Reassessment Notice Beyond Limitation Invalid Even After Excluding Assessee's Reply Period: Delhi HC

The Delhi High Court has quashed a reassessment notice issued under Section 148, holding that the notice was barred by limitation despite the Revenue's reliance on the exclusion of time granted to the assessee for filing a reply under Section 148A(b). The Bench of Justice Dinesh Mehta and Justice Vinod Kumar has observed that while the period available to an assessee for filing a reply under Section 148A(b) is required to be excluded for computing limitation, the Assessing Officer must still adhere to the extended limitation period prescribed under the statute. The dispute related to reassessment proceedings for Assessment Year 2017-18. The Assessing Officer issued a show-cause notice under Section 148A(b) on 29 March 2024, granting the assessee time until 8 April 2024 to submit a reply. Thereafter, the assessee sought adjournments and eventually filed a reply on 21 April 2024. Subsequently, the Assessing Officer passed an order under Section 148A(d) and issued a reassessment notice under Section 148 on 30 April 2024. The assessee challenged the proceedings, contending that the reassessment notice was issued beyond the statutory limitation period prescribed under Section 149 of the Income Tax Act. The petitioner argued that under the first proviso to Section 149, the outer time limit for issuing a reassessment notice for AY 2017-18 expired on 31 March 2024. It was submitted that when the Assessing Officer issued the Section 148A(b) notice on 29 March 2024, there were only two days left before the limitation period expired. Since the law mandates that an assessee must be given at least seven days to respond, the Revenue could not validly initiate proceedings so close to the limitation deadline and then seek to extend the period through subsequent proceedings. The petitioner further relied upon earlier judicial precedents, including the Rajasthan High Court decision in Shree Cement Ltd., the Bombay High Court ruling in Hexaware Technologies Ltd., and the Supreme Court's judgment in Union of India v. Rajeev Bansal. The Income Tax Department relied heavily on a recent Delhi High Court judgment in BKR Capital Private Limited, arguing that the reassessment proceedings remained within limitation because the fifth and sixth provisos to Section 149 require exclusion of the time granted to the assessee for filing a reply under Section 148A(b). According to the Revenue, once the reply period and extended time granted to the assessee are excluded, the limitation period correspondingly extends, thereby validating the reassessment notice issued on 30 April 2024. The Court undertook a detailed analysis of the limitation framework introduced by the Finance Act, 2021 and the interplay between Sections 148A and 149. The Bench observed that merely because seven clear days were not available when the Section 148A(b) notice was issued on 29 March 2024, the proceedings could not automatically be treated as invalid. The Court noted that the statute permits a response period ranging from seven to thirty days and specifically provides for exclusion of such period while computing limitation. According to the Court, Parliament consciously inserted the fifth proviso to Section 149 to exclude the time taken by the assessee in responding to a Section 148A(b) notice. Therefore, the period between issuance of the notice and filing of the reply had to be excluded while computing limitation. The Court held that after excluding the period from 29 March 2024 to 21 April 2024—the date on which the assessee filed the reply—the Assessing Officer was left with only seven days under the sixth proviso to complete the proceedings and issue the reassessment notice. The Bench found that the reply was filed on 21 April 2024, meaning the Assessing Officer had until 28 April 2024 to pass the order under Section 148A(d) and issue the notice under Section 148. However, both actions were taken only on 30 April 2024. The Court emphasized that once the statutory exclusions were applied, the Revenue still failed to act within the maximum permissible period. The High Court clarified that accepting the assessee's broader contention that every notice issued after 1 March would become invalid due to the minimum reply period requirement would create uncertainty and frustrate the legislative scheme behind Section 148A, which was introduced to strengthen compliance with principles of natural justice. At the same time, the Court made it clear that the exclusion provisions cannot be stretched indefinitely and must operate strictly within the statutory framework prescribed under the fifth and sixth provisos to Section 149. Allowing the writ petition, the Delhi High Court quashed both the order passed under Section 148A(d) dated 30 April 2024; and the reassessment notice issued under Section 148 dated 30 April 2024. The Court held that the notice ought to have been issued by 28 April 2024 and, having been issued on 30 April 2024, was clearly barred by limitation. Case Details Case Title: Shailendra Nath Rai Versus Assistant Commissioner Of Income Tax Circle 60 (1) New Delhi And Anr Citation: JURISHOUR-1494-HC-2026(DEL) Case No.: W.P.(C) 15305/2024, CM APPL. 64265/2024 Date: 29/05/2026 Counsel For Petitioner: Salil Aggarwal, Sr. Adv. Counsel For Respondent: Puneet Rai, SSC Click Here To Read Order Read More: Can Income Tax Dept. Reopen Assessment Through Rectification After Granting Immunity U/S 270AA? ITAT Says No

Reassessment Notice Beyond Limitation Invalid Even After Excluding Assessee’s Reply Period: Delhi HC

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