Did ITAT Delhi Misinterpret Section 149 in Manoj Garg v DCIT?

Summary: The article examines whether the Income Tax Appellate Tribunal, Delhi, correctly interpreted the limitation provisions of Section 149 of the Income Tax Act, 1961 while deciding Manoj Garg v DCIT concerning Assessment Year 2016-17. The Tribunal held that a reassessment notice issued under Section 148 on 16 April 2023 was time-barred, notwithstanding that a show-cause notice under Section 148A(b) had been issued on 3 March 2023 and the assessee was allowed until 20 March 2023 to respond. The author questions this conclusion by examining the interaction between the first, fifth and sixth provisos to Section 149. According to the author, the Assessing Officer had 29 days remaining on 3 March 2023 before the original limitation deadline of 31 March 2023. Excluding the period allowed for responding to the show-cause notice would, on this interpretation, extend the deadline to 18 April 2023. Consequently, the notice issued on 16 April 2023 would fall within the permissible period. The article contrasts these circumstances with Shailendra Nath Rai v Asstt. CIT, in which the Delhi High Court applied the seven-day extension mechanism because the Assessing Officer had only a short period remaining before the limitation deadline. It also discusses the Supreme Court’s explanation of the surviving limitation period in Union of India v Rajeev Bansal. The central issue is whether the Tribunal correctly applied the seven-day proviso despite the author’s contention that more than seven days remained available to the Assessing Officer.

Did ITAT Delhi Interpret Section 149 Correctly in Manoj Garg v DCIT?
Manoj Garg v DCIT (ITAT Delhi); IT Appeal No. 50 of 2026; 14/10/2026; (2026) 191 taxmann.com 421

Background: Manoj Garg v DCIT and the Section 149 Limitation Dispute

1. Recently, on 14^th October 2026, the Division bench of the Hon’ble Income Tax Appellate Tribunal, Delhi has delivered a judgement in the case of MANOJ GARG v DCIT (IT Appeal no 50 of 2026 dated 14.10.2026) on the point of limitation u/s new regime sec 149 (w.e.f 1.4.2021) of the Income Tax Act 1961 for Assessment Year 2016 17. The Hon’ble Tribunal held that the notice issued u/s 148 beyond 31.03.2023 for the Assessment Year 2016-17 is barred by limitation and proceeded to quash the Notice as well as the assessment order framed u/s 147 r.w.s. 144C (13) of the Income Tax Act. The said judgement has been passed by relying on the judgement of the Hon’ble Delhi High Court in Shailendra Nath Rai v. Asstt. CIT [2026] 187 taxmann.com 14 (Delhi)/WP (C) 15305/2024 dated 29.05.2026

2. The relevant dates of the present case of MANOJ GARG, as culled from the Tribunal judgement dated 16.10.2026, are as below:

Tribunal’s Finding on Limitation Under Section 149

3. The Hon’ble Tribunal, in paragraph 11 of the judgement dated 16.10.2026, held the Sec 148 notice dated 16.04.2023 as barred by limitation by relying on Shailendra Nath Rai v. Asstt. CIT, as below:

11. Accordingly, in view of the aforesaid decision of Hon’ble Delhi High Court, the time allowed to the assessee to file reply in the notice was 20.03.2023, as per 4^th & 5^th proviso, the period allowed to the assessee be excluded, hence, the period upto 20.03.2023 needs to be excluded as the assessee failed to respond. Then, the Assessing Officer had only 7 days to pass order u/s 148A(d) of the Act. Therefore, the Assessing Officer should have passed order on 28.03.2023 still he had time upto 31.03.2023. Issuing notice beyond 31.03.2023 is barred by limitation. Therefore, we hold that the notice issued u/s 148 of the Act beyond 31.03.2023 is barred by limitation and thus, following the principles of judicial discipline, we hereby quash the notice so issued u/s 148 of the Act dated 16.04.2025 in case of the assessee and also quash the assessment order so framed u/s 147 r.w.s. 144C(13) of the Act dated 26.12.2025 along with consequent demands being barred by limitation, void-ab-initio and bad in law

4. It is the Author’s submission that the Hon’ble Tribunal may not have correctly interpreted provisos to new regime Sec 149 and has may not have correctly applied the principle laid down in Shailendra Nath Rai v. Asstt. CIT.

5. The relevant portions of new regime of Sec 149 are extracted below:

Relevant Provisions of Section 149 Under the New Reassessment Regime

“149. Time limit for notice

149.(1) No notice under section 148 shall be issued for the relevant assessment year,—

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153 A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021:

Provided…..

Provided…

Provided…..

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A does not exceed seven days, such remaining period shall be extended to seven days and the period of limitation under this sub section shall be deemed to be extended accordingly.

Author’s Interpretation of the First, Fifth and Sixth Provisos to Section 149

First Proviso: Limitation Under the Earlier Reassessment Regime

6. 1^st proviso to the post 1.4.2021 new regime Sec 149 provides that no notice u/s 148 shall be issued for an assessment year beginning on or before 1^st day of April 2021 if a notice u/s 148 could not have been issued at that time on account of being beyond limitation period under provisions of Sec 149(1)(b) as it stood immediately before 1.4.2021. The Assessment Year in question is 2016 17 and the limitation period as per old Sec 149, it appears from the Judgement dated 16.10.2026, was the larger period of 6 years ending on 31.03. 2023 (31.03.2017 + 6 years = 31.03.2023).

Fifth Proviso: Exclusion of Time Allowed for Reply Under Section 148A(b)

6.1. However, the limitation restriction provided in 1^st proviso of the new regime sec 149 is expanded by 5^th proviso and it mandates that for the purpose of computing the period of limitation under this section, the time allowed to the assessee to reply to notice u/s 148A(b) shall be excluded. Para 112 of UNION OF INDIA v RAJEEV BANSAL (Civil appeal no 8629 of 2024 dated 03 October 2024) explains how to calculate the surviving period , after exclusions, as below:

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.

6.2. The Sec 148A(b) notice was issued to the assessee on 03.03.2023 and he was allowed time till 20.03.2023 to reply. The limitation period as per 1^st proviso to new regime sec 149 was to expire on 31.03.2023 in terms of old sec 149 and the AO, as on 03.03.2023, had 29 days till 31.03.2023 to issue a Sec 148 Notice. The time provided to the assessee to reply was till 20.03.2023. Thus, 18 days period (between 03.03.2023 being notice date to 20.03.2023 being date to file reply) granted to assessee stands excluded from the computation of limitation period. The limitation period, thus started again on 21.03.2023 on expiry of period granted to assessee to file reply, and as 29 days were available to the AO, it would be 29 days starting from 21.03.2023 and ending on 18.04.2023, It stood extended till 18.04.2023 by operation of exclusion provided in 5^th proviso to new regime Sec 149. In terms also of the surviving period explained by the Hon’ble Supreme Court, the limitation period as per 5^th proviso would be 20.03.2023 + 29 days = 18.04.2023

Sixth Proviso: When the Seven-Day Extension Applies

6.3. The 6^th proviso to new regime Sec 149 has no role in MANOJ GARG case as the period available to the assessing officer as on 3.3.2023 was 29 Days and exceeded 7 days on 20.03.2023, after exclusion of time as per 5^th proviso to new regime sec 149 , and was more than 7 days.

Why the Author Considers the Notice Dated 16 April 2023 Within Limitation

7. As the sec 148A(d) Order and Sec 148 Notice were issued on 16.04.2023, these were well within the period of limitation expiring on 18.04.2023, calculated as per 5^th proviso to Sec 149, as discussed in para 6 above. However, the Hon’ble Tribunal, in para 11 of its judgement, appears to have ignored that the number of days available to the AO on 3.3.2023 was 29 days and it needed to be added to 21.03.2023 to arrive at the limitation date of 18.04.2023. It merely proceeded by adding 7 days (as per 6^th proviso to new regime sec 149) to 21.03.2023 to arrive at 28.03.2023 and concluded that AO still had time till 31.03.2023 to pass order, and as the sec 148 Notice was issued beyond 31.03.2023 the same was barred by limitation.

8. The facts as regards the surviving period in the case of Shailendra Nath Rai v. Asstt. CIT were different, the assessment Year was 2017 18 and the relevant dates were as below:

Comparison With Shailendra Nath Rai v Asstt. CIT

Different Surviving Limitation Periods in the Two Cases

8.1. This case was decided by the Hon’ble High Court on the basis of a finding that the sec 148 notice was issued by the AO beyond maximum permissible 7 days as per 6^th proviso to new regime sec 149. The period available to the AO, calculated from 29.03.2024 (date of 148A(b) notice) to 31.03.2024 (limitation as per old sec 149), was only 3 days and the extended time available to the AO as per 6^th proviso to new regime Sec 149 was 7 days. Thus, the extended period of 7 days was available to the AO. The assessee had filed the reply on 21.04.2024 and the 7-day period to issue sec 148 Notice, starting from 22.04.2024, expired on 28.04.2024. Sec148 notice was issued on 30.04.2024 and it was issued beyond the available period of 7 days till 28.04.2024. The Hon’ble High Court, on these facts, allowed the Writ Petition and 148A(d) order and sec 148 Notice, both dated 30.04.2024, were quashed. The facts in Tribunal judgement dated 16.10.2026 in MANOJ GARG case are different as in this case the time available to AO was more than 7 days and the Sec148 notice was issued within the time permitted by 5^th proviso of the new regime sec 149. The extracts from the High Court judgement in Shailendra Nath Rai v. Asstt. CIT are as below:

22. A combined reading of fifth and sixth proviso to Section 149 suggests that the time between the date of notice under Section 148A(b) i.e. 29.03.2024 and the date on which the petitioner had filed reply i.e. 21.04.2024 (as given under fifth proviso) is to be excluded and then, from that date, a period of 7 days is to be taken as per sixth proviso for the purpose of determining the last date of limitation, by which the AO has to pass the order under Section 148A(d) and issue the notice under Section 148 of the Act of 1961.

23. Accordingly, having received reply on 21.04.2024, the AO had only 7 days at his disposal to pass order under Section 148A(d) of the Act of 1961 and to issue notice under Section 148 of the Act of 1961, whereas he has passed the order under Section 148A(d) of the Act of 1961 and issued notice under Section 148 of the Act of 1961 on 30.04.2024 – he has taken 9 days’ time to issue notice under Section 148 of the Act of 1961.

24. The notice under Section 148 was required to be issued within maximum of 7 days from the date, when reply was filed i.e. 21.04.2024. The notice could therefore be issued by 28.04.2024, whereas the same came to be issued on 30.04.2024. The impugned notice dated 30.04.2024 is, thus, barred by limitation.

9. Thus, it is submitted that provisos of Sec 149 have perhaps been incorrectly interpreted by the Hon’ble Tribunal in the case of MANOJ GARG and reliance has also been perhaps incorrectly placed by the Tribunal on the case of Shailendra Nath Rai v. Asstt. CIT.