Section 148 Reassessment Notice Time-Barred Under Rajeev Bansal Ruling: ITAT Delhi

Tyagi Pipe Craft Pvt. Ltd Vs ITO (ITAT Delhi)

Summary: The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), in Tyagi Pipe Craft Pvt. Ltd Vs ITO, allowed the assessee’s appeal for Assessment Year 2014-15 after holding that the reassessment notice issued under Section 148 of the Income-tax Act, 1961, on 23 July 2022 was barred by limitation. Applying the principles laid down by the Supreme Court in Union of India Vs Rajeev Bansal and the Delhi High Court in Ram Balram Buildhome Pvt. Ltd. Vs ITO And Anr., the Tribunal concluded that the extended deadline for issuing the fresh notice had expired on 26 June 2022. Consequently, the reassessment proceedings were quashed as void ab initio, and the assessee’s other grounds were left open without adjudication.

Background and Assessment Proceedings

The assessee had filed its return of income for AY 2014-15 on 29 November 2014 under Section 139(1) of the Income-tax Act. The dispute arose from reassessment proceedings initiated under Sections 147 and 148. The assessment order was passed on 23 June 2023 under Section 147 read with Section 144B by the Deputy Commissioner of Income Tax, Circle-16(2), New Delhi.

The assessee challenged the assessment before the National Faceless Appeal Centre (NFAC), Delhi. The appellate order dated 25 November 2024 was subsequently contested before the ITAT in ITA No. 147/Del/2025.

The principal ground before the Tribunal concerned the validity of the Assessing Officer’s jurisdiction to reopen the assessment. The assessee contended that the notice issued under Section 148 on 23 July 2022 was beyond the permissible statutory limitation period. Since this objection went to the root of the reassessment proceedings, the Tribunal considered it before examining the remaining grounds.

Transition to the New Reassessment Regime

The assessee’s authorised representative submitted that the original reassessment notice had been issued under the provisions of Section 148 applicable before the substitution introduced by the Finance Act, 2021, with effect from 1 April 2021.

The legal consequences of notices issued during the transition to the amended reassessment framework had been considered by the Supreme Court in Union of India Vs Ashish Agarwal, reported in 444 ITR 1 (SC), decided on 4 May 2022.

Following that decision, the Assessing Officer issued communications under Section 148A(b) on 26 May 2022 and 17 June 2022. The assessee submitted its reply on 24 June 2022. Subsequently, on 23 July 2022, the Assessing Officer rejected the assessee’s objections through an order under Section 148A(d) and issued a fresh reassessment notice under Section 148 on the same date.

The question was whether the fresh notice remained within the limitation period after accounting for the exclusions recognised under the Supreme Court’s interpretation of the reassessment provisions and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

Supreme Court’s Ruling in Rajeev Bansal

The Tribunal examined the Supreme Court’s decision in Union of India Vs Rajeev Bansal, reported in 469 ITR 46 (SC), which explained the computation of limitation for reassessment notices affected by the transition from the earlier statutory regime.

The Supreme Court had explained that the legal fiction created by Ashish Agarwal stopped the limitation clock from the date of the original notice under the old regime. The period until the Assessing Officer supplied the relevant information and material, together with the prescribed response period available to the assessee, was excluded from the limitation calculation.

However, once the relevant exclusions ended, the Assessing Officer was required to complete the statutory process within the surviving limitation period. That process included considering the assessee’s response, passing the order under Section 148A(d), and issuing the fresh notice under Section 148 where reassessment was considered warranted.

The principle was that the substituted reassessment procedure did not independently extend the outer limitation period. The Revenue could use only the time remaining after applying the legally permissible exclusions.

Calculation of the Surviving Limitation Period

The Tribunal reproduced a calculation showing that only two days remained before the extended limitation deadline of 30 June 2021. The material dates appearing in the calculation were as follows:

Applying the surviving-period principle, the Tribunal determined that the Assessing Officer was required to issue the fresh Section 148 notice by 26 June 2022. The notice actually issued on 23 July 2022 was therefore beyond the extended deadline.

The supplied order contains an internal discrepancy: paragraph 3 records the original notice date as 28 March 2021, whereas the calculation table in paragraph 4 records 28 June 2021. The Tribunal’s computation of two remaining days proceeds on the latter date. This discrepancy requires verification against the original judicial record and should not be silently reconciled.

Delhi High Court’s Decision in Ram Balram Buildhome

The Tribunal also relied on the jurisdictional Delhi High Court’s decision in Ram Balram Buildhome Pvt. Ltd. Vs ITO And Anr., decided on 30 January 2025.

In that case, the High Court considered the limitation period under Section 149, the extension granted through TOLA, and the exclusions arising from the Supreme Court’s decisions in Ashish Agarwal and Rajeev Bansal.

The High Court held that the Assessing Officer must complete the entire process leading to issuance of a reassessment notice within the period permitted under Section 149. The statutory period available for passing an order under Section 148A(d) could not be treated as an independent extension beyond the surviving outer limitation period.

Applying that principle to the facts before it, the High Court had held that the reassessment notice dated 30 July 2022 was beyond limitation and set aside the consequential proceedings.

The ITAT treated this jurisdictional precedent as supporting its conclusion that the fresh reassessment notice issued to Tyagi Pipe Craft Pvt. Ltd. on 23 July 2022 was time-barred.

Tribunal’s Findings and Final Decision

The Tribunal held that the surviving limitation period expired on 26 June 2022. Since the Assessing Officer issued the fresh notice only on 23 July 2022, the statutory requirement had not been satisfied.

Respectfully following the Delhi High Court’s ruling and applying the Supreme Court’s interpretation in Rajeev Bansal, the Tribunal allowed Ground No. 1 of the assessee’s appeal and quashed the reopening of the assessment.

Once the reassessment proceedings were invalidated on the jurisdictional ground of limitation, the remaining grounds became academic. The Tribunal expressly left those grounds open and did not adjudicate their merits.

The assessee’s appeal was accordingly allowed. The order was pronounced in the open court on 23 July 2025.

Practical Significance

The ruling illustrates the importance of calculating the surviving limitation period when reassessment proceedings originate from notices issued under the earlier reassessment regime and are subsequently processed under the substituted provisions introduced by the Finance Act, 2021.

The decision confirms, on the facts and calculation adopted by the Tribunal, that compliance with the procedural requirements of Section 148A does not dispense with the separate jurisdictional limitation requirement governing issuance of a notice under Section 148.

For affected taxpayers, the chronology of the original notice, supply of information, statutory response period, filing of objections, order under Section 148A(d), and fresh notice under Section 148 may determine the validity of the reassessment. The applicable exclusions and surviving period must be calculated with reference to the governing statutory provisions and judicial decisions.

Cases Discussed

• Union of India Vs Ashish Agarwal, (2022) 444 ITR 1 (SC), Supreme Court, decided on 04.05.2022 — Considered regarding the transition from the earlier reassessment regime to the substituted provisions introduced by the Finance Act, 2021.
• Union of India Vs Rajeev Bansal, (2024) 469 ITR 46 (SC), Supreme Court — Applied for determining the surviving limitation period after permissible statutory exclusions and the consequences of the legal fiction created in Ashish Agarwal.
• Ram Balram Buildhome Pvt. Ltd. Vs ITO And Anr., Delhi High Court, decided on 30.01.2025 — Followed regarding the requirement to complete the Section 148A procedure and issue the fresh reassessment notice within the surviving limitation period prescribed under Section 149.
• State of A P v. A P Pensioners Association, (2005) 13 SCC 161, Supreme Court — Referred to within the reproduced passage from Rajeev Bansal concerning the consequences flowing from a statutory legal fiction.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. The appeal in ITA No.147/Del/2025 for AY 2014-15, arise out of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC‟, in short] in Appeal No. ITBA/NFAC/S/250/2024- 25/1070597050(1) dated 25.11.2024 against the order of assessment passed u/s 147 r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 23.06.2023 by the Assessing Officer, DCIT, Circle-16 (2), New Delhi (hereinafter referred to as „ld. AO‟).

2. Ground No. 1 raised by the assessee is challenging the validity of assumption of jurisdiction u/s 147 of the Act, wherein, it has been pleaded that the notice u/s 148 of the Act is barred by limitation. This goes to root the matter and hence, is taken up first for adjudication.

3. We have heard the rival submissions and perused the material available on record. The return of income for AY 2014-15 was filed by the assessee u/s 139(1) of the Act 29.11.2014. Notice u/s 148 of the Act stood issued to the assessee on 28.03.2021. The ld AR pleaded that the said notice issued was as per old provisions of Section 148 of the Act prior to the substitution by Finance Act, 2021. It was submitted that Section 148 of the Act has been substituted by Finance Act, 2021 w.e.f 01.04.2021 wherein notice u/s 148 of the Act as per the old provisions of Section 148 of the Act applicable upto 31.03.2021 could not have been issued after 31.03.2021. This issue per se was subject matter of various writ petitions filed in various High Courts and ultimately got settled by the Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal reported in 444 ITR 1 (SC) dated 04.05.2022. Thereafter, the ld AO issued letter u/s 148A(b) of the Act on 26.05.2022 and subsequently, on 17.06.2022. The assessee filed its reply on 24.06.2022. The ld AO passed an order u/s 148A(d) of the Act on 23.07.2022 rejecting the objections of the assessee and proceeded to issue notice u/s 148 of the Act on 23.07.2022. All these facts are not in dispute before us with regard to dates. Now the short question that arises for our consideration is as to whether the subsequent notice issued u/s 148 of the Act on 23.07.2022 is to be treated as time barred or not in the light of decision of Hon’ble Supreme Court in the case of Union of India Vs. Rajeev Bansal reported in 469 ITR 46 (SC). In this regard, it would be appropriate to reproduce the relevant portion of the decision of the Hon’ble Supreme Court in the case of Rajeev Bansal referred (supra) 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.

4. Now let us see whether the notice issued u/s 148 of the Act on 23.07.2022 is within the time in the light of the aforesaid observation of the Hon’ble Supreme Court. For this purpose, the following table would be relevant which is reproduced as under:-

5. Hence, in view of the observation of the Hon’ble Supreme Court in the case of Rajeev Bansal (supra), the extended due date for issuance of notice u/s 148 of the Act expired on 26.06.2022 and since, the notice u/s 148 of the Act is issued on 23.07.2022, the said notice is to be treated as barred by limitation and consequentially reassessment proceedings would be liable to be quashed as void ab initio. This issue was also subject matter of consideration by the Hon‟ble Jurisdictional High Court in the case of Ram Balram Buildhome Vs. ITO & Anr reported in 445 ITR 1 (Del) dated 30.01.2025. Relevant operative portion of the said order is reproduced herein below:-

“65. Thus, in the facts of the present case, the last date for issuance of notice under Section 148 of the Act for AY 2013-14 under the statutory framework, as was existing prior to 01.04.2021 was 31.03.2020, that is, six years from the end of the relevant assessment year.

66. By virtue of Section 3 (1) of TOLA time for completion of specified acts, which fell during the period 20.03.2020 to 31 12.2020 were extended till 30.06.2021 [Notification No.38/21 dated 27.04.2021]. Thus, the notice dated 01.06.2021 was issued twenty-nine days prior to the expiry of period of limitation for issuing a notice under Section 148 of the Act as was extended by TOLA. As noted above, the period from 01.06.2021, the date of issuance of notice, and 04.05.2022, being the date of decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal is required to be excluded by virtue of the third proviso to Section 149 (1) of the Act.

67 Additionally, the period from the date of decision in Union of India & Ors. v. Ashish Agarwal2 till the date of providing material, as required to the accompanied with a notice under Section 148A (b) of the Act. is required to be excluded. Thus, the period between 04.05.2022 to 30.05.2022, the date on which the AO had issued the notice under Section 148A (b) of the Act in furtherance of his earlier notice dated 01.06.2021, is also required to be excluded by virtue of the third proviso to Section 149 (1) of the Act as held by the Supreme Court in Union of India & Ors. v. Rajeev Bansal4.

68. In addition to the above, the time granted to the petitioner to respond to the notice dated 30.05.2022-the period of two weeks-is also required to be excluded by virtue of the third proviso to Section 149 (1) of the Act. The petitioner had furnished its response to the notice under Section 148A (b) of the Act on 13.06.2022. Thus, the period of limitation began running from that date.

69. As noted above, by virtue of TOLA, the AO had period of twenty- nine days limitation left on the date of commencement of the reassessment proceedings, which began on 01.06.2021, to issue a notice under Section 148 of the Act. The said notice was required to be accompanied by an order under Section 148A (d) of the Act. Thus, the AO was required to pass an order under Section 148A (d) of the Act within the said twenty-nine days notwithstanding the time stipulated under Section 148A (d) of the Act. This period expired on 12.07.2022.

70. Since the period of limitation, as provided under Section 149 (1) of the Act, had expired prior to issuance of the impugned notice on 30.07.2022. The said is squarely beyond the period of limitation.

71. It is contended on behalf of the Revenue that the AO is required to pass an order under Section 148A (d) of the Act by the end of the month following the month on which the reply to the notice under Section 148A (b) of the Act was received. Thus, the order under Section 148A (d) of the Act as well as the notice under Section 148 of the Act (both dated 30.07.2022) are within the prescribed period. This contention is without merit as it does not take into account that proceedings under Section 148A of the Act necessarily required to be completed within the period available for issuing notice under Section 148 of the Act, as prescribed under Section 149 of the Act. Thus, the time available to the AO to pass an order under Section 148A (d) of the Act was necessarily truncated and the same was required to be passed on or before 12.07.2022. The fourth proviso to Section 149 of the Act did not come into play as the time period available for the AO to pass an order under Section 148A (d) of the Act was in excess of the seven days.

72. In view of the above, we find merit in Mr. Sehgal’s contention that the impugned notice dated 30.07.2022 has been issued beyond the period of limitation.

73. The petition is accordingly allowed and the impugned order dated 30.07.2022 passed under Section 148A (d) of the Act; the impugned notice dated 30.07.2022 issued under Section 148 of the Act; and the assessment order dated 30.05.2023 framed under Section 147 of the Act pursuant to the notice dated 30.07.2022 for AY 2013-14, are set aside. Pending application is also disposed of.”

6. Respectfully following the said decision, we hold that the notice issued u/s 148 of the Act on 23.07.2022 is barred by limitation. Accordingly, ground No. 1 raised by the assessee is allowed.

7. Since, reopening of assessment has been quashed, the adjudication of the other grounds raised by the assessee becomes academic in nature and they are left open.

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

Order pronounced in the open court on 23/07/2025.