Gujarat High Court

Saroj Tilakraj Juneja vs The Assistant Commissioner Of Income ... on 23 June, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                            C/SCA/19361/2023                                   JUDGMENT DATED: 23/06/2025

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                                     IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                      R/SPECIAL CIVIL APPLICATION NO. 19361 of 2023


                       FOR APPROVAL AND SIGNATURE:


                       HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                                     and
                       HONOURABLE MR. JUSTICE PRANAV TRIVEDI

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                                      Approved for Reporting               No Yes
                                                                            ✔
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                                             SAROJ TILAKRAJ JUNEJA
                                                       Versus
                            THE ASSISTANT COMMISSIONER OF INCOME TAX , CIRCLE 1(1)(1)
                       ==================================================
                       Appearance:
                       MR YOGESH B SHAH(11695) for the Petitioner(s) No. 1
                       KARAN G SANGHANI(7945) for the Respondent(s) No. 1
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                          CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                                                and
                                HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                       Date : 23/06/2025

                       ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

Learned advocate Mr. Yogesh B. Shah for the

petitioner has filed a draft amendment. The same

is allowed in terms of the draft. To be carried

out forthwith.

2. Heard learned advocate Mr. Yogesh B. Shah for

the petitioner and learned Senior Standing

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Counsel Mr. Karan Sanghani for the respondent.

3. Rule returnable forthwith. Learned Senior

Standing Counsel Mr. Karan Sanghani waives

service of notice of rule.

4. Having regard to the controversy involved

which is in a narrow compass, with the consent of

the learned advocates for the respective parties,

the matter is taken up for hearing.

5. By this petition under Article 226 of the

Constitution of India, the petitioner has

challenged the notice dated 29.06.2021 issued

under Section 148 of the Income Tax Act (For

short "the Act")as well as the subsequent order

dated 21.07.2022 was passed under 148A(d) of the

Act. At the outset, learned advocate Mr. Yogesh

Shah for the petitioner submitted that the notice

dated 29.06.2021 under Section 148 of the Act is

issued under the provisions of the Taxation and

Other Laws (Relaxation and Amendment of Certain

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Provisions) Act, 2020 (For short "TOLA") and as

per the decision of the Hon'ble Apex Court in the

case of Union of India v. Rajeev Bansal, reported

in 469 ITR 46 (SC) such notice would be an

invalid notice as only one day time would be

available with the Assessing Officer to issue the

notice in compliance with the order passed by the

Hon'ble Apex Court in the case of Union of India

taxmann.com 64.

5.1. It was further submitted that admittedly the

notice under Section 148A(b) of the Act pursuant

to the order of the Hon'ble Apex Court in case of

Ashish Agarwal (supra) was issued on 28.05.2022

and thereafter the petitioner - assessee filed

reply dated 09.06.2022 and 04.07.2022 and the

order under Section 148A(d) of the Act was passed

on 21.07.2022 along with notice under Section 148

of the Act. It was submitted that as per the

directions issued by the Hon'ble Apex Court the

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entire process ought to have been done within the

time period of issuance of notice under TOLA

which is 30.06.2021 and, therefore, admittedly

one day time was left as the notice under TOLA

was issued on 29.06.2021. It was, therefore,

submitted that as per decision of the Apex Court

in the case of Rajeev Bansal (supra), the notice

dated 29.06.2021 as well as the subsequent notice

dated 21.07.2022 would be invalid.

6. Learned Senior Standing Counsel Mr. Karan

Sanghani for the respondent could not controvert

the above submissions as the notice under TOLA

was issued on 29.06.2021 and only one day time

would be left with the Assessing Officer to

comply with the directions of the Hon'ble Apex

Court in the case of Ashish Agarwal (supra) which

was humanly impossible and as such the notice

dated 21.07.2022 would be invalid as held by the

Hon'ble Apex Court.

7. Having heard the learned advocates for the

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respective parties and considering the directions

issued by the Hon'ble Apex Court in case of

Rajeev Bansal (supra), it would be germane to

reproduce the observations made thereunder so as

to apply the same to the facts of the case as

under:

"92. This Court specifically mentioned that its directions would also apply to three categories:

(i) the judgment and order passed by the High Court of Judicature at Allahabad; (ii) all judgments and orders passed by the different High Court on the issue where notices issued under Section 148 of the old regime after 1 April 2021 were set aside; and (iii) writ petitions pending before various High Courts in which notices under Section 148 of the old regime issued after 1 April 2021 are under challenge Ashish Agarwal (supra).

The Court mentioned the above three categories to clarify that the general nature of its directions will also give a quietus to the matters that have already been adjudicated or are pending adjudication before judicial forums. The operation of the directions cannot be Ashish Agarwal (supra) and limited to the above three categories, especially when this Court has specifically held that "the present order shall be applicable PAN INDIA."

98. A legal fiction is created for a definite purpose and it should be limited to the purpose for which it is enacted or applied. It is a well- established principle of interpretation that the courts must give full effect to a legal fiction by having due regard to the purpose for which the legal fiction is created. 157 The consequences that follow the creation of the legal fiction "have got to be worked out to their logical extent." 158 The court has to assume all the facts and consequences that are incidental or inevitable

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corollaries to giving effect to the fiction.

105. A direction issued by this Court in the exercise of its jurisdiction under Article 142 is an order of a court. The third proviso to Section 149 of the new regime provides that the period during which the proceedings under Section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under Section 148A(b) and the date of the decision of this Court in Ashish Agarwal (supra) the assessing officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show cause notices were deemed to have been stayed by order of this Court from the date of their issuance (somewhere from 1 April 2021 till 30 June 2021) till the date of decision in Ashish Agarwal (supra), that is, 4 May 2022.

106. In Ashish Agarwal (supra), this Court directed the assessing officers to provide relevant information and materials relied upon by the Revenue to the assesses within thirty days from the date of the judgment. A show cause notice is effectively issued in terms of Section 148A(b) only if it is supplied along with the relevant information and material by the assessing officer. Due to the legal fiction, the assessing officers were deemed to have been inhibited from acting in pursuance of the Section 148A(b) notice till the relevant material was supplied to the assesses. Therefore, the show cause notices were deemed to have been stayed until the assessing officers provided the relevant information or material to the assesses in terms of the direction issued in Ashish Agarwal(supra). To summarize, the combined effect of the PART F legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time

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begins to run for the assesses to respond to the show cause notices.

107. The third proviso to Section 149 allows the exclusion of time allowed for the assesses to respond to the show cause notice under Section 149A(b) to compute the period of limitation. The third proviso excludes "the time or extended time allowed to the assessee." Resultantly, the entire time allowed to the assessee to respond to the show cause notice has to be excluded for computing the period of limitation. In Ashish Agarwal (supra), this Court provided two weeks to the assesses to reply to the show cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to Section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices.

108. The Income Tax Act read with TOLA extended the time limit for issuing reassessment notices under Section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. 163 Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to

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the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021.

109. If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under Section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time East End Dwellings Co. Ltd. v. Finsbury Borough Council, [1952] AC 109. [Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] PART F limit surviving under the Income Tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction.

iii. Effect of the legal fiction

110. The effect of the creation of the legal fiction in Ashish Agarwal(supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices].As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal(supra) has to be excluded

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from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.

111. The clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under Section 149A(c); (ii) take a decision under Section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Actread with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime.

112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022.

113.In Ashish Agarwal(supra), this Court allowed the assesses to avail all the defences, including

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the defence of expiry of the time limit specified under Section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under Section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under Section 149(1)of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under Section

151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under Section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income Tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time- barred.

G. Conclusions

114. In view of the above discussion, we conclude that:

a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions;

b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021;

c. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148;

d. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three

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years from the end of an assessment year falls between 20 March 2020 and 31 March PART G 2021, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval;

e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval;

f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021;

g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and

h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside;"

8. Considering the above dictum of law, we are

of the opinion that the notice dated 21.07.2022

would be an invalid notice as there was no time

left with the Assessing Officer after issuance of

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notice dated 29.06.2021 till 30.06.2021 to comply

with the decision of the Hon'ble Apex Court in

case of Ashish Agarawal (supra).

9. In view of the above as the facts speak for

itself and considering the directions issued by

the Hon'ble Apex Court in the case of Rajeev

Bansal (supra), more particularly in paragraph

nos.'98', '112' read with paragraph no. '114(d)',

the impugned notice dated 21.07.2022 would be an

invalid notice.

10. In the result, the petition therefore,

succeeds and is accordingly allowed. The impugned

notice dated 21.7.2022 is hereby quashed and set-

side. Consequential Assessment Order dated

30.05.2023 would not survive and is quashed and

set-aside. Rule is made absolute to the aforesaid

extent. No order as to costs.