Bhavarlal Mangilal Jat Vs ITO (ITAT Surat)
Reassessment Beyond the “Surviving Time” Is Invalid: ITAT Quashes ₹1.20 Crore Cash Deposit Assessment
A Saved Notice Does Not Carry Unlimited Time
The Surat Tribunal quashed a reassessment involving an addition of ₹1,20,70,000 under section 68, holding that the fresh notice under section 148 had been issued beyond the “surviving time” available to the Assessing Officer.
Applying the Supreme Court’s decisions in Ashish Agarwal and Rajeev Bansal, together with the jurisdictional Gujarat High Court’s ruling, the Tribunal held that preservation of an earlier notice did not dispense with the limitation governing subsequent proceedings. Once the fresh notice was found time-barred, the consequential reassessment could not survive.
Demonetisation Deposits Trigger Reopening
The assessee had filed his return for assessment year 2017–18 declaring total income of ₹5,61,910. Subsequently, information available in the Department’s system indicated cash deposits in bank accounts during the demonetisation period.
Based on this information, the Assessing Officer issued an initial notice under section 148 on 22 June 2021, relying on the extended limitation under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, commonly referred to as TOLA.
Following the Supreme Court’s decision in Ashish Agarwal, the Assessing Officer undertook proceedings under the substituted reassessment framework. After completing the procedure under section 148A, a fresh notice under section 148 was issued on 28 July 2022.
The reassessment order dated 25 May 2023 made the disputed addition for unexplained bank deposits. The Commissioner (Appeals), by order dated 9 April 2026, granted no relief. The assessee consequently approached the Tribunal.
The Assessee’s Eight-Day Limitation Argument
Before the Tribunal, the assessee raised an additional legal ground challenging the fresh notice as time-barred.
The authorised representative explained that the original notice dated 22 June 2021 left only eight days of surviving time up to 30 June 2021. Under the framework explained in Rajeev Bansal, the Assessing Officer had to complete the remaining statutory steps, including issuance of the fresh section 148 notice, within that surviving period after accounting for the applicable exclusions.
According to the chronology presented, the notice under section 148A(b) was issued on 25 May 2022, and the two-week period available for responding ended on 8 June 2022.
Adding the surviving eight days, the assessee contended that the fresh notice had to be issued by 16 June 2022. The notice actually issued on 28 July 2022 was therefore beyond limitation.
Ashish Agarwal Preserved the Defences Too
The Tribunal’s reasoning rested on the relationship between the two Supreme Court decisions.
In Ashish Agarwal, notices issued under the old reassessment provisions during the transitional period were treated as show-cause notices under section 148A(b). The decision required the Revenue to supply the relevant information and material and provide an opportunity to respond.
However, the Supreme Court also preserved the assessees’ available statutory defences, including those under section 149. The conversion of an old-regime notice into a deemed show-cause notice did not automatically validate every subsequent reassessment notice.
In Rajeev Bansal, the Supreme Court explained the exclusion of specified periods and the operation of the surviving limitation. The Assessing Officer was required to complete the remaining procedure and issue the fresh notice within the time that legally remained available.
Precedent Supports the Limitation Challenge
The Tribunal found that the controversy had already been examined by the Surat Bench in Kanchan Devi Agarwal v. ITO, ITA Nos. 479 and 480/SRT/2025, decided on 23 December 2025.
That decision applied Rajeev Bansal and the Gujarat High Court’s ruling in Dhanraj Govindram Kella, reported at [2025] 177 taxmann.com 194. The High Court had emphasised that surviving time must be examined separately in each case, using the relevant notice dates, information-supply date and procedural chronology.
The Revenue supported the assessment and alternatively requested a remand for verification. The assessee opposed remand, submitting that the dates were already clear from the record.
The Tribunal found no material distinguishing the coordinate Bench’s decision and followed it.
Assessment Quashed; Merits Remain Undecided
The Tribunal held that the notice dated 28 July 2022 was time-barred and invalid. Consequently, it quashed the reassessment order and allowed the appeal.
Having decided the jurisdictional issue, the Tribunal expressly left the grounds concerning the cash-deposit addition open and undecided. This was final relief against the impugned reassessment, rather than a remand or statistical allowance.
Author’s Comments
The decision reinforces that limitation is a jurisdictional requirement, even where the amount involved is substantial. A large cash deposit cannot enlarge the statutory period available for reopening.
For practitioners, the essential exercise is to reconstruct the complete chronology and calculate surviving time after the applicable exclusions. Reliance on TOLA or Ashish Agarwal alone is insufficient.
Equally, the outcome should be described accurately: the assessment was quashed because the notice was late. The Tribunal did not hold that the cash deposits were explained or decide whether section 68 was otherwise applicable.
Cases Discussed
- Union of India v. Ashish Agarwal, 2022 SCC OnLine SC 543 (Supreme Court) — Considered and applied. Old-regime reassessment notices issued during the transitional period were deemed notices under section 148A(b), subject to preservation of statutory defences.
- Union of India v. Rajeev Bansal, (2024) 469 ITR 46 (Supreme Court), decided on 03.10.2024 — Followed. Explained exclusion periods, surviving limitation and the requirement to issue fresh section 148 notices within the legally available period.
- Kanchan Devi Agarwal v. ITO, ITA Nos. 479 & 480/SRT/2025 (ITAT Surat), order dated 23.12.2025 — Followed. Coordinate Bench ruling holding reassessment notices beyond surviving time invalid.
- Dhanraj Govindram Kella v. ITO, [2025] 177 taxmann.com 194 (Gujarat High Court) — Followed through the coordinate Bench decision. Required case-specific computation of surviving limitation and quashed notices issued beyond it.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT SURAT
Feeling aggrieved by order of first appeal dated 09.04.2026 passed by learned Commissioner of Income-Tax (Appeals)-National Faceless Appeal Centre, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 25.05.2023 passed by learned Assessment Unit of Income-tax Department [“AO”] u/s 147 r.w.s. 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal.
2. The background facts leading to present appeal are as under:
(i) The assessee-individual filed his return of income of AY 2017-18 declaring a total income of Rs. 5,61,910/- u/s 139 which was duly assessed.
(ii) Subsequently, on the basis of information available in ITBA revealing that the assessee had deposited cash in bank a/cs during demonetization period, the AO issued initial notice dated 22.06.2021 u/s 148 to re-open assessee’s case u/s 147 on the strength of the time-limit extended by The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [“TOLA”]. Since a new set of provisions for re-assessment u/s 147 was introduced in Income-tax Act w.e.f. 01.04.2021, there arose controversies with regard to the issuance of notices u/s 148 after 01.04.2021 and the litigation travelled to Hon’ble Supreme Court in Ashish Agarwal (2022 SCC Online SC 543) in which the Hon’ble Supreme Court gave certain directions. Accordingly, after considering the decision of Ashish Agarwal, the Ld. AO issued a fresh notice dated 28.07.2022 u/s 148 to assessee for making assessment u/s 147 [after completing the procedure of section 148A(d)], which culminated into passing of an order of re-assessment dated 25.05.2023. By this order of re-assessment, the Ld. AO re-assessed assessee’s total income at Rs. 1,26,31,390/- after making an addition of Rs. 1,20,70,000/- u/s 68 on account of unexplained bank deposits.
(iii) Aggrieved by aforesaid order of re-assessment, the assessee carried matter in first-appeal. However, the Ld. CIT(A) did not grant any relief.
(iv) Now, the assessee has come in next appeal before us.
3. The assessee has raised following effective grounds:
“1. ADDITIONAL GROUND: The Ld. Faceless Assessing Officer has erred and was not just and proper on the facts of the case and in law in issuing Notice u/s 148 beyond the surviving period in terms of decision of Rajeev Bansal by the Hon’able SC. The notice u/s 148 may be kindly quashed as invalid.
2. The Ld CIT(A)-NFAC has erred and was not just and proper on the facts of the case and in law in confirming the addition of Rs.1,20,70,000/- made u/s 68 of the Act being Cash Deposits during the demonetisation period. The addition may be kindly deleted.”
4. We have heard learned Representatives of both sides and perused case record.
5. By means of Ground No. 1, the assessee is challenging the legality of re-assessment framed by Ld. AO u/s 147. The assessee is claiming that the notice issued by AO u/s 148 to frame assessment u/s 147 was time-barred.
6. Ld. AR for assessee submitted that the Ld. AO issued initial notice u/s 148 on 22.06.2021, which was within the extended time limit as per TOLA. That, as per decision of Hon’ble Supreme Court in Ashish Agarwal (supra), all notices issued u/s 148 during the period from 01.04.2021 to 30.06.2021, were saved and deemed to be the notices in terms of section 148A(b) i.e. under the new/substituted regime of re-assessment u/s 147 w.e.f. 01.04.2021 through Finance Act, 2021. That, the Hon’ble Supreme Court, also issued direction that the assessing officer shall supply the information/ material available with Revenue for framing assessment u/s 147 to assessee within 30 days from date of Judgement of Hon’ble Supreme Court (i.e. from 04.05.2022) and grant two weeks’ time to assessee to file reply. Only thereafter, the assessing officer shall pass order u/s 148A(d) and after completing such procedure of section 148A, may issue a fresh notice u/s 148. It was further held that all defences which may be available to the assesses including those available u/s 149 and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.
7. Subsequently, in Union of India Vs. Rajeev Bansal (2024) 469 ITR 46 (SC) dated 03.10.2024, the Hon’ble Supreme Court further held that the order u/s 148A(d) was required to be passed as well as the new notice u/s 148 was required to be issued within the “surviving time” available as per outer time-limit available under Income-Tax Act, 1961 read with TOLA (i.e. available upto 30.06.2021). Ld. AR explained that since the original notice u/s 148 of the Act was issued on 22.06.2021, the Ld. AO had only 8 days “surviving time” available upto 30.06.2021. Therefore, new notice u/s 148 of the Act was required to be issued within the survival period of 8 days from the last date on which the assessee was required to file reply to the notice u/s 148A(b) issued by AO. Since in present case, the AO issued notice u/s 148A(b) to assessee on 25.05.2022, the assessee was having two weeks’ time to file reply uptill 08.06.2022. Thereafter, the Ld. AO was having time period to issue notice u/s 148 uptill 16.06.2022 [08.06.2022 + 8 days]. That means, the AO could new/subsequent notice u/s 148 by 16.06.2022 only. However, the Ld. AO has issued new/subsequent notice u/s 148 dated 28.07.2022 which is barred by limitation and hence invalid. Consequently, the assessment-order passed by Ld. AO is also invalid.
8. With these submissions, Ld. AR requested to quash the assessment framed by AO u/s 147.
9. Per contra, Ld. DR for revenue supported the action of Ld. AO and requested to uphold the AO’s order. Alternatively, he submitted that the present matter may be remanded to Ld. AO for examination/verification of assessee’s claim.
10. In rejoinder, Ld. AR submitted that the chronology of events is very clear from case file and the law is settled by Hon’ble Supreme Court in Ashish Agarwal (supra) and Rajeev Bansal (supra). Hence, there is no purpose in remanding this matter to AO. He requested the bench to decide this matter and quash the assessment-order passed by AO.
11. We have carefully considered the rival submissions of both sides and perused the documents held in case file including the written-submissions filed by Ld. AR for assessee.
12. We find that the identical controversy involving similar facts has already been decided by Co-ordinate Bench of ITAT, Surat in ITA 479 & 480/SRT/2025, Kanchan Devi Agarwal Vs. ITO, order dated 23.12.2025 wherein the Co-ordinate Bench has accepted assessee’s claim. We re-produce below the relevant portion of order of ITAT for an immediate reference:
“10. The contention of the assessee is that the Assessing Officer was required to pass order under Section 148A(d) of the Act and also issue notice under Section 148 of the Act within the surviving period of three days (which was extended to seven days) of filing its reply on 06.06.2022. Thus, the Assessing Officer had time limit till 14.06.2022 only to take these actions. However, the order under Section 148A(d) of the Act and the notice under Section 148 of the Act was issued on 25.07.2022 i.e. beyond the period of seven days from its reply on 06.06.2022 and thus the notice was barred by limitation.
11. The Hon’ble Supreme Court, in the case of Ashish Agarwal (supra), had directed that all the notices u/s 148 of the Act issued under the old provision shall be treated as show cause notice issued u/s 148A(b) of the Act of the new provisions. Further, the Hon’ble Court had directed the assessing officers to supply the assesses with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. The effect of this direction was summarized by the Apex Court in the case of Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC) as under:
106. …..To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices. [Emphasis supplied.]
12. The Hon’ble Court had held that only the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of such deemed notice, including issuance of notice u/s 148 of the new regime. The surviving or balance time limit was required to be calculated by computing the number of days between the date of issuance of deemed notice and 30th June, 2021. The reasoning and the relevant part of the judgement of the Court is 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 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 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. [Emphasis supplied.]
13. The Hon’ble Supreme Court had thus categorically held that 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 and that all notices issued beyond the surviving period were time barred and liable to be set aside. This time line was also demonstrated in para 112 of the order with an illustration. In the present case, the original notice u/s 148 of the Act was issued on 28.06.2021 which was treated as deemed notice u/s 148A(b) of the Act. Since this notice was issued on 28.06.2021, the surviving time period available to the Assessing Officer to complete the further proceedings, including the issue of notice u/s 148 of the Act, was three days only, which was extended to seven days. Accordingly, the Assessing Officer was required to pass the order a u/s 148A(d) of the Act and also to issue notice u/s 148 of the Act in this case within a period of seven days from the date of receipt of reply of the assessee. As the assessee had filed its reply on 06.06.2022, the time limit available to the Assessing Officer to issue the notice u/s 148 of the Act was till 08.07.2022 only. As the notice in the present case was issued on 25.07.2022, the same is found to be beyond the limitation period.
14. Identical issue was decided by the Hon’ble Gujarat High Court in the case of Dhanraj Govindram Kella [2025] 177 taxmann.com 194 (Gujarat). The findings given by the Hon’ble Court on this issue are reproduced below:
65. The alternative contention of the petitioner as to whether notices would be valid notice or invalid notice considering ‘surviving time’ between the date of the issuance of notices under TOLA and 30th June, 2021 or not is required to be considered and for that each matter has to be considered separately on the basis of the facts of case considering the date of issuance of notices under section 148 under TOLA by the Revenue and thereafter date of supplying information to the assessee and date of passing of order under section 148A(d) and date of issuance of notice under section 148 of the Act so as to consider whether issuance of notice under section 148 of the Act is within ‘surviving time’ as per the direction of Hon’ble Apex Court in case of Rajeev Bansal (supra) or not.
66. So far as Assessment Years 2013-2014 and 2014-2015 are concerned, the period of three years from the end of the assessment year would be over prior to 20.03.2020 and the period of six years would be over between 20.03.2020 and 30.06.2021. Therefore, the notices issued under section 148 of the Act under old regime between 01.04.2021 and 30.06.2021 as per TOLA, will be a valid notice if the notice under section 148 of the Act under new regime is issued within the period of ‘surviving time’ as per the directions issued by Hon’ble Apex Court in case of Rajeev Bansal (supra). For the Assessment Years 2016-2017 and 2017-2018 are concerned, the notice issued under section 148 of the Act under old regime between 01.04.2021 and 30.06.2021 under TOLA would be considered to be issued within three years from the end of the relevant assessment year as three years would complete within the period of 20.03.2020 and 30.06.2021.
67. Therefore, in facts of these petitions, following data is required to be considered to find out ‘surviving time’ to decide as to whether the impugned notices under section 148 of the Act issued under the new regime as per the decision of Hon’ble Apex Court in case of Ashish Agarwal (supra) would be valid notice or not in view of the decision of Hon’ble Apex Court in case of Rajeev Bansal (supra):
| SCA NO | AY | Date of notice under section 148 under TOLA | No of days of surviving time available 30.06.2021 | Date of providing information under section 148A(b) |
|---|---|---|---|---|
| 6387/2023 | 2013-2014 | 17.06.2021 | 13 | 26.05.2022 |
| 5688/2023 | 2014-2015 | 09.06.2021 | 21 | 23.05.2022 |
| 22260/2022 | 2016-2017 | 30.06.2021 | I | 23.05.2022 |
| 996/2023 | 2017-2018 | 2017-2018 | I | 24.05.2022 |
| SCA NO | Due date of filing reply | Due date of reply:- | Date of order under section 148A(d) and notice under section 148:- | Last date for issuance of notice under section 148 as per surviving time:- |
| 6387/2023 | 09.06.2022 | 04.06.2022 | 29.07.2022 | 22.06.2022 |
| 5688/2023 | 06.06.2022 | – | 27.07.2022 | 27.06.2022 |
| 22260/2022 | 07.06.2022 | 06.07.2022 | 30.07.2022 | 14.06.2022 |
| 996/2023 | 11.06.2022 | 10.06.2022 | 19.07.2022 | 18.06.2022 |
68. It is apparent from the above details that impugned notice under section 148 of the Act is issued beyond the period of ‘surviving time’ as per the direction of Hon’ble Apex Court in case of Rajeev Bansal (supra)and therefore, such notices would be invalid notices.
69. The impugned notices issued under section 148 of the Act are accordingly quashed and set aside being invalid having been issued beyond the ‘surviving time’. Accordingly, impugned orders passed under section 148A(d) of the Act would also not survive and are accordingly, quashed and set aside. Subsequent proceedings, if any, undertaken by the respondent would not survive and are also quashed and set aside.
The Hon’ble Court held that since the notices under section 148 were issued beyond period of ‘surviving time’ as per direction of Supreme Court in Union of India v. Rajeev Bansal (supra), such notices were invalid.
15. In view of the facts discussed above and the judgement of the Hon’ble Supreme Court as well as the jurisdictional High Court, the impugned notice dated 25.07.2022 issued u/s 148 of the Act is held to be invalid as the same was issued beyond the surviving period as per the decision of Hon’ble Supreme Court in the case of Rajiv Bansal (supra). Accordingly, the proceeding initiated u/s 148 of the Act is quashed being time-barred. As a consequence, the impugned assessment order dated 25.04.2023 does not survive and the same is quashed and set aside. The legal ground taken by the assessee is allowed.
16. Since the legal ground taken by the assessee has been allowed, and the assessment order has been consequently quashed and set aside, other grounds on merits taken by the assessee has become infructuous. Accordingly, the appeal of the assessee is allowed.”
13. The analysis given and view taken by Co-ordinate Bench is very much applicable to present matter before us. The Revenue is not able to distinguish the same by placing any material. Respectfully following the view taken by Co-ordinate Bench and in the light of pre-existing decisions of Hon’ble Supreme Court and Hon’ble Jurisdictional High Court of Gujrat referred therein, we are inclined to hold that the impugned notice dated 28.07.2022 issued by Ld. AO u/s 148 is time-barred and therefore invalid. Consequently, the impugned assessment-order passed by Ld. AO u/s 147 does not survive and the same is hereby quashed. The legal ground raised by assessee is thus allowed.
14. As we have quashed the order of assessment itself, there is no necessity of adjudicating other grounds dealing with the merit of the addition made by AO; the same are kept open undecided.
15. Resultantly, this appeal is allowed.
Order pronounced in open court on 08/10/2026
