Period of limitation has taken centre stage over the last two years due to the onset of the pandemic and the same has been one of the main grounds for challenging a notice or an order issued by the tax authorities. In this regard, Ms. Vidushi Maheshwari (Advocate), highlights the significance of the period of limitation especially in tax matters, which is to be adhered by authorities while issuing the notice or passing order and by the taxpayers while filing the appeal. She discusses the recent Allahabad HC ruling in Daujee Abhushan, wherein the issuance of notice was objected to on the ground of being time-barred as the notice was signed digitally on a date within the limitation period but was received after the same had elapsed and the High Court held that merely digitally signing of the notice cannot be termed as issuance of notice. She also discusses Madhya Pradesh HC ruling in Yuvraj, which was rendered on similar issue. She opines that, “The above rulings have a far-reaching impact on the taxpayers, as it is a very common phenomenon to term the notice as issued on the date of signing instead of the actual date of issuance, which may or may not fall within the period of limitation. The rulings will preclude them from issuing any after-thought notices by merely signing them within the period of limitation.”

“Signing of Notice – A Simple Procedure with Significant Impact”

There is no doubt that period of limitation plays a very significant role in every grievance/enforcement of right. Rightfully, there should be a life-span for everything and no grievance can be remedied after that time limit. In the words of the Hon’ble Supreme Court – “Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time”.

Period of limitation plays an equally significant role in tax matters too. It is applicable from both ends of the spectrum - at the time of issuance of notice or passing of an order by the tax authorities or filing of an appeal by the taxpayer.

Period of limitation has taken centre stage over the last two years due to the onset of the pandemic. In order to ease the process of passing of orders and filing of appeals under the tax laws, limitation periods have been extended.

Interestingly one of the main grounds (if available) while challenging a notice or an order issued by the tax authorities, is that the same has been issued beyond the period of limitation and hence without jurisdiction and bad in law.  

When it comes to issuance of notices, which attract a period of limitation, it is often seen that though the date of notice or the date of signing of notice is within the period of limitation, the notice has been issued after the period of limitation. An issuance of such a notice may be an afterthought, as a notice issued through email will take only seconds to be delivered.

This was the exact issue before the Hon’ble Allahabad High Court in the case of Daujee Abhushan Bhandar Private Limited [TS-5103-HC-2022(ALLAHABAD)-O]. In this case the notice was digitally signed on 31.03.2021, however, was received electronically by the taxpayer on 06.04.2021. The issuance of notice was objected to by the taxpayer on the ground of being time-barred and without jurisdiction. On the other hand, it was rejected by the tax officer on the grounds that since the notice was digitally signed on 31.03.2021, it shall be deemed to have been issued on the said date and accordingly was well within the period of limitation.

Upon filing of the writ petition, the issue before the Hon’ble High Court was:

a) whether digitally signing of notice would amount to issuance of notice

b) whether issuance of notice takes place on the date and time when it is dispatched either electronically or through other mode

c) whether generating of notice from the portal of the income-tax department on 31.03.2021 and digitally signing would amount to issuance of notice

On these core issues, the Hon’ble High Court after referring to the provisions of Section 149 of the Income-tax Act, 1961 (IT Act) read with Section 282 and 282A of the IT Act held that “signing of notice and issuance or communication thereof have been recognised as different acts”. The Hon’ble Court further held that “the issuance of notice and other document would take place when the email is issued from the designated e-mail address of the concerned income tax authority”. Thus, the Hon’ble Court with due regard to the provisions of the IT Act and the Information Technology Act, 2000 held that once the notice is entered by the income-tax authority in the computer resource outside its control, then the notice will be issued as on the date and time of undertaking such an action. Accordingly, merely digitally signing of the notice cannot be termed as issuance of notice.

Similarly, the Hon’ble Madhya Pradesh High Court in the case of Yuvraj vs. ITO [TS-5085-HC-2022(MADHYA PRADESH)-O], quashed the notice under Section 148 dated 31.03.2021 which was communicated through email on 16.04.2021 as bad in law, as it did not follow the procedure laid down under Section 148A. As the notice was emailed after 01.04.2021, though dated and signed as on 31.03.2021, it was regarded as issued on 16.04.2021, wherein the new set of provisions (i.e., Section 148A) were applicable.

The above rulings have a far-reaching impact on the taxpayers, as it is a very common phenomenon to term the notice as issued on the date of signing instead of the actual date of issuance, which may or may not fall within the period of limitation. The rulings will preclude them from issuing any after-thought notices by merely signing them within the period of limitation.

As a thumb rule, on receipt of a notice, it is necessary for the taxpayer to always examine the date of signing and date of issuance of notice.  If required then one must appropriately challenge the very jurisdiction of the notice issued. Such prompt examination may assist them in quashing the entire proceedings initiated against them.