Gujarat High Court

Bipinchandra Himmatlal Mehta vs Assessment Unit, Income Tax Department on 24 June, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                            C/SCA/10327/2023                              JUDGMENT DATED: 24/06/2025

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                                     IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                      R/SPECIAL CIVIL APPLICATION NO. 10327 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               Yes             No
                                                                                     ✔
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                                         BIPINCHANDRA HIMMATLAL MEHTA
                                                      Versus
                                  ASSESSMENT UNIT, INCOME TAX DEPARTMENT & ANR.
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                       Appearance:
                       MR MANISH J SHAH(1320) for the Petitioner(s) No. 1
                       KARAN G SANGHANI(7945) for the Respondent(s) No. 1,2
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                          CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                                and
                                HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                                                     Date : 24/06/2025

                                             ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)

1. Heard learned advocate Mr. Jimi Patel, for

learned advocate Mr. Manish Shah for the

petitioner and learned Senior Standing Counsel

Mr. Karan Sanghani for the respondents.

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2. Having regard to the controversy involved

which is in narrow compass, with the consent

of the learned advocates for the respective

parties, the matter is taken up for hearing.

3. Rule returnable forthwith. Learned Senior

Standing Counsel Mr. Karan Sanghani waives

service of notice of rule.

4. By this petition under Article 226/227 of

the Constitution of India, the petitioner has

challenged assessment order dated 30.5.2023

read with Section 144B of the Income Tax Act,

1961 (For short "the Act") and subsequent

demand notice dated 30.5.2023 issued to the

petitioner.

5. The brief facts are as under:

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6. The petitioner filed return of income for

the Assessment Year 2014-2015 on 30.7.2014.

7. A notice dated 29.06.2021 was issued under

Section 148 of the Act under the provisions of

the Taxation and Other Laws (Relaxation and

Amendment of Certain Provisions) Act, 2020

(For short "TOLA").

8. Pursuant to the decision of the Hon'ble

Supreme Court in case of Union of India vs.

taxmann.com 64, the respondent issued notice

dated 27.5.2022 under Section 148A(b) of the

Act. The respondent thereafter passed an order

dated 27.7.2022 under Section 148A(d) of the

Act alleging that income to the extent of

Rs.62,98,345/- had escaped assessment.

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9. Being aggrieved, the petitioner preferred

Special Civil Application No. 20516 of 2022

challenging the action of the respondent No.2

for issuance of the notice under Section 148

of the Act dated 27.7.2022 as well as order of

same date passed under Section 148A(d) of the

Act.

10. This Court by order dated 21.11.2022,

issued the notice for final disposal in the

said petition and the notice issued to the

petitioner under Section 148 of the Act was

quashed by order dated 29.3.2023 relying upon

the decision of this Court in case of Keenara

Industries Pvt. Ltd. v. ITO, reported in

[2023] 147 taxamann.com 585 Guj.

11. The respondent- revenue preferred a

Special Leave Petition before the Hon'ble Apex

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Court challenging the order passed by this

Court in Keenara Industries Pvt. Ltd. v.

Income Tax Officer (Supra), wherein the

Hon'ble Apex Court stayed the judgment and

order passed by this Court. The respondent

No.1, relying upon the stay granted by the

Hon'ble Apex Court, issued a show-cause notice

dated 20.5.2023 to the petitioner, which was

objected by the petitioner for reactivating

the reassessment proceedings though the notice

under Section 148 issued to the petitioner was

quashed by this Court. It appears that

thereafter the Assessment Order under Section

147 read with Section 144B of the Act was

passed on 30.5.2023 making addition of

Rs.62,98,345/- being long term Capital Gain

for year under consideration. Subsequently

demand notice under Section 156 of the Act was

also issued against the petitioner wherein Rs.

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39,01,201/- was held to be payable by

petitioner for Assessment Year 2014-15.

12. Being aggrieved, the petitioner has

preferred this petition.

13. Learned advocate Mr. Jimi Patel, at the

outset, submitted that during the pendency of

this petition, the Apex Court in case of Union

of India v. Rajeev Bansal, reported in 469 ITR

46 (SC) has reversed the decision tendered by

this Court in Keenara Industries Pvt. Ltd. v.

Income Tax Officer (Supra) and has prescribed

the modalities to consider validity of the

notice issued under TOLA between 31.3.2021 and

30.6.2021.

14. It was submitted that as held by the

Hon'ble Apex Court in case of Union of India

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v. Rajeev Bansal (Supra), as the notice issued

under TOLA is dated 30.6.2021, only one day

was available for issuance of notice, after

giving opportunity of filing reply to the

assessee. From the date of passing of the

order by the Apex Court in case of Union of

India v. Ashish Agarwal (Supra) i.e.

21.5.2022, 14 days time was provided to the

assessee to reply to the above notice.

Therefore, the last date for filing the reply

by the assessee was 10.6.2022 and last date to

issue notice, as per the judgment of the Apex

Court in case of Union of India v. Rajeev

Bansal (Supra) would be 17.6.2022, whereas the

impugned notice under Section 148 is issued on

27.7.2022. It was therefore, submitted that

the notice dated 29.6.2021 which will relate

to the notice dated 27.7.2022 as per order

passed by the Apex Court in the case of Union

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of India v. Rajeev Bansal (Supra), would be

invalid notice. Reliance was placed on

following paragraphs of the Hon'ble Apex Court

wherein the situation is explained in detail

to 114:

"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 limited to the above three categories, especially when this Court has specifically held that "the present order shall be applicable PAN

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INDIA."

93. In Ashish Agarwal (supra), this Court was aware of the fact that it could not have used its jurisdiction under Article 142 to affect the vested rights of the assesses by deeming Section 148 notices under the old regime as Section 148 notices under the new regime. Hence, it deemed the reassessment notices issued under the old regime as show cause notices under Section 148A(b) of the new regime. Further, the Court directed the Revenue to provide all the relevant material or information to the assesses and thereafter allowed the assesses to respond to the show cause notice by availing all the defences, including those available under Section 149. Thus, the Court balanced the equities between the Revenue and the assesses by giving effect to the legislative scheme of reassessment as contained under the new regime. It supplemented the existing legal framework of the procedure of reassessment under the Income Tax Act with a remedy grounded in equitable standards.

iii. Effect of the legal fiction

"110. The effect of the creation of the legal fiction in Ashish

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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 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

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limit. The surviving time limit, as prescribed under the Income Tax Act read 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 148 of 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 the defence of expiry of the time limit specified under Section 149(1). In the

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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

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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 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

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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;"

15. Learned Senior Standing Counsel Mr. Karan

Sanghani could not controvert the facts that

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as per the decision of the Hon'ble Apex Court

in case of Union of India v. Rajeev Bansal

(Supra), the notice dated 27.7.2022 would be a

time barred notice and in turn the notice

dated 29.6.2021 would be an invalid notice, as

per aforesaid observations made by the Apex

Court.

16. Considering the above facts, there is a

notice dated 29.6.2021, only one day time was

left for the issuance of the notice under

Section 148 after granting 14 days time to the

assessee from the decision of Union of India

v. Ashish Agarwal, the date of issuance of the

notice under Section 148 would be 17.6.2022,

whereas in the facts of the case the notice

under Section 148 is issued on 27.7.2022 and

as such the notice dated 29.6.2021 would be an

invalid notice.