Gujarat HC Quashes Reassessment Notice Issued Beyond TOLA Surviving Time Under Section 148

Wealth First Portfolio Managers Limited Vs ACIT (Gujarat High Court)

The petitioner filed a writ petition under Article 226 of the Constitution of India challenging the notice dated 31.08.2022 issued under Section 148 of the Income-tax Act, 1961 for Assessment Year 2016-17, contending that the notice was invalid and barred by limitation.

The Assessing Officer had initially issued a notice dated 29.06.2021 under Section 148 during the extended limitation period available under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA). Following the decision of the Supreme Court in Union of India and others v. Ashish Agarwal, the notice issued during the transition period was required to be treated as a notice under Section 148A(b) of the Act after the new reassessment regime came into force from 01.04.2021.

The High Court noted that the Supreme Court in Union of India v. Rajeev Bansal had laid down that the validity of such reassessment notices depends upon the “surviving time” available between the issuance of the original notice under TOLA up to 30.06.2021 and the issuance of the fresh notice under Section 148 after compliance with the procedure prescribed in Ashish Agarwal. The Court also referred to its earlier decision in Dhanraj Govindram Kella v. Income Tax Officer, Ward(2), Surendranagar, where the principles governing computation of the surviving limitation period had been examined in detail. That decision held that reassessment notices issued after expiry of the surviving time would be invalid and liable to be quashed.

Applying those principles to the present case, the Court recorded that the Assessing Officer supplied the information under Section 148A(b) on 27.07.2022. Allowing 15 days for the petitioner to submit a reply, the due date for filing the response was 10.08.2022, although the petitioner actually filed its reply on 05.08.2022. Thereafter, the order under Section 148A(d) was passed on 30.08.2022, and the fresh notice under Section 148 was issued on 31.08.2022.

The Court observed that, after computing limitation in accordance with TOLA, Ashish Agarwal, and Rajeev Bansal, the last permissible date for issuing the reassessment notice under Section 148 was 10.08.2022. The Revenue verified the relevant dates before the Court and did not dispute the factual position.

The High Court referred to paragraphs 114(g) and 114(h) of the Supreme Court’s judgment in Rajeev Bansal, which clarified that the period during which the deemed notices remained stayed extends from the issuance of the deemed notice until supply of information and material by the Assessing Officer together with the response period granted to the assessee, and that reassessment notices under the new regime must be issued within the surviving limitation available under the Income-tax Act read with TOLA. Notices issued beyond that surviving period are time-barred and liable to be set aside.

Since the impugned notice dated 31.08.2022 had been issued after the surviving limitation expired on 10.08.2022, the High Court held it to be an invalid notice issued beyond the surviving time. Accordingly, the Court quashed and set aside the notice under Section 148 dated 31.08.2022 along with all consequential proceedings.

Cases Discussed

• Union of India v. Rajeev Bansal (SC), (2024) 469 ITR 46 (SC)
• Union of India and others v. Ashish Agarwal (SC), (2022) 444 ITR 1 (SC)
• Dhanraj Govindram Kella v. Income Tax Officer, Ward(2), Surendranagar, Judgment dated 08.07.2025 rendered in Special Civil Application No.6387 of 2023 and allied matters

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

Heard learned Senior Advocate Mr.Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioner and learned Senior Standing Counsel Mr. Aaditya D. Bhatt for the respondent.

2. This petition is filed under Article 226 of the Constitution of India challenging the notice under section 148 of the Income Tax Act, 1961 (For short “the Act”) dated 31.08.2022 on the ground that the notice would be invalid and time barred.

3. Brief facts of the case are that the respondent Assessing Officer issued notice dated 29.06.2021 under section 148 of the Act for the Assessment Year 2016-2017 during the extended time period as per Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 [(2020) 422 ITR (St.) 116] (For short “TOLA”).

4. In view of the decision of Hon’ble Apex Court in case of Union of India and others v. Ashish Agarwal, (2022) 444 ITR 1 (SC), the aforesaid notice was to be treated as notice under section 148A(b) of the Act which has come into statute with effect from 01.04.2021.

5. The Hon’ble Apex Court in case of Union of India v. Rajeev Bansal, (2024) 469 ITR 46 (SC) has laid down the law to consider such notice as valid notice or invalid notice depending upon the surviving time left between the date of issuance of notice under section 148 of the Act read with section 3(1) of TOLA upto 30.06.2021 and the issuance of notice under section 148 pursuant to the directions issued by the Hon’ble Apex Court in case of Ashish Agarwal (supra).

6. This Court in case of Dhanraj Govindram Kella v. Income Tax Officer, Ward(2), Surendranagar (Judgment dated 08.07.2025 rendered in Special Civil Application No.6387 of 2023 and allied matters) has considered in detail the submissions made by both the sides and has held as under:

“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 30^th 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 the Hon’ble Apex Court in case of Rajeev Bansal (supra):

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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.

70. Rule is made absolute to the aforesaid extent. No order as to costs.”

7. In the facts of the case, the respondent Assessing Officer has provided information pursuant to the directions issued by the Hon’ble Apex Court in case of Ashish Agarwal (supra) on 27.07.2022 and therefore, considering 15 days’ time to file reply by the assessee, the due date would be 10.08.2022. The petitioner filed reply on 05.08.2022. The order under section 148A(d) of the Act dated 30.08.2022 as well as notice under section 148 of the Act was issued on 31.08.2022. However, considering the period of limitation from the date of issuance of notice under section 148 read with TOLA upto 30.06.2021, the limitation for issuance of notice under section 148 of the Act applying the decision of Hon’ble Apex Court in case of Ashish Agarwal (supra) as well as Rajeev Bansal (supra), would be 10.08.2022.

8. Learned Senior Standing Counsel Mr. Aaditya D. Bhatt has verified the above dates and could not controvert the same.

9. In view of above, the impugned notice dated 31.08.2022 issued under section 148 of the Act would be invalid notice as the said notice is issued after 10.08.2022 as per the decision of Hon’ble Apex Court in case of Ashish Agarwal (supra). Therefore, the impugned notice having been issued beyond the ‘surviving time’ would be invalid notice as held by the Hon’ble Apex Court in case of Rajeev Bansal (supra) in the following paragraph no. 114 (g) and (h) of the judgment:

“114. In view of the above discussion, we conclude that:

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(9) The time during which the show-cause notices were deemed to be stayed is from the date of issuance of the deemed notice between April 1, 2021 and June 30, 2021 till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , and the period of two weeks allowed to the assessees to respond to the show-cause notices; and

(h) 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 the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. All notices issued beyond the surviving period are time barred and liable to be set aside.”

10. In view of foregoing reasons, impugned notice dated 31.08.2022 is hereby quashed and set aside and all consequential proceedings are also quashed and set aside.