ITAT Quashes AY 2016-17 Reassessment: Section 148 Notice Issued After Surviving Limitation

Sub Major Sub Bhadauria Vs ITO (ITAT Agra)

Summary: The Income Tax Appellate Tribunal allowed an assessee’s appeal for assessment year 2016-17 against the order dated 16 March 2026 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The assessee challenged reassessment jurisdiction under Sections 147 and 148 of the Income-tax Act, 1961, contending that the notice issued on 30 July 2022 was barred by limitation. The Tribunal considered the jurisdictional objection first because its determination would govern the validity of the reassessment proceedings.

The Assessing Officer had originally issued a notice under the old Section 148 regime on 25 June 2021. Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, the Assessing Officer issued a notice under Section 148A(b) on 26 May 2022. The assessee’s tabulated chronology recorded a reply filed on 10 June 2022, although an earlier narrative paragraph stated 8 June 2022. An order under Section 148A(d) and a fresh notice under Section 148 followed on 30 July 2022.

Applying the Supreme Court’s ruling in Union of India v. Rajeev Bansal, the Tribunal accepted the computation that only five days of limitation survived from the original notice. On the chronology adopted in the order, the last permissible date for the fresh Section 148 notice was 15 June 2022. The Tribunal also referred to the Delhi High Court decision in Ram Balram Buildhome v. ITO, which explained that the procedure under Section 148A must be completed within the time available under Section 149 and cannot independently extend the jurisdictional deadline.

As the notice was issued on 30 July 2022, after the surviving limitation expired, the Tribunal held it to be time-barred and quashed the reassessment as void ab initio. The remaining grounds were left open as academic, and the assessee’s appeal was allowed. The supplied extract does not identify the assessee’s name, ITAT bench, appeal number or members constituting the bench; those details should be verified before publication under a named-case heading.

Cases Discussed

• Union of India v. Rajeev Bansal, (2024) 469 ITR 46 (SC) — Applied to calculate the surviving limitation period.
• Union of India v. Ashish Agarwal, (2022) 444 ITR 1 (SC) — Considered regarding deemed notices under Section 148A(b).
• Ram Balram Buildhome Pvt. Ltd. v. ITO & Anr. (Delhi High Court) — Relied upon concerning the limitation governing completion of Section 148A proceedings.

FULL TEXT OF THE ORIGINAL ORDER (AS SUPPLIED)

This appeal has been preferred against the impugned order dated 16.03.2026 passed in Appeal No NFAC/2015-16/10269489 by the Id Commissioner of Income Tax, NFAC (Delhi) [hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the `Act), for the A.Y. 2016-17, wherein Id CIT(A) has dismissed the appeal.

2. At the very outset, we notice that assessee has raised as many as 06 grounds under this second appeal. Ld AR has submitted that according to the legal ground no. 1 & 2, the assumption of jurisdiction for reassessment u/s 147/148 of the Act is barred by limitation in view of law laid down by Hon’ble Supreme Court in Union of India v. Rajeev Bansal, (2024) 167 taxman.com 70. This issue goes to the very root of the matter, hence it is taken up for adjudication, first.

3. Perused the records and heard Id representative for the appellant assessee and Id CIT DR for the respondent revenue.

4. Ld representative for the assessee has submitted that assessee’s case was reopened by issuance of notice u/s. 148 of the Act, dated 25.06.2021 under the old regime. Thereafter, in light of the decision dated 04.05.2022 passed by Apex Court in Union of India v. Ashish Agarwal, 444 ITR 1 (SC), notice u/s. 148 A(b) of the Act was issued on 26.05.2022, which was replied by assessee on 08.06.2022. Finally, an order u/s. 148 A(d) and notice u/s. 148 of the Act was issued on 30.07.2022, which was time barred as the surviving period for it had lapsed in the light of decision of Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal, 469 ITR 46 (SC). Ld AR, thus, prayed to allow assessee’s appeal.

5. Ld Sr DR supported the impugned order.

6. The various dates of actions and compliances required in light of decision dated 04.05.2022 of the Hon’ble Supreme Court in Ashish Agarwal (supra), have been tabulated by the assessee in the brief synopsis as under:

7. The factum of various dates with reference to the actions and compliances narrated hereinabove, are not in dispute. The very small issue that arises for consideration is as to whether the subsequent notice issued u/s. 148 of the Act on 30.07.2022 is beyond the period of limitation in light of the decision of Hon’ble Supreme Court in Rajeev Bansal (supra). The relevant paras are read 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.”

8. This issue was also subject matter of consideration by the Hon’ble Delhi High Court in the case of Ram Balram Buildhome Vs. ITO & Anr, 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 Agarwal 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 Bansal.

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.”

9. In view of the observations of the Hon’ble Apex Court in Rajeev Bansal (supra), in the instant case, the extended due date for issuance of notice u/s. 148 of the Act expired on 15.06.2022. Since the notice u/s. 148 of the Act was issued on 30.07.2022, the said notice has to be treated as barred by limitation consequentially, the reassessment would be liable to be quashed as void ab initio.

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

11. In the result, assessee’s appeal is allowed.

Order pronounced on — 12.08.2026