices issued within the statutory time frame.

Conclusion

This judgment reinforces the principle that the first notice issued under Section 148A(b) determines the start of the limitation period for reopening assessments. The ruling provides much-needed clarity for both taxpayers and tax authorities on how limitation periods should be calculated under the Income Tax Act.

By upholding the High Court’s view, the Supreme Court has ensured that reopening notices issued within the prescribed three-year period remain legally sound, while preventing unnecessary challenges on procedural grounds.