AY 2015-16 Reassessment Time-Barred Under TOLA: ITAT Rajkot

Pratik Bhut Vs ITO (ITAT Rajkot)

TOLA Does Not Automatically Extend AY 2015–16 Reopening: Belated Section 148 Notice Quashed

The Controversy

Background of the Case

The original assessee filed his return for AY 2015–16 on 29 January 2016, declaring total income of ₹7,28,320.

Subsequently, information was forwarded to the Assessing Officer concerning a search conducted by the Central Excise Department at M/s Krupalu Metals Pvt. Ltd. During those proceedings, the assessee’s statement had been recorded on 9 February 2015.

According to the information, the assessee admitted purchasing goods without invoices and stated that his total sales during FY 2014–15 amounted to ₹1,88,53,462.

Based on this material, the Assessing Officer initiated reassessment and issued a notice under section 148 on 29 July 2022. In response, a return was filed on 21 November 2022 declaring the same income as originally returned.

Profit Estimated at 20%

During reassessment, the assessee explained that he had declared income under section 44AD at 8% of turnover of ₹95,33,360, resulting in business income of ₹7,62,669. He also submitted the return, computation and bank statement.

The Assessing Officer rejected the explanation and considered that purchases and sales had been undertaken outside the disclosed records.

However, recognising that the entire sales could not be treated as income, he estimated net profit at 20% of ₹1,88,53,462, working out income of ₹37,70,692.

After giving credit for profit of ₹13,16,805, as recorded in the assessment order’s computation, he made a net addition of ₹24,53,887.

The CIT(A) upheld the assessment. The legal heir appealed to the Tribunal.

Challenges Before the Tribunal

The assessee challenged both the reopening and the estimated addition.

On jurisdiction, he contended that the notice was barred by section 149 and that the alleged escaped income was below the ₹50 lakh threshold required for invoking the extended period under section 149(1)(b).

He also relied on the first proviso to section 149, TOLA and the Supreme Court’s decision in Union of India v. Rajeev Bansal, 469 ITR 46.

On merits, the assessee disputed the unsupported 20% profit rate and argued that the turnover included ₹69,26,700 belonging to his brother’s separate proprietary business. He maintained that the relevant turnover had been separately recorded and taxed.

The Tribunal decided the appeal on limitation, leaving these substantive objections unresolved.

Application of Rajeev Bansal

The Tribunal relied on the discussion in Rajeev Bansal, including the Revenue’s concession concerning AY 2015–16 in the TOLA context.

The reasoning noted that the three-year period for AY 2015–16 ended on 31 March 2019, before the relevant TOLA relaxation period, while the six-year period ended on 31 March 2022, after that relaxation period.

Accordingly, TOLA could not automatically supply an extension for the notices under consideration.

The Revenue’s representative before the Tribunal agreed with the assessee’s limitation submission.

Supreme Court and Gujarat High Court Authorities

The Tribunal also relied on Deepak Steel and Power Ltd., [2025] 174 taxmann.com 144 (Supreme Court).

The passage reproduced from that decision referred to the Revenue’s concession in Rajeev Bansal and granted relief in litigation concerning a notice dated 25 June 2021 for AY 2015–16.

Further reliance was placed on Sorathia Mahesh Veljibhai HUF, [2025] 179 taxmann.com 54 (Gujarat), which discussed the position that the three-year and six-year deadlines for AY 2015–16 fell outside the relevant TOLA window.

Following these authorities, the Tribunal held that the notice dated 29 July 2022 was time-barred.

Final Decision

The Tribunal quashed the section 148 notice and the consequential reassessment order dated 19 May 2023.

Once the reassessment was annulled, the disputes concerning profit estimation, turnover attribution and the addition became academic.

The assessee’s appeal was allowed.

Author’s Comments

TOLA is a relaxation tied to specified statutory deadlines; it is not a universal extension for every reassessment year. The relevant limitation must be worked out by reference to the assessment year, the applicable section 149 framework and the particular reopening chronology.

The decision should nevertheless be reported carefully. The broad reference to notices issued for AY 2015–16 arises from the Revenue’s concession in the TOLA litigation and the authorities followed by the Tribunal. It should not be converted into a proposition that every conceivable post-1 April 2021 notice for that year is invalid irrespective of its statutory basis and facts.

The present order also does not reproduce a complete earlier-notice and section 148A chronology, although the appeal grounds refer to CBDT Instruction No. 1/2022. Its operative conclusion is that the particular July 2022 notice before it was barred, with the Revenue agreeing to the limitation argument.

Finally, the relief does not establish that 8% was the correct profit rate, that the brother’s turnover was wrongly included, or that the Excise statement was unreliable. Those questions were expressly left undecided. The reassessment failed at the jurisdictional threshold, making further adjudication of the addition unnecessary.

Cases Discussed

• Sorathia Mahesh Veljibhai HUF v. ITO, [2025] 179 taxmann.com 54 (Gujarat High Court) — Followed regarding the effect of TOLA and the applicable statutory deadlines for reassessment proceedings concerning AY 2015–16.
• Deepak Steel and Power Ltd. v. Central Board of Direct Taxes & Ors., [2025] 174 taxmann.com 144; (2025) 476 ITR 369 (Supreme Court) — Followed regarding the Revenue’s concession in Rajeev Bansal and the invalidity of the reassessment notices involved in that litigation for AY 2015–16.
• Union of India & Ors. v. Rajeev Bansal & Ors., (2024) 469 ITR 46; 2024 SCC OnLine SC 2693, Civil Appeal No. 8629 of 2024 (Supreme Court) — Followed concerning the relationship between TOLA and the substituted reassessment provisions and the Revenue’s concession relating to notices for AY 2015–16.
• Union of India & Ors. v. Ashish Agarwal, (2022) 444 ITR 1 (Supreme Court) — Referred to within the reproduced submissions in Rajeev Bansal concerning reassessment notices issued during the transition from the old regime to the substituted provisions.

FULL TEXT OF THE ORDER OF ITAT RAJKOT

Captioned appeal filed by the Assessee, pertaining to assessment year (AY) 2015-16, 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 (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 30.06.2026, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 read with section 144B of the Act, dated 19.05.2023.

2. Grounds of appeal raised by the assessee, are as follows:

1. The CIT(A) erred in upholding the reopening as valid, since it was time-barred under section 149(1)(a), the alleged escaped income being below the Rs. 50,00,000/-, threshold needed to invoke the extended period under section 149(1)(b) of the Act.

2. The CIT(A) erred in not addressing the appellant’s submission that the notice, though purportedly issued pursuant to CBDT Instruction No. 01/2022 dated 11.05.2022, was independently barred under the first proviso to section 149 read with TOLA, 2020 a submission supported by the Hon’ble Supreme Court’s decision in Union of India v. Rajeev Bansal (2024).

3. The CIT(A) erred in sustaining the addition of Rs. 24,53,887/- based on an arbitrary 20% profit estimate on turnover of Rs. 1,88,53,462/-, unsupported by any basis, comparable, or past history, and contrary to the 8% rate accepted u/s 44AD.

4. The CIT(A) erred in law and violated natural justice by relying, for the first time, on an unsubstantiated finding that manufacturing yields higher margins than trading to justify the 20% rate, without material, comparables, or opportunity to rebut.

5. The CIT(A) erred in treating the Excise statement dated 09.02.2015, as conclusive admission and disregarding the documentary evidence i.e. computation of income, sales register, VAT returns, Invoices, registration certificate establishing separately recorded and taxed turnover.

6. The CIT(A) erred in sustaining an addition that taxes the same turnover twice by adding the brother’s (Mr. Kishorbhai Kalyanjibhai Bhut) turnover of Rs. 69,26,700/- , from his own separate proprietary business to the appellant’s turnover, without rejecting the brother’s books of account.

3. Succinctly, the factual panorama of the case is that assessee before me is an Individual and has filed the Return of Income for the assessment year 2015-16, on 29/01/2016 by declaring total income of Rs.7,28,320/-. In this case, an information was forwarded by ACIT, Circle-2(2), Jamnagar vide letter dated 01/01/2020 to the assessing officer. Vide the letter, it was informed that a search was conducted by Central Excise Department in the case of M/s Krupalu Metals Pvt Ltd at the factory premises. During the search, statement of the assessee (Shri Rasiklal K Bhutt) was recorded on 09/02/2015 by Central Excise Authorities. In the statement recorded, the assessee accepted that he has purchased goods without invoices from M/s Krupalu Metals Pvt Ltd. The assessee, during the course of recording of statement has given the details of total sales made by him during F.Y.2014-15, and as per the assessee, total sales made by him during F.Y.2014-15 was Rs. 1,88,53,462/-.In the light of all the facts as discussed above, the assessment proceeding u/s 147 under the Income Tax Act, 1961 (referred as “Act”) was initiated by the then jurisdictional assessing officer after taking necessary approval from the competent authority and accordingly a notice u/s 148 was issued on 29/07/2022 by the then jurisdictional assessing officer, which was duly served upon the assessee. The assessee has filed income tax return (ITR) in response to 148 notice, on 21.11.2022 by declaring total income of Rs.7,28,320/-. Therefore, assessing officer issued show-cause notice to the assessee to explain the transaction with M/s Krupalu Metals Pvt Ltd.

4. In response to the notice of the assessing officer, the assessee submitted that he had declared the income under section 44AD of the Act, on the turnover of Rs.95,33,360/- at the rate of 8%, which comes to Rs.7,62,669/-. The assessee also stated that he is not required to maintain books of accounts. The assessee submitted before the assessing officer, copy of the income tax return, copy of computation of total income, copy of bank statement etc and stated that no addition should be made in the hands of the assessee, as the assessee had already declared the income under section 44AD of the Act.

5. However, the assessing officer rejected the contention of the assessee and observed that the cash component involved in such transaction forms the undisclosed part of the assets held by the assessee for the period under consideration, therefore, the assessee has allegedly entered into cash sales/purchase out of books, avoided the due taxes on such transactions. Further, it was also mentioned by the assessing officer that entire sales cannot be considered as total income of the assessee, keeping in view of various judicial decisions pronounced by the ITAT, High Court and Supreme courts. Hence, the estimated Net profit 20% of total turnover Rs.1,88,53,462/-, has been taken in the case of the assessee, therefore, assessing officer made the addition of Rs.37,70,692/- (20% of Rs.1,88,53,462). Since the assessee had already declared the profit at Rs.13,16,805/-, therefore assessing officer made the net addition in the hands of the assessee to the tune of Rs.24,53,887/- (Rs.37,70,692- Rs.13,16,805).

6. Being aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), but remained unsuccessful. Therefore, assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.

7. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the Ld. CIT(A) and other materials brought on record.

8. Shri Dushyant Maharshi, Learned Counsel for the assessee, begins by pointing out that assessee’s case, under consideration pertains to assessment year (AY) 2015-16, which is squarely covered by the judgement of the Hon’ble Supreme Court in the case of Rajiv Bansal, 469ITR 46 (SC). As per the said judgement of the Hon’ble Supreme Court, when the assessment is to be re-opened after three years, then time limit to issue the notice is up to 31.03.2019. If the assessment is to be re-opened after expiry of six years then time limit to issue the notice u/s 148 of the Act, is up to 31.03.2022, in the new regime. However, the assessing officer has issued the notice u/s 148 of the Act on 29.07.2022, therefore, the notice issued by the assessing officer u/s 148 of the Act is time barred, that is, barred by limitation. Therefore, the assessee’s appeal may be allowed on this count.

9. On the other hand, Ld. Sr. DR for the revenue, fairly agreed with the submissions of learned Counsel for the assessee.

10. I have heard, both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon and perused the facts of the case including the findings of the Ld. CIT(A) and other material brought on record. I find that notice u/s 148 of the Act was beyond time allowed as held in the decision of UOI vs. Rajeev Bansal, (2024) 469 ITR 46 (SC), dated 03.10.2024. The revenue made a concession in the aforesaid decision at Para ‘f’ therein, that for AY. 2015-16, all notices issued on or after 01.04.2021 would have to be dropped as they would not fall for completion during period prescribed under TOLA. Therefore, I find that based on the above facts, the issue under consideration is squarely covered in favour of the assessee by the judgment of Hon’ble Supreme Court in case of Rajeev Bansal (Supra), wherein it was held as follows:

“19. Mr. N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue:

a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID- 19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income-tax Act;

b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re assessment for previous assessment years;

c. The relaxations provided under section 3(1) of TOLA apply “notwithstanding anything contained in the specified Act.” Section 3(1), therefore, overrides the time limits for issuing a notice under section 148 read with Section 149 of the Income-tax Act;

d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime;

e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income-tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below:

f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA;

g. Section 2 of TOLA defines “specified Act” to mean and include the Income-tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income-tax Act. Therefore, TOLA continues to apply to the Income T a x Act even after 1 April 2021; and

h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income-tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra).”

11. I note that in the case of Deepak Steel and Power Ltd. (2025) 174 taxmann.com 144 (SC), the revenue made a concession, for Assessment Year (AY) 2015-16 and stated that all notices issued on or before 01.04.2021 would have to be dropped. For that, reliance is placed on the decision of the Hon’ble Supreme Court in case of Deepak Steel and Power Ltd. (supra), wherein it was held as follows:

“4. The learned counsel appearing for the revenue with his usual fairness invited the attention of this Court to a three judge bench decision of this Court in Union of India v. Rajeev Bansal 2024 SCC OnLine SC 2693/[2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC), more particularly, paragraph 19(f) which reads thus:-

“19. (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.”

5. As the revenue made a concession in the aforesaid decision that is for the assessment year 2015-2016, all notices issued on or after 1st April, 2021 will have to be dropped as they would not fall for completion during the period prescribed under the taxation and other laws (Relaxation and Amendment of certain Provisions Act, 2020). Nothing further is required to be adjudicated in this matter as the notices so far as the present litigation is concerned is dated 25.6.2021.

6. In view of the aforesaid, in such circumstances referred to above the original writ petition nos.2446 of 2023, 2543 of 2023 and 2544 of 2023 respectively filed before the High Court of Orissa at Cuttack stands allowed.”

12. I also find that issue under consideration is also covered in favour of the assessee by the judgment of the Hon’ble jurisdictional High Court of Gujarat in case of Sorathia Mahesh Veljibhai HUF (2025) 179 taxmann.com 54, wherein it was held as follows:

“9. During the course of hearing before the Hon’ble Apex Court, Revenue conceded to the effect that so far as Assessment Year 2015-2016 is concerned, Revenue could not have issued the notices under section 3(1) of TOLA as considering the time period as prescribed under section 149 of the Act with effect from 01.04.2021, three years would be over on 31.03.2019 which is prior to coming into force of TOLA and six years would be completed on 31.03.2022 which is after operation of TOLA. In such circumstances, notices for Assessment Year 2015-2016 are held to be invalid by Hon’ble Apex Court in case of Rajeev Bansal (supra).”

13. Hence, respectfully following the judgement of Hon’ble Supreme Court in case of Rajeev Bansal (supra) and judgement of jurisdictional High Court of Gujarat(supra), I find that notice u/s 148 being time barred, deserves to be quashed and the consequent order passed u/s 147 of the Act dated 19.05.2023 is also quashed.

14. As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

15. In the result, appeal filed by the assessee is allowed.

Order is pronounced in the open Court Today on 12/10/2026.