Introduction
The Madurai Bench of the Madras High Court, in its detailed common order dated 08.07.2026 in Kattuputhur Srinivasaiyengar Ramaswamy v. Assessment Unit & Others (W.P.(MD)Nos.9187 and 9188 of 2026), delivered a significant ruling on the limitation period for reassessment proceedings under the Income Tax Act, 1961. The Court quashed a Section 148 notice, the consequential assessment order under Section 147 read with Sections 144 and 144B, and a penalty under Section 271(1)(c) for the Assessment Year 2015-16, holding that the reassessment was time-barred. This commentary provides a deep legal analysis of the Court’s reasoning, focusing on the interplay of provisos to Section 149(1) and the precise computation of limitation periods. The judgment reinforces the strict requirement for revenue authorities to adhere to statutory timelines, even when the assessee fails to respond to notices.
Facts of the Case
The petitioner, an individual assessee holding PAN AGYPR3097E, did not file a return of income for AY 2015-16, claiming a bona fide belief of no tax liability. The Revenue, based on information about cash deposits of ₹1.42 crore, time deposits of ₹13 lakh, and interest income of ₹3.29 lakh, issued a notice under Section 148A(b) on 26.03.2022. After the petitioner failed to respond, an order under Section 148A(d) and a Section 148 notice were both issued on 18.04.2022. Subsequently, despite multiple notices under Section 142(1) and show-cause notices, the assessee did not participate. The Faceless Assessment Unit passed an assessment order on 18.03.2024 under Section 147 r/w 144 and 144B, determining tax liability of ₹53,44,053, followed by a matching penalty under Section 271(1)(c) on 20.09.2024. The petitioner, claiming lack of effective service, challenged all proceedings. The primary legal ground was that the reassessment was barred by limitation under Section 149(1) of the Act.
Reasoning of the High Court
The Court examined the timeline under Section 149(1) of the Income Tax Act, 1961, which provides the time limit for issuing a notice under Section 148. For AY 2015-16, the normal six-year period from the end of the relevant assessment year ended on 31.03.2022. The first proviso to Section 149(1) excludes the period allowed for filing a response to a Section 148A(b) notice—here, seven days (from 26.03.2022 to 01.04.2022). Consequently, the limitation for issuing the Section 148 notice was extended to 02.04.2022. Additionally, the fourth proviso to Section 149(1) granted a further extension of seven days for passing the order under Section 148A(d) and issuing the Section 148 notice. Thus, the permissible last date became 09.04.2022.
The Revenue issued the Section 148A(d) order and the Section 148 notice on 18.04.2022, which was nine days beyond the extended limit of 09.04.2022. The Court held that this delay was fatal, rendering the entire reassessment proceedings void ab initio. The Court did not accept the Revenue’s argument that the limitation period should be computed differently. The Revenue had contended that the fourth proviso should allow a total of 14 days from the date of the Section 148A(b) notice, but the Court clarified that the fourth proviso operates in addition to the first proviso, not in substitution. The correct calculation: notice issued 26.03.2022 → 7-day response period ends 01.04.2022 (excluded per first proviso) → then 7 days to pass order under fourth proviso → last date 09.04.2022.
The Court also noted the petitioner’s alternative argument based on the Revenue’s concession in Union of India v. Rajeev Bansal (2024 SCC OnLine SC 2693) regarding the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). However, the Court found it unnecessary to address this because the limitation issue alone was sufficient to quash the proceedings. The judgment emphasizes that statutory limitation periods are mandatory and not directory; any deviation, even by a few days, invalidates the reassessment. The Court did not need to examine the natural justice allegations because the primary legal defect was decisive.
Conclusion
The Madras High Court allowed both writ petitions, quashing the Section 148 notice dated 18.04.2022, the assessment order dated 18.03.2024 under Section 147 r/w 144 and 144B, and the penalty order dated 20.09.2024 under Section 271(1)(c) for AY 2015-16. The Court held that the reassessment proceedings were barred by limitation under Section 149(1) as the notice under Section 148 was issued beyond the prescribed period, even considering all provisos. The decision underscores the strict adherence required in revenue matters and reaffirms that the burden lies on the Assessing Officer to ensure compliance with time limits. The order serves as a critical precedent for assessees contesting belated reassessment actions and reinforces the importance of procedural precision in tax administration.