Mumbai: The Bombay High Court has quashed the Income Tax Department’s show cause notice to Godrej Industries, observing that it was “bad in law” and barred by limitation. Godrej had approached the High Court challenging the show cause notices issued by the I-T Department in May 2021 and July 2022, contending that they were issued during the pendency of reassessment proceedings under an earlier notice and, therefore, illegal.
Court's Decision On Timeliness Of Income Tax Notice
On February 28, a bench of Justices BP Colabawalla and Neela Gokhale allowed the petition by Godrej noting that the I-T notices were out of time. The court, however, did not address the other issues raised by the consumer goods company. Godrej’s lawyers, senior advocate PJ Pardiwalla and advocates Jeet Kamdar and Atul K Jasani, submitted that, according to the original Section 149(1)(b) of the Income Tax Act (I-T Act), a Section 148 notice must be issued within six years of the end of the assessment year in question, adding that the deadline for the 2014-15 assessment year would be March 2021.
Section 148 of the I-T Act gives the assessing officer (AO) the authority to send a notice to a taxpayer whose income has not been properly assessed. Thus, if an AO suspects that a taxpayer has not disclosed complete income or has provided an inaccurate representation of it, officers can commence proceedings.
The I-T Notice Sent On Time?
Advocate Suresh Kumar, appearing for the tax authority, contended that there were provisions in the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, that permitted extension of the time frame and thus the May 21, 2021, notice was timely.
The bench, however, noted that the validity of the notice must be judged on the basis of the law existing as on the date on which the notice is issued under Section 148 of the Income Tax Act. Thus, considering that the Finance Act, 2021, was enacted on July 31, 2022, no notice under Section 148 for the assessment year 2014- 15 should have been issued after April 1, 2021.
Godrej's Argument Regarding Timeliness of Notice
Godrej submitted that the showcause notice under Section 148A(b) was issued on May 24, 2022, asking the company to furnish a reply by June 8, 2022. Godrej filed its reply on June 8, 2022. Subsequently, Godrej received another letter dated June 28, 2022, which provided further time for making detailed submissions up to July 8, 2022.
The company replied to the letter and made detailed submissions on July 2, 2022. Godrej contended that even assuming a period of 27 days (16 days from May 24 to June 8 and 11 days from June 28 to July 8) are excluded from the date of the notice issued on July 31, 2022, the notice would be barred by limitation and could not have been issued.
