Rajkot ITAT Quashes Reassessment for Time-Barred Section 148 Notice

Vijaybhai Dayabhai Marvaniya Vs ITO (ITAT Rajkot)

Summary: The Rajkot ITAT held that the notice issued under Section 148 on 28 June 2022 was barred by limitation. The original notice had been issued on 11 June 2021, leaving only 19 days of the extended limitation period ending on 30 June 2021. After the decision in Union of India v. Ashish Agarwal, the material was supplied to the assessee on 17 May 2022, with two weeks to respond. Applying the “surviving period” principle laid down by the Supreme Court in Union of India v. Rajeev Bansal, the Tribunal held that the Revenue had to issue the consequential notice within the remaining 19 days after expiry of the response period, i.e., by approximately 19 June 2022. The judgment did not grant the AO an entirely fresh limitation period. Since the order under Section 148A(d) and the notice under Section 148 were issued only on 28 June 2022, the assumption of jurisdiction was invalid. Consequently, the reassessment under Sections 147 read with 144 was quashed and the ₹45-lakh addition under Section 69 was deleted.

FULL TEXT OF THE ORDER OF ITAT RAJKOT

Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2018-19, is directed against the order under section 250 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the National Faceless Appeal Centre [hereinafter referred to as ‘NFAC’], dated 10.03.2026, which in turn arises out of an order passed by assessing officer u/s. 147 of the Act, dated 25.05.2023.

2. Brief facts of the case are that the assessee filed its return of income declaring total income of Rs.2,53,710/-. Subsequently, information was available with the capital contribution in the partnership firm, M/S Harvi Plastwood LLP, during the year under consideration. On examination of the particulars available in the return of income and the information in possession of the Department, it was noticed that the said investment was not reflected in the return/profile of the assessee. The Assessing Officer, therefore, formed a belief that income chargeable to tax had escaped assessment within the meaning of section 147 of the Act and initiated reassessment proceedings. The original notice under section 148 of the Act was issued on 11.06.2021. The said notice was issued during the period commencing from 01.04.2021 and ending on 30.06.2021, which was subsequently dealt with by the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal. In terms of the directions issued by the Hon’ble Supreme Court, the notice issued under the erstwhile provisions of section 148 was required to be treated as a notice under section 148A(b) of the Act. The Assessing Officer was required to furnish the information and material relied upon by the Revenue and provide an opportunity to the assessee to respond thereto.

3. Accordingly, the Assessing Officer supplied the information and material relied upon by the Revenue to the assessee on 17.05.2022, granting two weeks’ time to furnish its response. The said communication along with the relevant information material was served upon the assessee on the same date. The assessee, however, did not furnish any response within the prescribed period. Consequently, the Assessing Officer passed an order under section 148A(d) of the Act on 28.06.2022 and, thereafter, issued a fresh notice under section 148 of the Act on the same date, i.e., 28.06.2022, after obtaining the requisite approval under section 151 of the Act. In response to the said notice, the assessee filed its return of income on 02.08.2022, declaring total income of Rs.2,53,710/-.The Assessing Officer thereafter completed investment of Rs.45,00,000/-as unexplained investment under section 69 of the Act, determining the total income of the assessee at Rs.47,53,700/-.

4. Aggrieved by the order of the AO assessee preferred an appeal before the Ld. CIT(A) where the assessee challenged, inter alia, the validity of the notice issued under section 148 of the Act. It was contended that the notice dated 28.06.2022 was issued beyond the permissible period of limitation in terms of the law laid down by the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal & ors. [2022] 138 taxmann.com 64 (SC) and subsequently clarified in Union of India v. Rajeev Bansal. The learned CIT(A), however, dismissed the appeal and sustained the assessment.

5. Still aggrieved by the order of the Ld. CIT(A) assessee is in appeal before this tribunal at the time of hearing the learned counsel for the assessee submitted that the notice under section 148 dated 28.06.2022 was barred by limitation. It was submitted that the original notice dated 11.06.2021, in view of the judgment of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal & ors. (supra), was required to be treated as a notice under section 148A(b) of the Act. It was further submitted that the information and material relied upon by the Revenue were supplied to the assessee on 17.05.2022 and two weeks’ time was granted to furnish the reply. The said period expired on 31.05.2022. Therefore, in terms of the surviving period principle laid down by the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal, the Assessing Officer was required to complete the proceedings under section 148A and issue the consequential notice under section 148 within the surviving period. According to the learned counsel, the consequential order under section 148A(d) ought to have been passed and the consequential notice under section 148 ought to have been issued within the surviving period, but the

6. The Ld. DR, on the other hand, supported the orders of the authorities below.

7. We have carefully considered the rival submissions and perused the material available on record. While looking into the fact we find the following crucial facts as under:-

08. There is no dispute with regard to the material dates. The original notice under section 148 was issued on 11.06.2021. Pursuant to the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal & ors. (supra), the said notice was required to be treated as a notice under section 148A(b) of the Act. The Hon’ble Supreme Court, in Union of India v. Rajeev Bansal, has subsequently explained the manner in which the limitation has to be computed in cases covered by the judgment of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal & ors (supra). The Hon’ble Supreme Court has held, inter alia, that the surviving period available to the Assessing Officer under the applicable limitation regime has to be utilised for completing the proceedings and issuing the consequential notice under section 148 of the Act. In the present case, the original notice was issued on 11.06.2021. The period available up to 30.06.2021, therefore, constituted the relevant surviving period. Thus, the Revenue had 19 days available from 11.06.2021 up to 30.06.2021. Thereafter, pursuant to the directions of the Hon’ble Supreme Court, the information and material relied upon by the Revenue were supplied to the assessee on 17.05.2022, granting two weeks’ time to furnish its response. The assessee did not furnish any response. The crucial question before us is whether the Assessing Officer could issue the consequential notice under section 148 on 28.06.2022, or whether the same was required to be issued within the surviving period available after expiry of the period granted to the assessee. In our considered opinion, in view of the law laid down by the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal, the subsequent proceedings pursuant to the judgment of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal & ors (supra) do not give the Assessing Officer an entirely fresh period of limitation. The surviving period has to be utilised for completing the proceedings under section 148A of the Act and issuing the consequential notice under section 148 of the Act. In the present case, the two-week period granted to the assessee from 17.05.2022 expired before the date on which the Assessing Officer passed the order under section 148A(d) of the Act. Even thereafter, the Assessing Officer did not issue the consequential notice under section 148 of the Act within the surviving period. Instead, the order under section 148A(d) and the notice under section 148 of the Act were issued only on 28.06.2022. Thus, the consequential notice under section 148 of the Act was issued beyond the permissible surviving period. Once the notice issued under section 148 of the Act is held to be barred by limitation and consequently invalid, the very foundation of the reassessment proceedings fails. The subsequent assessment framed under section 147 read with section 144 of the Act dated 25.05.2023 cannot independently survive in the absence of a valid assumption of jurisdiction under section 148 of the Act. Consequently, the addition of Rs.45,00,000/- made by the Assessing Officer under section 69 of the Act also cannot survive. In view of the above discussion, we hold that the notice issued under section 148 of the Act on 28.06.2022 was barred by limitation and, therefore, the reassessment proceedings initiated pursuant thereto are invalid. Accordingly, the assessment order passed under section 147 read with section 144 of the Act is quashed. Consequently, the addition of Rs.45,00,000/- made under section 69 of the Act is deleted. Since we have quashed the reassessment proceedings on the jurisdictional ground, the other grounds raised by the assessee on the merits of the addition become academic and, therefore, require no separate adjudication.

9. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on this 25th day of August, 2026.