ITAT Mumbai Quashes Reassessment Orders Due to Time-Barred Section 148 Notices

Solar Packaging Private Limited Vs ITO (ITAT Mumbai)

The appeals before the Income Tax Appellate Tribunal (ITAT), Mumbai, comprised cross appeals filed by both the assessee and the Revenue against the orders of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) dated 18.06.2025 for Assessment Years (AYs) 2016-17 and 2017-18. The appeals arose from reassessment orders passed under Section 147 of the Income Tax Act, 1961, dated 18.05.2023 and 15.05.2023. Since both appeals involved the same assessee and identical facts and issues, they were heard and decided through a common order.

The assessee contended that the reassessment notices issued under Section 148 were barred by limitation in light of the principles laid down by the Supreme Court in Union of India v. Rajeev Bansal. The assessee presented the chronology of events for both assessment years, highlighting that the original notices under the old regime were issued in June 2021, followed by fresh proceedings under Section 148A pursuant to the Supreme Court’s decision in Union of India v. Ashish Agarwal. According to the assessee, after considering the surviving limitation period recognized in Rajeev Bansal, the Assessing Officer was required to issue the orders under Section 148A(d) and the fresh notices under Section 148 by 26.06.2022 for AY 2016-17 and 15.06.2022 for AY 2017-18. However, both the orders under Section 148A(d) and notices under Section 148 were issued only on 29.07.2022, rendering them time-barred and invalid.

The Departmental Representative sought time to file written submissions but did not submit any report before the order was drafted. Consequently, the Tribunal decided the matter based on the material available on record and the judicial principles laid down by the Supreme Court.

After considering the rival submissions, the Tribunal observed that the reassessment proceedings had indeed been initiated pursuant to the directions of the Supreme Court in Ashish Agarwal and explained further in Rajeev Bansal. The Tribunal reproduced the relevant portions of the Supreme Court judgment, which clarified that while the legal fiction created in Ashish Agarwal preserved the reassessment proceedings, the Revenue was still required to issue fresh reassessment notices within the surviving limitation period computed after excluding the period during which proceedings were deemed stayed and the period granted to the assessee for filing a reply. The Supreme Court had also held that reassessment notices issued beyond the surviving limitation period would be time-barred and invalid.

Applying these principles to the facts of the present case, the Tribunal found that for AY 2016-17 the Assessing Officer should have issued the order under Section 148A(d) and the notice under Section 148 on or before 26.06.2022, while for AY 2017-18 the corresponding deadline was 15.06.2022. Since both were actually issued on 29.07.2022, they were beyond the permissible limitation period. Accordingly, the Tribunal held that the notices under Section 148 were invalid, non est, and incapable of conferring valid jurisdiction for reassessment. As a result, the entire reassessment proceedings and the consequential assessment orders under Section 147 were also held to be non est and bad in law.

The Tribunal therefore quashed the reassessment orders dated 18.05.2023 for AY 2016-17 and 15.05.2023 for AY 2017-18. Since the reassessment proceedings themselves were invalid on the ground of limitation, the Tribunal held that the remaining legal and factual grounds raised by the assessee had become academic and required no adjudication.

As the reassessment proceedings had already been quashed for want of valid jurisdiction, the Tribunal held that the Revenue’s appeals had become infructuous and did not require consideration on merits. Accordingly, the assessee’s appeals were allowed, while the Revenue’s appeals were dismissed. The order was pronounced on 04.06.2026.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The aforesaid cross appeals are filed by the Assessee as well as the Revenue, against the order of Commissioner of Income Tax Appeals/ National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”] both dated 18.06.2025, for the Assessment Years (AYs) 2016-17and 2017-18,which have been arises against the orders u/s 147 of the Income Tax Act, 1961 (in short, “the Act”) dated 18.05.2023 and 15.05.2023, passed by Assessment Unit, Income Tax Department (in short, “the Ld AO”).

2. Since the captioned appeals pertain to same assessee, having identical, interconnected and inextricably interwoven facts and issues, under similar grounds of appeals, the same for the sake of brevity, are heard together and adjudicated under this common order.

3. At the outset, the Ld. AR representing the assessee submitted that for AYs 2016-17 and 2017-18, the re-opening notices issued u/s 148 of the Act are barred by limitation, in terms of the guiding principles laid down by Hon’ble Apex Court in the case of Union of India and Others vs. Rajeev Bansal [2024] 469 ITR 46(SC). The details of dates of events qua the issuance of notice u/s 148 and proceedings u/s 148A for the AYs 2016-17 and 2017-18 are tabulated as under:

4. Appraising the above dates of events, it was the submission by Ld. AR that both notices issued u/s 148 for AYs 2016-17 and 2017-18, in compliance to the directions of Hon’ble Apex Court in the case of Union of India and Ors. vs. Ashish Agarwal [2022] 444 ITR 1 (SC), which is further explained by Hon’ble Apex Court in the case of Rajeev Bansal (supra), are barred by limitation, being issued even after considering the time permitted including the surviving period (computed supra), therefore, the entire proceedings on the basis of such invalidated /time barred would constitute non est, bad in law and liable to be struck down.

5. Per contra, Ld. DR of the assessee sought some time to furnish a written note on or before 7^th April, 2026, which was permitted with an advance copy to the Ld. AR. However, no report has been filed by the Ld. DR till the drafting of this order on 3^rd June, 2026. Therefore, the matter is decided in terms of facts available on record, following the principles laid down in judgments referred to supra.

6. We have considered the rival submissions. On perusal of facts on record, in terms of the guiding principles laid down by Hon’ble Apex Court in the case of Ashish Agarwal (supra) and Rajeev Bansal (supra), we find that in the facts of present case, the notices u/s 148 and orders u/s 148A(d) for re-opening assessment for AY 2016-17 as well as AY 2017-18 were issued following the directions of Hon’ble Apex Court in the aforesaid cases, but beyond the prescribed timelines deliberated, discussed and laid down by Hon’ble Apex Court. In this context, for the sake of completeness, the guiding principles and observations of the Hon’ble Apex Court in the case of Rajeev Bansal (supra), are extracted as under:

“110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.

111. The clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under Section 149A(c); (ii) take a decision under Section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was See State of A P v. A P Pensioners Association, (2005) 13 SCC 161 [28]. [This Court observed that the “legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom.”]

PART F required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime.

112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022.

113. In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under Section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under Section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under Section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority.

PART G specified under Section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under Section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income Tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time- barred.

G. Conclusions

114. In view of the above discussion, we conclude that:

a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions;

b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021;

c. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148;

d. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval;

e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval;

f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021;

g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside; PART C of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income Tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra).”

7. In backdrop of aforesaid observations of the Hon’ble Apex Court, applying the emerging ratio to the dates of events in the present cases, we find that the order u/s 148A(d) and the notice u/s 148 for AY 2016-17 and 2017-18, both were issued on 29^th July, 2022, whereas such orders/notices were supposed to be issued on or before 26.06.2022 and 15.06.2022,for the AY 2016-17 and 2017-18, respectively. Consequently, such notices, being issued beyond the prescribed timelines as prescribed and stipulated by Hon’ble Apex Court in the case of Rajeev Bansal (supra)are to be treated as invalid and non-est. Since, notices u/s 148 dated 29.07.2022 for both the AY’s under consideration are barred by limitation and are held to be in valid, the entire re-assessment proceedings as well as impugned orders are rendered as non est and bad in law.

8. We thus, in terms of our aforesaid observations on this legal aspect itself, are constrained to quash the impugned assessment orders u/s 147 dated 18.05.2023 for AY 2016-17 and dated 15.05.2023 for AY 2017-18.

9. Since we have set aside the notice u/s 148 on the ground of limitation and accordingly, the re-assessment proceedings are also quashed. The other grounds raised by the assessee challenging the legality or on merits of the case are rendered to be academic.

10. In result, both the appeal of assessee in ITA Nos.4678/Mum/2025 & 4679/Mum/2025 are allowed in above terms.

11. Since the re-opening assessments in the present cases are held to be non-est and quashed on account of invalidity of the notices issued u/s 148 and want of valid jurisdiction, the contentions raised by the Revenue in their respective appeals become infructuous and need not be dealt with on merits. We therefore, dismiss the appeal of Revenue accordingly.

12. In combined result, both the appeals of assessee are allowed, whereas the appeals of Revenue are dismissed in terms of aforesaid observations.

Order pronounced in the open court on 04-06-2026.