Section 148 Notice Held Valid Where Reply Period Under Section 148A(b) Was Excluded from Limitation

The Delhi High Court, in Sunil Bhalla v. Deputy Commissioner of Income-tax, examined an important issue relating to reassessment proceedings under the Income-tax Act, 1961. The Court held that the time allowed to an assessee for replying to a notice under Section 148A(b) must be excluded while computing the limitation period for issuing a notice under Section 148.

Background of the Case

The Assessing Officer issued a notice under Section 148A(b) on 28-03-2024, asking the assessee to explain why a reassessment notice should not be issued.

The assessee was granted time up to 08-04-2024 to submit a reply. Instead of filing the reply, the assessee sought adjournment on 05-04-2024 and again on 15-04-2024. The second adjournment request was rejected by the Assessing Officer.

Thereafter, the Assessing Officer passed an order under Section 148A(d) and issued a reassessment notice under Section 148 on 16-04-2024. The assessee challenged the proceedings before the Delhi High Court, arguing that the reassessment notice was barred by limitation.

Relevant Legal Provision

Section 148A provides an opportunity to the assessee before issue of notice under Section 148. Under Section 148A(b), the assessee is given time to respond to the show cause notice.

Section 149 prescribes the time limit for issue of notice under Section 148. The fifth and sixth provisos to Section 149 provide that:

• The time or extended time allowed to the assessee for replying to a notice under Section 148A(b) is to be excluded while computing limitation.

• If the remaining limitation period after such exclusion is less than seven days, it is extended to seven days.

Delhi High Court’s Decision

The High Court held that the period allowed to the assessee for filing reply under Section 148A(b) was rightly excluded while computing the limitation period.

Since the assessee did not file any reply and the second adjournment request was rejected on 15-04-2024, the Court treated 15-04-2024 as the deemed date of filing the reply for limitation purposes.

Accordingly, the Assessing Officer had seven days from 15-04-2024 to pass the order under Section 148A(d) and issue the notice under Section 148. The last permissible date was therefore 22-04-2024. Since the order and notice were issued on 16-04-2024, the proceedings were held to be within limitation.

The writ petition was dismissed.

Key Takeaways for Taxpayers

• Reply timelines under Section 148A(b) directly affect reassessment limitation.

• Seeking adjournment does not automatically invalidate reassessment proceedings.

• If an adjournment is rejected, the rejection date may be treated as the effective date for computing limitation.

• Assessees should respond to Section 148A(b) notices within the prescribed time and avoid relying only on technical limitation objections.

• Proper documentation and timely representation are critical in reassessment matters.

Conclusion

This ruling clarifies that reassessment notices cannot be treated as time-barred merely because the original limitation date has passed, where the statutory exclusion under Section 149 applies. Taxpayers receiving notices under Section 148A(b) should act promptly and seek professional advice before the deadline expires.

For expert guidance on this topic, contact your tax professional today.