Jothirajan Sathiyamoorthy Vs ACIT (ITAT Chennai)
Reopening Saved, Deadline Not Extended: ITAT Quashes Two Reassessments
The decision in Jothirajan Sathiyamoorthy v. ACIT, ITA Nos. 4203 and 4204/Chny/2026, was pronounced on 6 October 2026 by Aby T. Varkey, Judicial Member, and S. R. Raghunatha, Accountant Member. Although both years involved the same original and subsequent notice dates, the Tribunal examined their limitation issues separately.
The Background: Substantial Additions Following Reopening
The assessee, an individual engaged in a small-scale, traditional family money-lending business, had declared income of ₹5,49,710 for AY 2014–15.
The reassessment resulted in additions of ₹3,26,24,050 under Section 69A, comprising cash deposits of ₹1,59,74,050 and other bank credits of ₹1,66,50,000. The assessed income consequently increased to ₹3,31,73,760.
For AY 2015–16, the assessee had declared income of ₹6,37,112. The Assessing Officer applied 8% to aggregate bank credits of ₹6,60,29,000, determining ₹52,82,320 as business income.
Both reassessment orders were passed on 29 May 2023. The CIT(A) upheld the proceedings and additions, prompting the assessee’s appeals before the Tribunal.
AY 2014–15: Only Eight Days Survived
The original notice under the erstwhile Section 148 was issued on 23 June 2021. Following Union of India v. Ashish Agarwal, [2022] 444 ITR 1 (SC), it was treated as a deemed show-cause notice under Section 148A(b).
The Assessing Officer supplied the relevant information on 25 May 2022, allowing the assessee to respond up to 8 June 2022. However, the order under Section 148A(d) and the fresh Section 148 notice were issued only on 27 July 2022.
Applying Union of India v. Rajeev Bansal, [2024] 469 ITR 46 (SC), the Tribunal held that the limitation clock had stopped when the original notice was issued. After excluding the intervening period and the time allowed for the assessee’s response, only the unexpired portion of limitation became available again.
Since the TOLA-extended period ended on 30 June 2021, the Tribunal computed eight surviving days from the original notice date. Once the response period expired, those eight days carried the deadline to 16 June 2022.
The notice issued on 27 July 2022 was therefore beyond limitation.
“Continuation” Cannot Mean Proceedings Without Limitation
The CIT(A) had reasoned that the fresh notice merely continued the original proceedings and that the timelines explained in Rajeev Bansal were directory.
The Tribunal rejected both propositions. Ashish Agarwal preserved the transitional proceedings; it did not create a fresh limitation period.
The Tribunal distinguished the time available for an intermediate procedural step from the outer jurisdictional limit under Section 149. The former could not enlarge the latter.
It also held that participation, consent or absence of prejudice could not cure a notice issued after jurisdiction had expired. Neither a subsequent Section 148A(d) order nor administrative approval could revive that jurisdiction.
Supporting reference was made to DCIT v. Reliance Industries Ltd., Supreme Court order dated 24 February 2025, and Hina Prakash Shah v. ITO, [2026] 311 Taxman 269 (Gujarat).
AY 2015–16: Notice Beyond the Applicable Outer Limit
For AY 2015–16, the original notice was likewise issued on 23 June 2021, followed by the fresh notice on 27 July 2022.
The Tribunal held that the applicable six-year period expired on 31 March 2022. That terminal date did not fall within the relaxation period covered by TOLA.
It relied on Rajeev Bansal and the subsequent Supreme Court order in ITO v. Sri Sai Kumar Mateti, dated 4 May 2026, concerning transitional reassessment notices for AY 2015–16.
The Tribunal also referred to Kala Kumar v. ITO, [2026] 186 taxmann.com 882 (Chennai Tribunal), where a notice dated 2 April 2022 had been held beyond the permissible period.
Accordingly, the July 2022 notice and consequential reassessment were quashed.
Merits Left Open
Both appeals were allowed, and the connected stay applications were dismissed as infructuous.
The Tribunal did not adjudicate the merits of the bank-credit additions. It also left open the alternative objection that the reopening information had incorrectly characterised total bank credits as cash deposits.
Author’s Comments
The decision highlights the importance of reconstructing the complete notice chronology before addressing substantial additions on merits. For transitional notices, the original notice date, supply of information, response deadline and fresh notice date can determine the outcome.
It also demonstrates why limitation must be examined separately for each assessment year. The surviving-period calculation for AY 2014–15 and the applicable outer limit for AY 2015–16 provided distinct grounds for relief.
The ruling concerns the transitional proceedings before the Tribunal. Its clear message is that preservation of proceedings does not override statutory limitation, and a reassessment lacking a timely jurisdictional notice cannot survive merely because substantial bank credits require examination.
Cases Discussed
- ITO Vs Sri Sai Kumar Mateti (Supreme Court) — Civil Appeal arising out of SLP (C) No. 8682 of 2024 and connected matters, order dated 04.05.2026 — Followed for AY 2015-16 limitation.
- Hina Prakash Shah Vs ITO (Gujarat High Court) — [2026] 311 Taxman 269 (Guj.) — Relied upon for applying the surviving-period methodology and quashing a July 2022 reassessment notice.
- Kala Kumar Vs ITO (ITAT Chennai) — [2026] 186 taxmann.com 882 (Chennai-Trib.) — Followed for holding that the outer limitation for AY 2015-16 expired on 31.03.2022.
- Smt. Prema Vs ITO (ITAT Chennai) — [2025] 173 taxmann.com 446 (Chennai-Trib.) — Cited on the alternative jurisdictional objection concerning erroneous foundational information; that objection was ultimately left open.
- DCIT Vs Reliance Industries Ltd. (Supreme Court) — SLP (Civil) Diary No. 56889/2024, order dated 24.02.2025 — Referred to for computation of limitation according to the methodology in paragraph 112 of Rajeev Bansal.
- Union of India Vs Rajeev Bansal (Supreme Court) — [2024] 469 ITR 46 (SC) — Followed and applied for the surviving-period methodology and jurisdictional limitation governing reassessment notices.
- Union of India Vs Ashish Agarwal (Supreme Court) — [2022] 444 ITR 1 (SC) — Applied regarding transitional reassessment notices deemed to be notices under Section 148A(b).
FULL TEXT OF THE ITAT CHENNAI ORDER
These appeals, along with the corresponding stay applications, filed by the Assessee are directed against two separate orders, both dated 15.07.2026, passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as “the ld. CIT(A)”), arising out of two separate assessment orders, both dated 29.05.2023, passed by the Assessment Unit, National Faceless Assessment Centre, Delhi (hereinafter referred to as “the AO”), for the Assessment Years 2014-15 and 2015-16 respectively. Since the issues involved in these appeals arise out of a common set of facts and involve substantially identical questions of law and fact, the appeals, together with the connected stay applications, were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity.
ITA No.4203/Chny/2026 (A.Y.2014-15)
2. The brief facts of the case are that the assessee is an individual stated to be engaged in the business of money-lending on a small scale, being a traditional family business. For the A.Y.2014-15, the assessee filed his return of income on 04.11.2014 declaring a total income of Rs.5,49,710/-.
3. Subsequently, the case of the assessee was sought to be reopened and a notice u/s.148 of the Act, as it then stood, came to be issued on 23.06.2021. In view of the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC), the said notice was required to be treated as a show-cause notice deemed to have been issued u/s.148A(b) of the Act under the amended reassessment regime.
4. In pursuance of the directions of the Hon’ble Supreme Court in Ashish Agarwal (supra), the AO, vide communication dated 25.05.2022, furnished to the assessee the information relied upon for reopening the assessment and called upon the assessee to show cause as to why an order u/s.148A(d) of the Act should not be passed. Thereafter, the AO passed an order u/s.148A(d) of the Act on 27.07.2022 holding it to be a fit case for issuance of notice u/s.148 of the Act. Consequent thereto, notice u/s.148 of the Act was issued to the assessee on the same date and reassessment proceedings were taken up.
5. The reassessment proceedings culminated in an assessment order dated 29.05.2023. In the said order, the AO noticed cash deposits aggregating to Rs.1,59,74,050/- and other credits aggregating to Rs.1,66,50,000/- in the bank accounts of the assessee. The AO treated the aforesaid amounts, aggregating to Rs.3,26,24,050/-, as unexplained money u/s.69A of the Act and, accordingly, determined the total income of the assessee at Rs.3,31,73,760/- as against the returned income of Rs.5,49,710/-.
6. Aggrieved by the reassessment order, the assessee carried the matter in appeal before the ld.CIT(A), challenging, inter alia, the validity of the reassessment proceedings as well as the additions made on merits.
7. The ld.CIT(A), vide impugned order dated 15.07.2026, dismissed the appeal of the assessee and upheld the validity of the reassessment proceedings as well as the additions made by the AO u/s.69A of the Act.
8. Being aggrieved by the order of the ld.CIT(A), the assessee is in further appeal before this Tribunal, challenging both the assumption of jurisdiction for reopening the assessment and the additions sustained on merits.
9. The ld. AR appearing for the assessee, at the outset, raised a preliminary legal objection challenging the validity of the reassessment proceedings and the consequential assessment order. The ld.AR submitted that the assumption of jurisdiction by the AO u/s.147 of the Act was fundamentally vitiated and, therefore, the reassessment order was liable to be quashed at the threshold.
10. The first limb of the argument of the ld. AR was that the notice issued u/s.148 of the Act on 27.07.2022 was barred by limitation. Referring to the chronology of events, the ld.AR submitted that the original notice under the erstwhile section 148 of the Act was issued on 23.06.2021, whereas the extended period available under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [“TOLA”] expired on 30.06.2021. Thus, according to the ld.AR, only eight days of the limitation period were surviving as on the date of issuance of the original notice.
11. The ld.AR submitted that the issue is no longer res integra in view of the judgment of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC). Elaborating upon the ratio laid down by the Hon’ble Supreme Court, the ld.AR submitted that though the notices issued under the erstwhile section 148 during the period from 01.04.2021 to 30.06.2021 were saved by the decision of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal and were deemed to be show-cause notices u/s.148A(b) of the Act, such deeming fiction did not confer upon the Revenue a fresh or unrestricted period of limitation for issuance of a notice u/s.148 of the Act under the new regime.
12. Drawing our attention to the principles enunciated in Rajeev Bansal (supra), the ld. AR submitted that the AO would be entitled only to the period which was surviving under the Act read with TOLA. In other words, the number of days remaining between the date of issuance of the original notice under the erstwhile section 148 and 30.06.2021 alone would become available to the AO after giving effect to the period liable to be excluded in accordance with law. Applying the aforesaid principle to the facts of the present case, the ld.AR submitted that the original notice was issued on 23.06.2021 and the TOLA extension expired on 30.06.2021. Therefore, only eight days were surviving. The ld.AR further submitted that the information contemplated in the judgment of the Hon’ble Supreme Court in Ashish Agarwal were furnished to the assessee on 25.05.2022 and the assessee was granted time up to 08.06.2022 for furnishing its response. Consequently, upon expiry of the time granted to the assessee, the AO had only the surviving period of eight days within which a fresh notice u/s.148 of the Act could validly be issued. According to the ld.AR, the last permissible date for issuance of such notice was, therefore, 16.06.2022. However, the notice u/s.148 of the Act was admittedly issued only on 27.07.2022 and was thus clearly beyond the permissible period of limitation.
13. The ld.AR then assailed the reasoning adopted by the ld.CIT(A) in rejecting the aforesaid legal contention. The ld.AR submitted that the ld.CIT(A) had principally proceeded on the premise that the notice dated 27.07.2022 was merely a continuation of the proceedings initiated by the original notice dated 23.06.2021 and that the timelines referred to in Rajeev Bansal (supra) were directory and not mandatory. According to the ld.AR, both these findings were contrary to the law declared by the Hon’ble Supreme Court.
14. The ld.AR clarified that the assessee was not disputing the legal fiction created by the judgment in Ashish Agarwal whereby the original notice u/s.148 of the Act was treated as a notice u/s.148A(b) of the Act. His contention, however, was that even after giving full effect to such deeming fiction, the subsequent proceedings had necessarily to be completed within the limitation period available under law. Merely describing the subsequent proceedings as a “continuation” of the original proceedings could not, according to him, confer an unlimited period upon the AO for issuance of the fresh notice u/s.148 of the Act. The continuation itself was circumscribed by the surviving period of limitation recognised by the Hon’ble Supreme Court in Rajeev Bansal (supra).
15. The ld.AR further contended that the observation of the ld.CIT(A) that the timeline prescribed in Rajeev Bansal was merely directory was equally untenable. He submitted that limitation governing assumption of jurisdiction u/s.147 to 149 is not a mere procedural formality. Once the Hon’ble Supreme Court has held that notices issued beyond the surviving period would be time-barred, the prescription of limitation necessarily operates as a jurisdictional restriction upon the power of the AO. Therefore, according to him, a notice issued beyond such period could not be validated on the ground that the proceedings were otherwise in continuation of the earlier proceedings.
16. In further support of his contention, the ld.AR placed reliance upon the order of the Hon’ble Supreme Court in DCIT v. Reliance Industries Ltd., SLP (Civil) Diary No.56889/2024, dated 24.02.2025, and submitted that the Hon’ble Supreme Court had directed the issue of limitation to be examined with reference to the methodology laid down in paragraph 112 of the judgment in Rajeev Bansal (supra). Reliance was also placed upon the judgment of the Hon’ble Gujarat High Court in Hina Prakash Shah v. ITO [2026] 311 Taxman 269 (Guj), wherein, according to the ld. AR, on similar facts, the notice u/s.148 of the Act was held to be time-barred by applying the principles laid down in Rajeev Bansal.
17. The ld.AR, therefore, submitted that in the present case the last permissible date for issuance of notice u/s.148 of the Act was 16.06.2022, whereas the impugned notice was issued only on 27.07.2022. The notice was consequently barred by limitation and without jurisdiction. Once the very jurisdictional notice failed, the reassessment order dated 29.05.2023 and all proceedings emanating therefrom, according to the ld.AR, were liable to be quashed.
18. Without prejudice to the aforesaid contention on limitation, the ld.AR raised another jurisdictional objection and submitted that the reassessment proceedings were initiated on the basis of a fundamentally erroneous factual premise concerning the very banking transaction alleged to represent income escaping assessment.
19. Drawing our attention to the show-cause notice and the material forming the basis of reopening, the ld.AR submitted that the AO proceeded on the premise that the assessee had made cash deposits aggregating to Rs.3,28,07,000/- in his ICICI Bank account. The assessee had, however, specifically disputed the correctness of the said information and pointed out before the AO that the actual cash deposits in the relevant bank account were only Rs.1,59,74,050/-.
20. The ld.AR submitted that this was not a case of a mere bald denial by the assessee. In support of its objection, the assessee had furnished the relevant bank statement of ICICI Bank Account No.608805018899 as well as an extract setting out the cash deposits made during the relevant previous year. On the basis of the bank statement, the assessee had specifically demonstrated that the credits appearing in the bank account comprised two distinct categories, namely, cash deposits and credits received through banking channels. The figure of Rs.3,28,07,000/-, which formed the basis of the reopening, had erroneously been characterised in its entirety as cash deposits, whereas the actual aggregate cash deposits were only Rs.1,59,74,050/-.
21. The ld. AR further submitted that the correctness of the objection raised by the assessee stood established from the assessment order itself. He pointed out that while discussing the issue, the AO recorded, on the one hand, that the information available with the Department reflected cash deposits of Rs.3,28,07,000/-, but, on the other hand, acknowledged that the actual cash deposits were Rs.1,59,74,050/- and that the larger figure represented the total credits appearing in the bank account. Even in the final computation, the AO separately considered cash deposits of Rs.1,59,74,050/- and other credits of Rs.1,66,50,000/-. Thus, according to the ld.AR, the assessment order itself demonstrated beyond doubt that the foundational information on the basis of which the reassessment proceedings were initiated was factually incorrect.
22. It was the submission of the ld.AR that the aforesaid error went to the very root of the assumption of jurisdiction. Proceedings u/s.148A of the Act had been initiated on the specific information that the assessee had made cash deposits of Rs.3,28,07,000/-, whereas the Department’s own subsequent examination revealed that the actual cash deposits were only Rs.1,59,74,050/- and that the figure mentioned in the show-cause notice represented the aggregate credits in the bank account. According to the ld.AR, jurisdiction to reopen an assessment could not validly be assumed on the basis of unverified or materially erroneous information concerning the very transaction alleged to constitute escaped income.
23. The ld.AR emphasised that the correctness of the foundational information must exist at the stage at which the jurisdiction under the reassessment provisions is invoked. An AO could not, according to him, initiate reassessment proceedings on an incorrect factual premise and thereafter use the reassessment proceedings themselves as a roving or fishing enquiry for discovering the true nature or quantum of the transaction. The subsequent ascertainment of the correct factual position could not retrospectively cure a jurisdictional defect existing at the inception of the proceedings.
24. Referring to the course of the assessment proceedings, the ld.AR submitted that the AO himself was ultimately required to segregate the actual cash deposits from other credits appearing in the bank account and proceed on figures materially different from those mentioned in the show-cause notice initiating the proceedings. This, according to him, established that the foundational information had either not been verified or had not been correctly appreciated before the reassessment jurisdiction was invoked.
25. The ld.AR then assailed the findings of the ld.CIT(A) on this issue. He submitted that although the ld.CIT(A) had accepted the factual position that the actual cash deposits were Rs.1,59,74,050/- and not Rs.3,28,07,000/-, the legal objection was rejected on the reasoning that the error was not fatal since substantial deposits nevertheless existed and the correct amount had ultimately been taken into account in the reassessment proceedings. According to the ld.AR, such reasoning overlooked the settled principle that the validity of reopening must be examined with reference to the information available and the application of mind by the AO at the stage of assumption of jurisdiction and not on the basis of what may subsequently be discovered during the reassessment proceedings.
26. In support of the aforesaid proposition, the ld.AR placed reliance upon the decision of the Coordinate Bench of this Tribunal in Smt.Prema v. ITO [2025] 173 taxmann.com 446 (Chennai-Trib). Referring to the ratio of the said decision, the ld.AR submitted that where the very foundation based upon information is erroneous, the reopening of assessment cannot be sustained. He submitted that the Tribunal had applied the principle embodied in the maxim sublato fundamento cadit opus, namely, that once the foundation is removed, the superstructure built upon it must necessarily fall.
27. The ld.AR submitted that the principle laid down in the aforesaid decision squarely applied to the facts of the present case. Once the very information which triggered the reassessment proceedings, namely, the alleged cash deposits of Rs.3,28,07,000/-, was subsequently found by the Department itself to be factually incorrect, the jurisdiction assumed on such erroneous information could not be sustained merely because, during the course of reassessment, the AO discovered that there were other credits in the bank account.
28. According to the ld.AR, subsequent discovery or correct characterisation of some other credits could not retrospectively validate the assumption of jurisdiction founded upon materially incorrect information. The jurisdictional satisfaction contemplated under the reassessment provisions was required to be founded upon correct and relevant information at the threshold itself.
29. Concluding his arguments on the preliminary legal grounds, the ld.AR submitted that the reassessment proceedings suffered from two independent jurisdictional infirmities. Firstly, the notice issued u/s.148 of the Act on 27.07.2022 was beyond the permissible period of limitation as computed in accordance with the law laid down by the Hon’ble Supreme Court in Rajeev Bansal (supra). Secondly, the reassessment jurisdiction itself had been assumed on an erroneous foundational fact, namely, that the assessee had made cash deposits of Rs.3,28,07,000/-, which was subsequently found even by the AO to be factually incorrect.
30. The ld.AR, therefore, submitted that either of the aforesaid jurisdictional defects was sufficient to invalidate the reassessment proceedings. He accordingly prayed that the notice issued u/s.148 of the Act dated 27.07.2022 be held to be time-barred and void ab initio and that the consequential reassessment order dated 29.05.2023, together with all proceedings emanating therefrom, be quashed.
31. Per contra, the ld.DR, appearing for the Revenue, vehemently supported the orders passed by the authorities below. The ld.DR submitted that the findings recorded by the lower authorities were based on a proper appreciation of the facts and material available on record and, therefore, did not call for any interference. Accordingly, the ld.DR prayed that the grounds raised by the assessee be rejected and the appeal filed by the assessee be dismissed.
32. We have heard the rival submissions, perused the orders of the authorities below and carefully considered the material available on record. We have also gone through the judicial precedents relied upon by the ld.AR. Since the assessee has raised a preliminary legal ground challenging the very assumption of jurisdiction u/s.147 of the Act on the ground that the notice issued u/s.148 of the Act dated 27.07.2022 was barred by limitation, we deem it appropriate to adjudicate this jurisdictional ground at the threshold. It is trite that where the very assumption of jurisdiction is under challenge, such ground goes to the root of the assessment and, therefore, requires adjudication before entering upon the merits of the additions made in the reassessment.
33. The material facts relevant for adjudication of the aforesaid legal issue are not in dispute. The assessment year involved is A.Y.2014-15. The original notice under the erstwhile section 148 of the Act was issued by the AO on 23.06.2021. By virtue of the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC), the said notice was required to be treated as a show-cause notice deemed to have been issued u/s.148A(b) of the Act under the substituted reassessment regime. Pursuant to the directions contained in the aforesaid judgment, the AO supplied the relevant information/material to the assessee on 25.05.2022 and granted time to the assessee up to 08.06.2022 for furnishing his response. Thereafter, however, the order u/s.148A(d) of the Act came to be passed only on 27.07.2022 and the consequential notice u/s.148 of the Act was also issued on 27.07.2022.
34. The short question which, therefore, arises for our consideration is whether, after giving effect to the legal fiction created by the judgment in Ashish Agarwal (supra), the notice issued u/s.148 of the Act on 27.07.2022 was within the period of limitation available to the AO u/s.149 of the Act read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”). This controversy, in our considered view, is no longer res integra. The Hon’ble Supreme Court in Union of India & Ors. v. Rajeev Bansal [2024] 469 ITR 46 (SC) has comprehensively considered the interplay between the substituted reassessment provisions introduced by the Finance Act, 2021, the relaxation granted under TOLA and the legal fiction created by the earlier judgment in Ashish Agarwal (supra). The Hon’ble Supreme Court has explained the precise manner in which the period of limitation is required to be computed in respect of notices originally issued under the erstwhile section 148 of the Act during the period from 01.04.2021 to 30.06.2021 and subsequently treated as notices u/s.148A(b) of the Act of the substituted regime.
35. The ratio emerging from Rajeev Bansal (supra), insofar as relevant for the present controversy, is that the legal fiction created by Ashish Agarwal (supra) had the effect of stopping the clock of limitation from the date on which the original notice under the erstwhile section 148 of the Act was issued. The period commencing from the date of such deemed notice till the supply of the relevant information and material by the AO pursuant to the directions in Ashish Agarwal (supra), as also the period allowed to the assessee for furnishing the response, is liable to be excluded while computing limitation. However, once the excluded period comes to an end, the Revenue does not acquire a fresh period of limitation. The AO gets only such period as was actually surviving on the date on which the limitation clock had originally stopped. This principle has been explained in unmistakable terms by the Hon’ble Supreme Court in paragraphs 110 to 113 of Rajeev Bansal (supra). Their Lordships have held that the legal fiction stopped the clock of limitation with effect from the date of issuance of the notices under the old regime and that, after the clock started running again, the AO was required, within the surviving time, to consider the reply of the assessee, take a decision u/s.148A(d) of the Act and issue the notice u/s.148 of the Act, if it was considered to be a fit case for reassessment.
36. More importantly, in paragraph 112 of the judgment, the Hon’ble Supreme Court has itself illustrated the manner in which such surviving period has to be computed. Taking an illustration of an original notice issued on 01.05.2021, the Hon’ble Supreme Court held that the AO would have 61 days, being the period between 01.05.2021 and 30.06.2021, available after the limitation clock started running again. Thus, the surviving period is not a fresh statutory period commencing after the proceedings u/s.148A(b) of the Act; it is merely the unexpired portion of the limitation which remained available when the original notice was issued.
37. We find that the matter is put beyond any pale of doubt by the conclusion recorded by the Hon’ble Supreme Court in paragraph 114(h) of Rajeev Bansal (supra), wherein it has categorically been held that the Assessing Officers were required to issue reassessment notices u/s.148 of the new regime within the time limit surviving under the Act read with TOLA and that all notices issued beyond such surviving period are time-barred and liable to be set aside. If the aforesaid binding principle is applied to the facts of the case before us, the position which emerges is clear. The original notice under the erstwhile section 148 of the Act was issued on 23.06.2021. The extended period available under TOLA came to an end on 30.06.2021. Thus, reckoned in the manner explained by the Hon’ble Supreme Court in paragraph 112 of Rajeev Bansal (supra), the period surviving with the AO was eight days. Pursuant to the judgment in Ashish Agarwal (supra), the information/material relied upon for reopening was supplied to the assessee on 25.05.2022 and time was granted up to 08.06.2022 to furnish the response. Upon the expiry of the period allowed to the assessee for responding to the deemed show-cause notice, the limitation clock resumed and the AO had only the aforesaid surviving period of eight days within which the statutory exercise culminating in the issuance of notice u/s.148 of the Act was required to be completed. Consequently, the outer limit available to the AO for issuance of notice u/s.148 of the Act worked out to 16.06.2022.
38. The chronology can, therefore, be conveniently noticed as under:
| Particulars | Date / Period |
|---|---|
| Original notice under erstwhile section 148 | 23.06.2021 |
| Extended limitation under TOLA ending on | 30.06.2021 |
| Surviving period | 8 days |
| Information/material supplied pursuant to Ashish Agarwal | 25.05.2022 |
| Time granted to the assessee for response up to | 08.06.2022 |
| Last permissible date for issuance of notice u/s.148 of the Act after applying the surviving period | 16.06.2022 |
| Order passed u/s.148A(d) of the Act | 27.07.2022 |
| Impugned notice issued u/s.148 of the Act | 27.07.2022 |
39. It is thus manifest that the impugned notice u/s.148 of the Act was issued on 27.07.2022, whereas the surviving limitation had expired on 16.06.2022. The notice was, therefore, issued more than a month after expiry of the jurisdictional time limit available to the AO. Applying the ratio laid down by the Hon’ble Supreme Court in Rajeev Bansal (supra), the inevitable consequence is that the notice dated 27.07.2022 is barred by limitation.
40. At this stage, we may also refer to the order of the Hon’ble Supreme Court in DCIT v. Reliance Industries Ltd., SLP (Civil) Diary No.56889/2024, order dated 24.02.2025. The Hon’ble Supreme Court noticed that the subject matter stood covered by Rajeev Bansal (supra) and specifically directed that the computation of limitation be examined with reference to the methodology contained in paragraph 112 thereof. The computation placed before the Hon’ble Supreme Court proceeded on precisely the principle that the number of days between the date of the original notice and 30.06.2021 constitutes the surviving period available for issuance of the notice under the new regime after the excluded period comes to an end. This fortifies the position that the surviving-period methodology prescribed in Rajeev Bansal is not merely illustrative or directory but governs the determination of the jurisdictional limitation.
41. We further find considerable support from the subsequent judgment of the Hon’ble Gujarat High Court in Hina Prakash Shah v. ITO [2026] 311 Taxman 269 (Guj), wherein, according to the ld. AR, on similar facts, the notice u/s.148 of the Act was held to be time-barred by applying the principles laid down in Rajeev Bansal.
42. The principle flowing from the aforesaid judgment is directly applicable to the case before us. In the present case, the original notice was issued on 23.06.2021 and, therefore, only eight days of the TOLA-extended limitation remained. The Revenue was required to complete the post-Ashish Agarwal statutory exercise, including issuance of the notice u/s.148 of the Act, within such surviving period once the limitation clock recommenced. Admittedly, this was not done.
43. We are unable to subscribe to the reasoning adopted by the ld.CIT(A) that the notice dated 27.07.2022 could be sustained on the premise that the proceedings constituted a “continuation” of the proceedings initiated by the notice dated 23.06.2021. There can be no quarrel with the proposition that, by virtue of the legal fiction created in Ashish Agarwal (supra), the old notice dated 23.06.2021 was deemed to be a notice u/s.148A(b) of the Act. But the consequence of such fiction cannot be selectively applied. As explained by the Hon’ble Supreme Court in Rajeev Bansal (supra), full effect has to be given to the fiction together with all its legal consequences. One such necessary consequence is that the limitation clock stopped on the date of the original notice and, when it recommenced, only the unexpired or surviving period became available to the Revenue. In other words, “continuation” of the proceedings cannot mean continuation without limitation. The fiction created by Ashish Agarwal preserved the proceedings; it did not confer upon the Revenue an altogether fresh period of limitation, much less an indefinite period, for completing the procedure u/s.148A of the Act and issuing a fresh jurisdictional notice u/s.148 of the Act. To accept the reasoning of the ld.CIT(A) would amount to converting a limited saving of the proceedings into an enlargement of the statutory period of limitation, which would run directly contrary to the law declared by the Hon’ble Supreme Court in Rajeev Bansal (supra).
44. We are equally unable to sustain the observation of the ld.CIT(A) that the timeline contemplated in Rajeev Bansal (supra) is merely directory. Such an interpretation, in our considered opinion, is plainly contrary to the express declaration of law by the Hon’ble Supreme Court. The Apex Court has categorically held that notices issued beyond the surviving time limit are “time-barred” and has further held that compliance with the time limit prescribed u/s.149 of the Act is a precondition for assumption of jurisdiction u/s.148 of the Act. Once the statute, as interpreted by the Hon’ble Supreme Court, prescribes an outer limit for assumption of reassessment jurisdiction, such limitation cannot be regarded as a mere procedural formality capable of being dispensed with.
45. The distinction between a procedural timeline governing an intermediate step and the jurisdictional limitation governing issuance of notice u/s.148 of the Act is significant. Section 149 of the Act places an embargo upon the very power of the AO to issue a notice beyond the prescribed period. Once that period expires, the jurisdiction itself ceases to be available. Neither the time available for passing an order u/s.148A(d) of the Act, considered in isolation, nor the fact that the proceedings originated from an earlier notice can enlarge the outer limitation prescribed for issuance of the jurisdictional notice u/s.148 of the Act.
46. We may usefully reiterate that jurisdiction u/s.147 of the Act is assumed only upon a valid notice u/s.148 of the Act issued in accordance with the statutory conditions. Limitation is one of the essential conditions governing the validity of such notice. Where the notice itself is issued beyond the period permitted by section 149 of the Act read with TOLA and the law declared in Rajeev Bansal (supra), the defect is not an irregularity in procedure; it goes to the root of the authority of the AO to reopen the assessment.
47. The argument that no prejudice has been caused to the assessee or that the assessee participated in the subsequent reassessment proceedings can equally be of no assistance to the Revenue. Jurisdiction which is otherwise absent on account of expiry of statutory limitation cannot be conferred by acquiescence, participation or consent of the assessee. Once the jurisdictional notice is found to have been issued beyond limitation, all proceedings founded upon such invalid notice necessarily lose their legal foundation.
48. In the present case, the material dates speak for themselves. The original notice was issued on 23.06.2021. The period extended by TOLA ended on 30.06.2021. Eight days alone were thus surviving. The information was supplied on 25.05.2022 and the assessee was permitted to respond up to 08.06.2022. Even after giving full effect to the exclusion contemplated by Ashish Agarwal and Rajeev Bansal, the Revenue had only the surviving period thereafter. Accordingly, the notice u/s.148 of the Act ought to have been issued on or before 16.06.2022. Instead, both the order u/s.148A(d) of the Act and the jurisdictional notice u/s.148 of the Act came to be issued only on 27.07.2022. Thus, there is a clear and substantial breach of the jurisdictional limitation. This is not a case involving a marginal discrepancy in computation or an arguable procedural irregularity. The impugned notice was issued after the surviving limitation had already come to an end. In view of the authoritative pronouncement of the Hon’ble Supreme Court in Rajeev Bansal (supra), the legal consequence is inexorable: the notice is time-barred and liable to be set aside.
49. We may further observe that once the period prescribed for assumption of jurisdiction has expired, neither an order passed u/s.148A(d) of the Act thereafter nor an administrative approval obtained in connection therewith can breathe life into a jurisdiction which already stood extinguished by limitation. The procedural machinery contained in section 148A of the Act necessarily operates within, and remains subordinate to, the outer jurisdictional boundary prescribed by section 149 of the Act. A statutory authority cannot derive from a procedural provision a power which the substantive limitation provision has already taken away. The law declared by the Hon’ble Supreme Court under Article 141 of the Constitution is binding on all Courts and authorities. The computation mechanism explained in paragraphs 110 to 113 and the categorical conclusion recorded in paragraph 114(h) of Rajeev Bansal (supra) leave no scope for treating the surviving limitation as optional, flexible or merely directory. The ld.CIT(A), therefore, fell into error in sustaining the notice dated 27.07.2022 notwithstanding the expiry of the surviving limitation.
50. We accordingly hold that the notice issued by the AO u/s.148 of the Act dated 27.07.2022 was beyond the period of limitation available u/s.149 of the Act read with TOLA and the law laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal (supra). The said notice is, therefore, time-barred, invalid and without jurisdiction. Once the jurisdictional notice u/s.148 of the Act fails, the very foundation upon which the reassessment proceedings rest disappears. The consequential order passed u/s.147 of the Act dated 29.05.2023 cannot have an independent existence in the absence of a valid jurisdictional notice. We, therefore, quash the notice issued u/s.148 of the Act dated 27.07.2022 and consequently quash the impugned reassessment order dated 29.05.2023 as being without jurisdiction. The impugned order of the ld.CIT(A), to the extent it sustains the validity of such reassessment, is accordingly set aside. Thus, the preliminary legal ground raised by the assessee challenging the reassessment on the ground of limitation is, therefore, allowed.
51. Since we have quashed the reassessment itself for want of jurisdiction, adjudication of the alternative jurisdictional objection relating to the correctness of the foundational information and the grounds challenging the additions made u/s.69A of the Act on merits would be purely academic. We, therefore, refrain from adjudicating those grounds and leave the same open.
52. In the result, the appeal filed by the assessee in ITA No.4203/Chny/2026 for the A.Y.2014-15 is allowed.
ITA No.4204/Chny/2026 (A.Y.2015-16)
53. The brief facts of the case are that for the A.Y.2015-16, the assessee filed his return of income on 01.08.2015 declaring a total income of Rs.6,37,112/-. Subsequently, a notice u/s.148 of the Act, as it then stood, was issued on 23.06.2021 seeking to reopen the assessment for the year under consideration. In view of the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC), the aforesaid notice issued under the erstwhile section 148 of the Act was required to be treated as a show-cause notice u/s.148A(b) of the Act under the substituted reassessment regime.
54. Pursuant to and in purported compliance with the directions of the Hon’ble Supreme Court in Ashish Agarwal (supra), a notice dated 26.05.2022 u/s.148A(b) of the Act, was issued to the assessee calling upon him to show cause as to why a notice u/s.148 of the Act should not be issued for the relevant assessment year. Thereafter, a fresh notice u/s.148 of the Act came to be issued on 27.07.2022. Consequent thereto, reassessment proceedings were undertaken and the reassessment was completed by the AO vide order dated 29.05.2023. In the course of the reassessment proceedings, the AO noticed aggregate credits of Rs.6,60,29,000/- in the bank account of the assessee. The AO proceeded to treat the aforesaid aggregate bank credits as the basis for estimating the assessee’s income from business. Applying a rate of 8% to the total bank credits of Rs.6,60,29,000/-, the AO determined an amount of Rs.52,82,320/- and brought the same to tax as business income in the reassessment.
55. Aggrieved by the reassessment order, the assessee preferred an appeal before the ld.CIT(A), challenging, inter alia, the validity of the reassessment proceedings as well as the addition made by estimating income at 8% of the aggregate bank credits. The ld.CIT(A), vide the impugned order dated 15.07.2026, dismissed the appeal of the assessee and upheld both the validity of the reassessment proceedings and the addition made by the AO.
56. Being aggrieved by the aforesaid order of the ld.CIT(A), the assessee has preferred the present appeal before this Tribunal, challenging the impugned order both on the legal issue relating to the validity of the reassessment proceedings and on the merits of the addition sustained thereunder.
57. The ld.AR, appearing for the assessee submitted that the reassessment proceedings initiated against the assessee are barred by limitation and, therefore, deserve to be quashed at the threshold. He submitted that the issue relating to limitation for issuance of reassessment notice for A.Y.2015-16 now stands concluded by the judgment of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [469 ITR 46 (SC)] and has subsequently been reiterated by the Hon’ble Supreme Court in ITO v. Sai Kumar Mateti [2026] 187 taxmann.com 225 (SC).
58. The ld.AR drew our attention to paragraph 19(f) of the judgment in Rajeev Bansal (supra), wherein the Hon’ble Supreme Court recorded the concession made on behalf of the Revenue with regard to notices pertaining to A.Y. 2015-16. It was submitted that the Revenue had accepted before the Hon’ble Supreme Court that notices issued on or after 01.04.2021 in respect of A.Y.2015-16 would have to be dropped, having regard to the applicable period of limitation and the effect of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
59. The ld.AR submitted that there is no dispute that the assessment year involved in the present appeal is A.Y.2015-16. The original notice under the erstwhile provisions of section 148 of the Act was issued on 23.06.2021 and, pursuant to the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal, the subsequent notice u/s.148 of the substituted provisions came to be issued on 27.07.2022. According to the ld.AR, therefore, the facts of the assessee’s case squarely fall within the legal position noticed by the Hon’ble Supreme Court in paragraph 19(f) of Rajeev Bansal (supra).
60. The ld.AR further submitted that the ld.CIT(A) had erred in rejecting the assessee’s challenge to the validity of the notice by principally relying upon the decision of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal. According to him, Ashish Agarwal cannot be read as extending the statutory period of limitation beyond what was otherwise permissible u/s.149 of the Act. The validity of the notice has necessarily to be tested with reference to the limitation prescribed u/s.149 of the Act, including the first proviso thereto. In this regard, the ld.AR placed particular reliance upon the subsequent judgment of the Hon’ble Supreme Court in ITO v. Sai Kumar Mateti (supra). He submitted that the Hon’ble Supreme Court has expressly reiterated the consequence flowing from paragraph 19(f) of Rajeev Bansal (supra) in cases pertaining to A.Y.2015-16. The ld.AR pointed out that the Hon’ble Supreme Court recorded that there was no quarrel that, if the cases before it pertained to A.Y.2015-16, the impugned notices were liable to be struck down outright in terms of the concession of the Revenue recorded in paragraph 19(f) of Rajeev Bansal, which concession was once again reiterated before the Hon’ble Supreme Court by the learned Additional Solicitor General.
61. The ld.AR also relied upon the decision of the Coordinate Bench of this Tribunal in Kala Kumar v. ITO [2026] 186 taxmann.com 882 (Chennai-Trib.), wherein, following the aforesaid legal position, the Tribunal considered the validity of reassessment proceedings relating to A.Y.2015-16. He submitted that the Tribunal held the notice u/s.148 of the Act dated 02.04.2022 to be barred by limitation, since the permissible period of limitation, having regard to the first proviso to section 149, had expired on 31.03.2022.
62. Applying the above legal position to the facts of the present case, the ld.AR submitted that the impugned notice u/s.148 of the Act was issued only on 27.07.2022, i.e., much after 31.03.2022. Therefore, the notice was clearly beyond the permissible period of limitation and was void ab initio.
63. The ld.AR contended that limitation for assumption of jurisdiction u/s.148 of the Act goes to the very root of the reassessment proceedings. Once the foundational notice issued u/s.148 of the Act is found to be barred by limitation, the AO lacked jurisdiction to proceed with the reassessment. Consequently, all proceedings undertaken pursuant to such invalid notice, including the impugned reassessment order dated 29.05.2023, are rendered without jurisdiction and cannot be sustained in law.
64. The ld.AR, therefore, prayed that the notice issued u/s.148 of the Act dated 27.07.2022 for A.Y.2015-16 be held to be barred by limitation and consequently quashed, and that the impugned reassessment order dated 29.05.2023 passed pursuant thereto be annulled as being without jurisdiction.
65. Per contra, the ld.DR, appearing for the Revenue, vehemently supported the orders passed by the authorities below. The ld.DR submitted that the findings recorded by the lower authorities were based on a proper appreciation of the facts and material available on record and, therefore, did not call for any interference. Accordingly, the ld.DR prayed that the grounds raised by the assessee be rejected and the appeal filed by the assessee be dismissed.
66. We have heard the rival submissions, perused the orders of the authorities below and considered the material available on record. The assessee has challenged the very assumption of jurisdiction by the AO u/s.147 of the Act on the ground that the notice issued u/s.148 of the Act was barred by limitation. Since the issue raised goes to the root of the jurisdiction assumed by the AO, we deem it appropriate to adjudicate the same at the threshold.
67. The material facts relevant for deciding this legal issue are not in dispute. The assessment year under consideration is A.Y.2015-16. The original notice under the erstwhile section 148 of the Act was issued on 23.06.2021. Pursuant to the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC), the said notice was treated as a show-cause notice u/s.148A(b) of the Act. Thereafter, notice u/s.148A(b) of the Act was issued on 26.05.2022 and, ultimately, a fresh notice u/s.148 of the substituted provisions was issued on 27.07.2022. The reassessment proceedings initiated pursuant thereto culminated in the assessment order dated 29.05.2023.
68. The short question that arises for our consideration is, therefore, whether the reassessment proceedings for A.Y.2015-16 founded upon the aforesaid notices could survive the bar of limitation prescribed u/s.149 of the Act. The controversy, in our considered view, is no longer res integra. The Hon’ble Supreme Court in Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC), while considering the interplay between the substituted reassessment provisions, the first proviso to section 149 and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”), specifically dealt with the position obtaining in respect of A.Y.2015-16. In paragraph 19(f) of the judgment, the Hon’ble Supreme Court recorded the categorical concession of the Revenue that, for A.Y.2015-16, all notices issued on or after 01.04.2021 would have to be dropped as they would not fall for completion during the period prescribed under TOLA.
69. The significance of the aforesaid position is that the benefit of TOLA was not available for extending the relevant limitation in respect of A.Y.2015-16. Under the applicable statutory scheme, the six-year period in relation to A.Y.2015-16 expired on 31.03.2022. The terminal date of 31.03.2022 did not fall within the period covered by the relaxation under TOLA. Consequently, a notice seeking to reopen A.Y.2015-16 beyond the permissible statutory period could not be sustained. This position has also been noticed by the Hon’ble Delhi High Court while explaining the effect of paragraph 19(f) of Rajeev Bansal (supra). More importantly, any possible controversy on this aspect now stands put to rest by the subsequent order of the Hon’ble Supreme Court in ITO v. Sri Sai Kumar Mateti, Civil Appeal arising out of SLP (C) No.8682 of 2024 and connected matters, dated 04.05.2026. The Hon’ble Supreme Court specifically considered a batch of matters which were segregated on the premise that they pertained to A.Y.2015-16. The learned Additional Solicitor General appearing for the Revenue fairly conceded that, in assessment cases pertaining to A.Y.2015-16, notices issued or proposed to be issued for reassessment would stand barred by time in the light of the decision in Rajeev Bansal (supra). The Hon’ble Supreme Court thereafter categorically observed that, where the cases pertained to A.Y.2015-16, the impugned notices were liable to be struck down outright in terms of the concession recorded in paragraph 19(f) of Rajeev Bansal (supra). The Hon’ble Supreme Court further directed that once it was found that the matter pertained to A.Y.2015-16, no further adjudicatory exercise was required except to declare the notice as time-barred.
70. Thus, the legal position emerging from the aforesaid decisions of the Hon’ble Supreme Court is clear and unambiguous. Insofar as A.Y.2015-16 is concerned, a reassessment notice which does not survive the statutory bar of limitation cannot derive validity merely on account of the directions issued in Ashish Agarwal (supra). Indeed, in Rajeev Bansal (supra), the Hon’ble Supreme Court has clarified that the directions issued in Ashish Agarwal under Article 142 of the Constitution cannot be construed so as to override the substantive provisions of the Income-tax Act governing limitation and that the defence of limitation available to an assessee u/s.149 of the Act remained open.
71. Viewed in the light of the aforesaid settled legal position, we find that the facts of the present case admit of no ambiguity. The year under consideration is admittedly A.Y.2015-16. The notice u/s.148 of the substituted provisions was issued on 27.07.2022, whereas the outer limitation applicable to the year under consideration had expired on 31.03.2022. The impugned notice was thus issued after expiry of the period prescribed u/s.149 of the Act and was consequently barred by limitation.
72. We also find support for the above conclusion from the decision of the Coordinate Bench of this Tribunal in Kala Kumar v. ITO [2026] 186 taxmann.com 882 (Chennai-Trib.), wherein, in relation to A.Y.2015-16, the notice u/s.148 of the Act issued on 02.04.2022 was held to be beyond the permissible period of limitation, the outer limit having expired on 31.03.2022. Similar application of Rajeev Bansal and Sai Kumar Mateti can also be seen in subsequent decisions of the Tribunal concerning A.Y.2015-16.
73. We are unable to sustain the reasoning of the ld.CIT(A) in placing reliance upon the judgment of the Hon’ble Supreme Court in Ashish Agarwal (supra) for upholding the reassessment. The directions in Ashish Agarwal were intended to regulate the transition from the erstwhile reassessment regime to the substituted regime and cannot be understood as conferring jurisdiction upon the AO to issue a notice which was otherwise barred by the substantive limitation prescribed u/s.149 of the Act. This position now stands authoritatively clarified by the Hon’ble Supreme Court in Rajeev Bansal (supra) and reiterated specifically in relation to A.Y.2015-16 in Sai Kumar Mateti (supra).
74. We may also observe that limitation prescribed for issuance of notice u/s.148 of the Act is not a mere procedural requirement. A valid notice issued within the period permitted by law is the foundation for assumption of jurisdiction u/s.147 of the Act. Once such foundational notice is found to have been issued beyond the period prescribed by section 149 of the Act, the AO could not validly assume jurisdiction to reassess the income of the assessee. The subsequent participation of the assessee or completion of reassessment proceedings cannot cure such inherent lack of jurisdiction.
75. In the present case, the notice u/s.148 of the Act dated 27.07.2022 having been issued beyond the permissible period of limitation for A.Y.2015-16, the same is invalid and without jurisdiction. Consequently, the impugned reassessment proceedings founded upon such notice and the impugned reassessment order dated 29.05.2023 passed pursuant thereto cannot be sustained.
76. Accordingly, respectfully following the binding decisions of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal (supra) and ITO v. Sri Sai Kumar Mateti (supra), we hold that the notice issued u/s.148 of the Act for A.Y.2015-16 is barred by limitation. The said notice is, therefore, quashed. Consequently, the impugned reassessment order dated 29.05.2023 passed u/s.147 r.w.s 144 of the Act is hereby quashed as without jurisdiction.
77. The finding of the ld.CIT(A) upholding the validity of the reassessment proceedings is accordingly set aside and the legal ground raised by the assessee challenging the reassessment on the ground of limitation is allowed. Since we have quashed the reassessment proceedings themselves for want of jurisdiction, the grounds raised by the assessee challenging the addition on merits have become academic and, therefore, do not require adjudication.
78. In the result, the appeal filed by the assessee in ITA No.4204/Chny/2026 for the A.Y.2015-16 is allowed.
SA 169 & 170/Chny/2026 for the Assessment Years 2014-15 and 2015-16
79. Since we have already disposed of the main appeals of the assessee, the stay applications filed by the assessee for the Assessment Years 2014-15 and 2015-16 have become infructuous and are dismissed accordingly.
80. In the result, both the appeals of the assessee are allowed and the stay applications are dismissed as infructuous.
Order pronounced in the open court on 06th October, 2026 at Chennai.
