Case Note & Summary
The petitioner, a proprietor of a petrol bunk, challenged a reassessment notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-14. The assessment was originally completed under Section 143(1). The notice was issued on 31.03.2021 based on information that the petitioner had received accommodation entries from two Kolkata-based companies, which were identified as shell entities. The petitioner contended that the notice was time-barred, as it was dispatched only on 01.04.2021, beyond the extended limitation period of 31.03.2021 under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Additionally, the petitioner argued that no tangible material linked him to the alleged transactions and that the reasons recorded were vague, not specifying the bank accounts or documents where the entries appeared. The revenue defended the notice, asserting it was based on concrete information and that the petitioner had been given an opportunity to prove genuineness. The court examined the meaning of 'issue' of notice in the context of electronic transmission, relying on Section 13 of the Information Technology Act, 2000 and precedents. It held that issuance occurs when the email enters a computer resource outside the control of the originator. In this case, the notice was digitally signed on 31.03.2021 but entered the relevant server or resource only on 01.04.2021 at 7:16 a.m., thereby exceeding the limitation date. The court further held that for reopening beyond four years, the proviso to Section 147 requires an allegation of failure to disclose material facts, which was absent. The reasons merely reproduced information from the ADIT, Kolkata without independent application of mind or identification of specific entries in the petitioner's books. Consequently, the impugned notice dated 31.03.2021 and the consequential order dated 01.03.2022 were quashed.
Headnote
A) Income Tax - Reassessment - Limitation - Section 149(1)(b) Income Tax Act, 1961 - Notice under Section 148 issued beyond the extended limitation period of 31.03.2021 - Notice digitally signed on 31.03.2021 but dispatched on 01.04.2021 held issued beyond limitation and quashed (Paras 5-7, 25-30).
B) Income Tax - Issue of Notice - Electronic Transmission - Section 282, 282A Income Tax Act, 1961, Section 13 Information Technology Act, 2000 - Issuance of electronic notice occurs when it enters a computer resource outside the control of the originator - Dispatch on 01.04.2021 after midnight means notice not issued on 31.03.2021, hence time-barred (Paras 14, 21-24).
C) Income Tax - Reassessment - Tangible Material - Condition Precedent - Where assessment completed under Section 143(1), reopening on the basis of information from another office without independent inquiry or specifying bank account entries linking the assessee to accommodation entries is invalid (Paras 10-11, 31-33).
D) Income Tax - Reassessment - Failure to Disclose Material Facts - Section 147 proviso, Section 149 - For reopening beyond four years from the end of the assessment year, failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment must be alleged - Absence of such allegation renders the notice without jurisdiction (Paras 8-9, 34).
Issue of Consideration
Whether the reassessment notice under Section 148 for AY 2013-14 issued on 31.03.2021 but dispatched on 01.04.2021 was time-barred under Section 149, and whether there was failure to disclose material facts to justify reopening beyond four years
Final Decision
The impugned notice dated 31.03.2021 under Section 148 and the consequential order dated 01.03.2022 were quashed. The writ petition was allowed.
Law Points
- Legal points not extracted
- interpretation of issuance of notice under Section 148/149 read with Section 13 of Information Technology Act
- 2000
- notice issuance occurs when email enters computer resource outside originator's control
- limitation period under Section 149
- reopening beyond 4 years requires failure to disclose material facts
- reassessment notice based solely on information without independent verification is invalid
Case Details
2025 LawText (MAD) (02) 114
Citation not available, 2025:MHC:1323
The Deputy Commissioner of Income-tax, Central Cir 3(4) and another
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Nature of Litigation
Writ petition under Article 226 of the Constitution challenging reassessment notice under Section 148 of the Income Tax Act and the consequential order disposing of objections
Remedy Sought
Petitioner sought quashing of the notice dated 31.03.2021 issued under Section 148 for AY 2013-14 and the order dated 01.03.2022 disposing of objections
Filing Reason
Notice was issued beyond the period of limitation and lacked tangible material to believe income had escaped assessment
Previous Decisions
Assessment for AY 2013-14 was originally completed under Section 143(1) without scrutiny
Issues
Whether the reassessment notice under Section 148 was time-barred under Section 149 considering the extensions under TOLA Act, 2020?
Whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment to justify reopening beyond four years?
Whether the reasons recorded for reopening were based on tangible material or merely on borrowed information without independent verification?
Submissions/Arguments
Petitioner argued that the notice dated 31.03.2021 was time-barred even after applying TOLA extensions, as it was issued beyond the limitation period of 31.03.2021
Petitioner contended that no tangible material linked him to the alleged accommodation entries; the reasons did not specify which bank account or document reflected the entries
Petitioner submitted that there was no failure to disclose material facts and the assessment under Section 143(1) did not warrant reopening on the basis of vague information
Respondent argued that the reopening was based on confirmed information from ADIT, Kolkata that the two companies were shell entities providing accommodation entries
Respondent stated that the petitioner was given an opportunity to prove genuineness and that objections were premature and intended to derail proceedings
Ratio Decidendi
A notice under Section 148 is deemed to be issued only when it enters a computer resource outside the control of the originator under Section 13 of the Information Technology Act, 2000; hence a notice digitally signed but dispatched after the last date of limitation is time-barred. Reopening beyond four years requires specific allegation of failure to disclose material facts and must be based on tangible material, not borrowed information.
Judgment Excerpts
2. Assessee has stated that "the reasons recorded are incomplete, as it has not been pointed out in which document belongint to M/s.MKR Enterprises, viz. Book of account or bank account, the impugned accommodation entries are appearing".
It is found that Shri Rajagopalan [MKR Enterprises (AAEPR4969B)] with a total information value of Rs.1.25 Cr in respect of accommodation entries from shell entities namely Nectar Deal Trade Private Ltd. (PAN: AADCN5751F) and Moonview Vintrade Private Ltd. (AAHCN7679K).
17. ...the issuance of notice and other document would take place when the e-mail is issued from the designated e-mail address of the concerned income tax authority.
20. Thus, after digitally signing the notice the income tax authority has to issue it to the assessee either in paper form or through electronic mail. Sub-Section (1) of Section 13 of the Act, 2000 provides that dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator. ...then that point of time would be the time of issuance of notice.
29. ...the point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator i.e., the assessing authority that shall the date and time of issuance of notice under Section 148 read with Section 149 of the Act, 1961.
Procedural History
Assessment for AY 2013-14 was completed under Section 143(1). The Assessing Officer issued a notice under Section 148 dated 31.03.2021 seeking to reopen the assessment on the ground of accommodation entries. The petitioner filed objections. The objections were disposed of by an order dated 01.03.2022. The petitioner filed the present writ petition challenging the notice and the order.
Acts & Sections
- Income Tax Act, 1961: 148, 149, 147, 142(1), 143(1), 282, 282A, 14, 10
- Information Technology Act, 2000: 13
- Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020:
- Constitution of India: Article 226
