Bombay High Court Grants Relief to Godrej Industries, Declares Income Tax Notice Time-Barred and Invalid.
The Bombay High Court granted relief to Godrej Industries by ruling that the revenue department’s show cause notice was legally flawed and dismissed due to being out of time.
Godrej Industries contested the show cause notice from the income tax department, dated May 22, 2022, arguing it was unlawfully issued during the reassessment proceedings initiated by an earlier notice.
The court, led by Justice KR Shriram and Justice Neela Gokhale, sided with Godrej Industries on the matter of the notice’s timing, choosing not to address the company’s other objections.
Representing the company, the senior counsel pointed out that, according to the original Section 149(1)(b) of the Income Tax Act, a Section 148 notice must be issued within six years of the end of the assessment year in question, making the deadline for the 2014-15 assessment year March 2021.
Section 148 allows the Assessing Officer to notify a taxpayer if there’s a belief of underreported or inaccurately depicted income.
Despite changes to the Act allowing a notice under Section 148 to be issued within three or ten years under specific conditions, the revenue department, represented by counsel Suresh Kumar, maintained that due to the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, or TOLA, extending the timeframe, the May 21, 2021 notice was timely.
Nonetheless, the court concluded that the notice’s legality hinges on the laws in effect when the notice is issued. Therefore, considering the enactment of the Finance Act, 2021 by July 31, 2022, no notice under Section 148 for the assessment year 2014-15 should have been issued after April 1, 2021, according to the initial clause of Section 149 of the Act.