The Bombay High Court has held that a notice under Section 148 of the Income Tax Act, though dated and digitally signed on March 31, 2021, cannot be treated as having been issued on that date if it was actually dispatched and received by the taxpayer only on April 1, 2021.
The bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla ruled that the delay in triggering the email through the Income Tax Business Application (ITBA) portal is attributable to the Income Tax Department, thereby requiring the reassessment proceedings to comply with the post-Finance Act, 2021 regime.
The dispute pertained to Assessment Year 2013-14. The appellant challenged the validity of a reassessment notice dated March 31, 2021, issued under the erstwhile provisions of Section 148, along with the consequential reassessment order dated March 30, 2022.
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The company argued that although the notice bore the date of March 31, 2021, it was actually received via email only at 5:51 a.m. on April 1, 2021. Since the Finance Act, 2021 introduced an entirely new reassessment framework with effect from April 1, 2021, the assessee contended that the Department could not rely on the old reassessment provisions.
The Income Tax Department maintained that the reassessment notice had been digitally signed and uploaded to the ITBA portal on March 31, 2021, at around 1:32 p.m., and therefore stood “issued” on that date.
According to the Revenue, once the Assessing Officer digitally signs and uploads the notice to the ITBA system, the subsequent transmission through the portal is beyond the officer’s control. Consequently, the date of email dispatch should not determine the legal date of issuance.
During the proceedings, the High Court sought clarification from the Department regarding the exact time when the ITBA system triggered the email dispatch.
On instructions from the Assessing Officer, the Revenue informed the Court that the ITBA system recorded the “Notice Sent” timestamp as April 1, 2021, at 5:51:42 a.m., while the “Delivered” timestamp was 5:51:47 a.m. on the same day.
Based on these official system records, the Court concluded that the notice itself was dispatched only after the new reassessment provisions had already come into force.
The Bench relied extensively on the Delhi High Court’s decision in Suman Jeet Agarwal v. Income-tax Officer, which categorized such cases as those where notices were dated and digitally signed before April 1, 2021, but were actually sent and received only after the new law became effective.
The Court observed that any delay caused by the ITBA email system in triggering dispatch must necessarily be attributed to the Income Tax Department and cannot prejudice taxpayers.
Accordingly, it held that the impugned notice must be deemed to have been issued on April 1, 2021, rather than March 31, 2021.
Having held that the notice was effectively issued after April 1, 2021, the High Court applied the principles laid down by the Supreme Court in Union of India v. Ashish Agarwal (444 ITR 1).
The Supreme Court had directed that reassessment notices issued under the old law after April 1, 2021 should be treated as show-cause notices under Section 148A(b) introduced by the Finance Act, 2021.
Following this precedent, the Bombay High Court held that the reassessment proceedings must now continue under the amended statutory framework instead of the repealed provisions.
The Court quashed the reassessment order dated March 30, 2022, along with all consequential proceedings, directed that the impugned Section 148 notice be treated as a notice under Section 148A(b).
The court ordered the Assessing Officer to furnish all information and material relied upon within 30 days and permitted the assessee to file objections within two weeks thereafter.
The court directed the Assessing Officer to pass a fresh order under Section 148A(d) after considering every objection raised by the petitioner and clarified that all statutory defences available to both parties, including limitation under Section 149, remain open.
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