[Opinion] Somethings are to be Done by the Stroke of the Midnight Hour, Not 2 Minutes After!!

Mayank Mohanka – [2024] 168 taxmann.com 555 (Article)

Friends, we all are familiar with the famous words, “At the stroke of the midnight hour, when the world sleeps, India will awake to life and freedom” of the speech ‘Tryst with Destiny’ made by our first Prime Minister Pandit Jawaharlal Nehru, to the Indian Constituent Assembly, in the Parliament House, on the eve of India’s Independence, towards midnight on 14th August 1947.

However, not many of us know, that guided by the auspicious astrological considerations of such a historic and significant event, this speech had to be completed exactly at 12 AM on the midnight of 14th August 1947, so that the holy Shankha be blown to herald the birth of a new nation at the stroke of midnight hour. The astrologers had strictly advised against any delay whatsoever, even of 2 minutes past 12AM, to commence the attainment of freedom by our Country. Thus, the criticality and significance of completing a time bound task by the stroke of midnight of the specified time barring date, was first witnessed when India attained freedom at the stroke of the midnight hour.

Recently, in the Income-tax jurisprudence also, we have witnessed the paradoxical criticality and importance of this ‘2-minutes’ time frame, in the valid issuance and service of the scrutiny notice in the faceless assessments’ regime.

The case in point is the recent judgement of the hon’ble Delhi High Court in the case of Acropolis Reality Pvt Ltd. v. ITO W.P.(C) 14317/2024 & CM No.59931/2024, dated 23-10-2024]. In the said Writ Petition, the petitioner challenged the validity of the impugned reassessment proceedings and the notice dated 1.4.2023, issued under section 148A(b) of the Income Tax Act, proposing to reopen the assessment of the petitioner for the AY 2019-20, as being time barred. The main contention of the petitioner was that since the quantum of escaped income, as alleged in the said notice was less than Rs. 50 lakhs, and as such the maximum time period of three years from the end of the relevant AY 2019-20, by virtue of legislative provision contained in section 149(1)(a) of the Act, for issuance of the said notice u/s 148A(b) of the Act, as available with the AO was only uptill 31.3.2023 and not beyond that.

Going by the above stated facts, at first instance, the case appeared quite normal just like any other time barring limitation period case. But as they say, the beauty lies in the details. A detailed reading of the judgement unfolds a very interesting and critical factual and legal proposition. During the course of hearing, the Revenue side contended that although the impugned notice bore the date of 01.04.2023, however, the same should be construed as having been issued on 31.03.2023. Their contention was premised on the basis that the process for issuing the impugned notice had begun in the late hours of 31.03.2023 and the final act of affixing the digital signature, which is a system generated process, was completed on 12:02 AM on 01.04.2023. The Revenue side thus contended that the delay is of only about two minutes in issuance of the impugned notice under Section 148A(b) of the Act. Therefore, the same be construed as having been issued within the period of three years from the end of the relevant AY 2019-20.

In adjudicating the issue as to when a notice can be considered to have been issued, in such circumstances, the hon’ble Delhi High Court, relied upon its earlier pronounced judgement in the case of ‘Suman Jeet Agarwal v. ITO [2022] 143 taxmann.com 11/[2023] 290 Taxman 493/449 ITR 517. In the said judgement in Suman Jeet Agarwal case (supra), the hon’ble Delhi High Court has observed that while the function of generation of Notice on ITBA portal and digital signing of the Notice is executed by the JAO, the function of drafting of the e-mail to which the Notice is attached and triggering the e-mail to the assessee is performed by the ITBA e-mail software system. Thus, mere generation of Notice on the ITBA Screen cannot in fact or in law constitute issue of notice, whether the notice is issued in paper form or electronic form. In case of paper form, the notice must be despatched by post on or before 31st March 2021 and for communication in electronic form the e-mail should have been despatched on or before 31st March 2021.

Thus, relying upon the above observations, the hon’ble Delhi High Court in the present writ petition of Acropolis Reality Pvt Ltd, observed that the fact that the steps to generate the impugned notice commenced on 31.03.2023 cannot be a ground to hold that the impugned notice was issued on 31.03.2023. The impugned notice was digitally signed on 01.04.2023. Thus, the process of digitally generating the same on the system was completed on 01.04.2023. The impugned notice could not have been issued prior to the same being signed. The date of the said notice was correctly reflected as 01.04.2023. In addition, it was also pointed out that the DIN & Notice Number mentioned in the impugned notice – ITBA/AST/F/148A(SCN)/2023-24/1051828274(1) – also indicated that the impugned notice was issued in the financial year 2023-24. In view thereof, the hon’ble High Court found merit in the contention of the petitioner and set aside the impugned reassessment proceedings, as being time barred in Law.

Therefore, even a minor delay of just 2 minutes by the AO, in completing the steps to generate, digitally sign and dispatch the said notice u/s 148A(b) of the Act to the petitioner via email, proved fatal to the life of such notice and the impugned reassessment proceedings, and the same were quashed being barred by limitation, by the hon’ble High Court.

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