Hexaware Technologies Limited vs Assistant Commissioner of Income Tax

Court/Forum: HC

Bench: K. R. Shriram & Dr. Neela Gokhale, JJ.

Order Date: 2024-05-03

Outcome: Assessee

Sections: Section 10AA, Section 80JJAA, Section 143(2), Section 142(1), Section 148, Section 148A, Section 149, Section 151, Section 151A

Core Ratio

Reassessment notices issued after 1st April 2021 must comply with the amended provisions of the Income Tax Act, 1961, and cannot rely on the erstwhile provisions.

Outcome

The High Court quashed the reassessment notice issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2015-16, holding it to be barred by limitation and invalid due to procedural lapses.

Favourability

Assessee

Core Issue

The central legal question was whether the reassessment notice issued after 31st March 2021 could be sustained under the amended provisions of the Income Tax Act, particularly in light of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the Supreme Court's decision in Ashish Agarwal.

Facts of the Case

Hexaware Technologies Limited filed its return for AY 2015-16, claiming deductions under Sections 10AA and 80JJAA. The original assessment was completed, but a reassessment notice was issued in 2021, which was challenged by the petitioner.

Arguments by Assessee

The assessee argued that the reassessment notice was barred by limitation, issued without proper approval, and based on a change of opinion. They also contended that the notice lacked a DIN, making it invalid.

Arguments by Revenue

The Revenue argued that the notice was within the extended limitation period under TOLA and that the procedural requirements were met. They also contended that the notice was validly issued by the JAO.

Key Sections & Provisions

Section 148 - Notice for reassessment; Section 149 - Time limit for notice; Section 151 - Sanction for issue of notice; Section 80JJAA - Deduction for employment of new workmen.

Ratio Decidendi

The court held that the provisions of TOLA do not apply to assessment years 2015-16 and onwards, and any notice issued under Section 148 after 31st March 2021 must adhere to the new procedural requirements. The court also emphasized that the validity of a notice must be judged based on the law existing at the time of its issuance.

Court Reasoning & Analysis

• The court found that TOLA does not apply to AY 2015-16, and the notice was issued beyond the permissible period.
• The absence of a DIN rendered the notice invalid as per CBDT Circular No.19 of 2019.
• The notice was issued by the JAO instead of the NFAC, contrary to the faceless assessment scheme.
• The reassessment was based on a change of opinion, which is not permissible under the new provisions.

Key Observations

• The court observed that the procedural requirements under the amended Income Tax Act must be strictly followed.
• The court noted that the absence of a DIN is a significant procedural lapse that invalidates the notice.

Case Laws Cited

• Union of India & Ors. vs. Ashish Agarwal
• Tata Communications Transformation Services Ltd. vs. Assistant Commissioner of Income Tax
• Siemens Financial Services (P.) Ltd. vs. Deputy Commissioner of Income Tax

Related Issues

• Validity of reassessment notices under amended provisions
• Impact of procedural lapses on tax notices
• Role of CBDT instructions in interpreting tax laws

Important Passages

• The validity of a notice issued under Section 148 of the Act must be judged on the basis of the law existing on the date on which such notice is issued.
• The absence of a DIN renders the notice invalid as per CBDT Circular No.19 of 2019.

Not Decided / Remanded

The court did not decide on the merits of the deductions claimed under Sections 10AA and 80JJAA.

Practical Takeaway

Practitioners should ensure compliance with procedural requirements, including the issuance of notices with a DIN, and be aware of the limitations on reassessment under the amended Income Tax Act.

Supporting Judgments

• Manju Somani vs Income Tax Officer Ward-70(1) & Ors. (HC) — A reassessment notice issued post-01 April 2021 must comply with the time limits prescribed by the pre-amendment provisions of Section 149 if the assessment yea
• Manisha Agarwal vs Income Tax Officer, Ward 59(1), Delhi & Ors. (HC) — A reassessment notice issued beyond the surviving time limit under the Income Tax Act read with TOLA is time-barred.
• Twylight Infrastructure Pvt Ltd vs Income Tax Officer Ward 25 3 Delhi and Ors. (HC) — Approval from the specified authority is mandatory for issuing reassessment notices under Section 148.
• Mon Mohan Kohli vs Assistant Commissioner of Income Tax & Anr (HC) — The government cannot extend the applicability of statutory provisions through notifications without explicit legislative authority.
• Mon Mohan Kohli vs Assistant Commissioner of Income Tax & Anr (HC) — The Government cannot extend the applicability of legislative provisions beyond the dates specified by the Legislature through notifications.
• T.K.S. Builders Pvt. Ltd. vs Income Tax Officer Ward 25(3) New Delhi (HC) — Notices under Section 148 must be issued through automated allocation and in a faceless manner as per the Faceless Assessment Scheme.

Contrary Judgments

• Union of India & Ors. vs Rajeev Bansal (SC) — Reassessment notices issued under the old regime are deemed valid under the new regime due to the application of TOLA and judicial directions.
• Union of India & Ors. vs Rajeev Bansal (SC) — Reassessment notices issued after 1 April 2021 should be treated as issued under the new regime, with TOLA extending the time limits for compliance.
• Union of India & Ors. vs Ashish Agarwal (SC) — Reassessment notices issued under the unamended Section 148 post-01.04.2021 are deemed valid under Section 148A of the Finance Act, 2021.
• Pawan Sachdeva vs Income-Tax Officer, Ward 19(3), Delhi & Anr. (HC) — Issuance of notice within the limitation period is sufficient for jurisdiction, even if the service occurs later or with errors.
• GKN Driveshafts (India) Ltd. vs Income Tax Officer and Ors. (SC) — When a notice under Section 148 is issued, the noticee should file a return and may seek reasons, which the assessing officer must provide, allowing the noticee
• Arya Roadways Company Pvt. Ltd. vs I.T.O., Ward-12(1), Kolkata (ITAT) — The case was remanded to ensure a fair opportunity for the assessee to substantiate its claims regarding the expenditure.