ITAT Jaipur Quashes Section 148 Reassessment Beyond Seven-Day Surviving Limit

Banarsi Devi Vs ITO (ITAT Jaipur)

Reassessment Beyond Surviving TOLA Period Is Void: Seven-Day Balance Cannot Become a Fresh Limitation Period

Background of the Case

A survey under section 133A was conducted at the business premises of M/s Impulse Career Institute, Sikar. A register containing rough entries was impounded. According to the Department, those entries reflected payment of ₹6 lakh as rent to the assessee.

When confronted with the information, the assessee denied receiving rental income during the relevant year. The Assessing Officer nevertheless added ₹6,00,000 as unexplained money under section 69A and applied section 115BBE.

The CIT(A) confirmed the addition. Before the Tribunal, the assessee challenged both the validity of the reassessment and the substantive treatment of the alleged rental income.

The appeal was ultimately decided on limitation, without examining the addition on merits.

The Crucial Reassessment Dates

The original notice under section 148, issued under the old reassessment regime, was dated 23 June 2021.

Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, a notice under section 148A(b) was issued on 26 May 2022, seeking a response by 14 June 2022. The assessee submitted her reply on 18 June 2022.

The fresh notice under section 148 of the new regime was issued on 25 July 2022.

The assessee contended that this fresh notice was beyond the time available to the Assessing Officer under the surviving-period principle explained in Union of India v. Rajeev Bansal, 469 ITR 46 (Supreme Court).

Assessee’s Limitation Argument

The assessee argued that the old-regime notice had been issued only seven days before 30 June 2021, the extended deadline under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, commonly referred to as TOLA.

Accordingly, only seven days survived for completing the remaining reopening procedure once the limitation clock resumed.

Since her reply was received on 18 June 2022, the Assessing Officer was required to consider the response, pass the appropriate order under section 148A(d), and issue the fresh section 148 notice by 25 June 2022.

The notice actually issued on 25 July 2022 was therefore time-barred. The Revenue contested this contention.

Supreme Court’s Surviving-Period Principle

The Tribunal examined the reasoning in Rajeev Bansal, particularly paragraphs 108 to 113.

It noted that Ashish Agarwal had created a legal fiction treating the relevant old-regime section 148 notices as show-cause notices under the new regime. The resulting exclusion of time did not give the Department an unrestricted fresh period for reopening.

Instead, the balance time surviving between the original notice date and 30 June 2021 remained available for completing the subsequent steps, after accounting for the applicable exclusions.

As explained in the passages relied upon by the Tribunal, the clock resumed after receipt of the assessee’s response. The Assessing Officer then had to complete the remaining procedure within that surviving period.

A fresh section 148 notice issued beyond it would be barred by limitation, affecting the jurisdiction to reassess.

Tribunal’s Application to the Facts

The Tribunal found that only seven days survived in the present case because the original notice was issued on 23 June 2021.

The assessee replied to the section 148A(b) notice on 18 June 2022. Applying the surviving period, the Tribunal held that the fresh notice should have been issued on or before 25 June 2022.

Since it was issued on 25 July 2022, the Tribunal concluded that the notice was time-barred.

Consequently, the reassessment order lacked valid jurisdiction and was quashed as void ab initio. The assessee’s appeal was allowed.

Rental Income and Section 115BBE Left Undecided

The assessee had alternatively argued that, even if the alleged receipt were accepted, it should be assessed as income from house property, with the applicable 30% deduction, rather than as unexplained money under section 69A.

She also challenged the application of section 115BBE and the levy of interest.

However, after quashing the reassessment, the Tribunal treated these grounds as academic and did not adjudicate them.

Author’s Comments

Conversion of an old notice into a deemed show-cause notice does not replenish the Department’s limitation period. The remaining statutory time must still be calculated and respected.

This decision illustrates the practical importance of preparing a complete reopening chronology. The original section 148 notice, supply of information, response period, actual reply, section 148A(d) order and fresh notice must be examined together. A reopening that appears procedurally complete may nevertheless fail because the fresh notice was issued after the surviving deadline.

The seven-day period is specific to this case. It should not be applied mechanically to every reassessment arising from Ashish Agarwal; the available balance and relevant exclusions must be worked out from the actual record.

Cases Discussed

1. Union of India Vs Ashish Agarwal, [2022] 138 taxmann.com 64 (SC) — old-regime reassessment notices deemed show-cause notices under the new regime.

2. Union of India Vs Rajeev Bansal, [2024] 469 ITR 46 (SC) — surviving-period limitation after applicable exclusions.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 10.11.2025 u/s 250 of the Income Tax Act, 1961,(hereinafter referred to as “the Act”).

2. The grounds raised by the assessee read as under:-

1. The impugned order u/s 147 rws 144 of the I.T. Act, 1961 dated 09.05.2023 as well as the action taken u/s 147/148 notices u/s 148A(b), 148A(d), 148 and other notices are illegal, bad in law and on the facts of the case for want of jurisdiction, without proper satisfaction, approval, and being the third party survey case u/s 133A before 01.04.2021, and various other reasons or bared by limitation and further contrary to the real facts of the case, hence the same may kindly be quashed.

2.1 Rs. 6,00,000/-: The Id. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs.6,00,000/- made by the Id. AO U/s 69A as unexplained Money on account of alleged rent received from M/s Impulse Career Institute Sikar. The Ld. AO and CIT(A) have also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the addition so made by the Id. AO and confirmed by the Id.CIT (A) are also being contrary to the real facts of the case and not according to the provision of law, hence the same is illegal, bad in law, against the principle of natural justice the same may kindly be deleted in full.

2.2 The Id. CIT(A) and the Id. AO have also grossly erred in law as well as on the facts of the case in taxing the entire alleged rental income of Rs.6,00,000/- u/s 69A in place of income from House Property and also erred in not giving the deduction 30.00 percent deduction allowable as per law under the head income from rent, if the additions on account of rental income is sustained Thus the Id. AO and CIT(A) have also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the addition if any may kindly be directed to be made under the head income from house property and allow deduction as per act.

3. The Id. AO has also grossly erred in law as well as on the facts of the case invoking the provisions of Sec. 115BBE for taxing the income at the higher rate, without issue any show cause notice and also not applicable in the present case for the rental income and also. The Ld.AO has also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the provisions of Sec. 115BBE so invoked are also being contrary to the real facts of the case and not according to the provision of law, hence the same is illegal, bad in law, against the principle of natural justice the same may kindly be deleted in full.

4. The Id. AO has grossly erred in law as well as on the facts of the case in charging the interest u/s 234A, B,C. The interest so charged is being totally contrary to the provision of law and on facts of the case and hence same may kindly be deleted in full.

5. That the appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.

3. Brief facts of the case are, there was a survey u/s 133A on the business premises of M/s Impulse Career Institute wherein a register had been impounded in which some rough entries were written. The entries allegedly contained the name of the assessee reflecting receipt of Rs.6 lacs of rent from Impulse Career Institute. During assessment proceedings the assessee was confronted with the said information , to which she denied receiving any rental income during the year under consideration. The AO however added the amount of Rs. 6,00,000/-as unexplained money of the assessee applying the provisions of section 69A of the Act and charged interest u/s 115BBE of the Act thereon.

4. Aggrieved by the same, the assessee carried the matter before the Ld. CIT(A), who confirmed the order of the AO.

5. Before me, ld. Counsel for the assessee has raised a legal ground contending that the assessment order passed is barred by limitation. He contended that in the facts of the present case, initially notice u/s 148 of the Act of the old regime was issued on 23.06.2021 and thereafter in pursuance to the directions of the Hon’ble Apex Court in the case of UOI Vs. Ashish Agarwal reported in [2022] 138 taxmann.com 64(SC) dated May 04, 2022 notice u/s 148A(b) of the Act was issued to the assessee on 26.05.2022 seeking response by the 14th of June 2022. That assessee filed response to the same on 18th June 2022. Ld. Counsel for the assessee contended that the Hon’ble Apex Court in the case of Rajeev Bansal Vs. UOI [2024] 469 ITR 46 (SC) dated 22nd February 2023,had propounded the concept of surviving time available with the AO for issuing notice u/s 148 of the Act of the new regime , being the time remaining from the date of issuance of notice u/s 148 of the old regime after 01-04-2021 to 30-06-21, being the date of extension of limitation as per TOLA. That accordingly, the AO , in the facts of the present case had seven days time (from 23.06.2021 to 30-06-21) for issuance of notice after receiving response of the assessee on 18th June 2022. And notice under the new regime therefore needed to be issued by 25th June 2022, however the same was issued on 25th July 2022 and accordingly the notice issued was barred by limitation. The contents of his submissions in this regard made in writing before me are reproduced here under:-

A. Notice u/s 148 dated 29/07/2022 is time barred

In this case it is pertinent to mention that the notice issued by the Ld. AO u/s 148 of the act dated 25/07/2022 is time barred and liable to be quashed. It is relevant to mention here that the Hon’ble Supreme Court in Ashish Agarwal (supra) created a legal fiction, which 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). That the period from the date of the issuance of the deemed notices till the supply of relevant information and material by theassessing 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.

responsibilities: (i) consider the reply of the assessee under section

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 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.

The Hon’ble Supreme Court in the matter of Rajeev Bansal illustrated the manner of calculation for the limitation period and surviving time limit.

“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 18June 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.”

We are reproducing this example along with the fact of this case in the tabular form hereunder:-

6. Ld. DR vehemently contested the pleadings of the assessee as above.

7. I have heard the rival contentions. The fact that in the present case notice issued u/s 148A(b) of the Act was issued in pursuance to the direction of the Hon’ble Apex Court in the case of Ashish Agarwal (Supra) is not disputed. Undeniably, the Hon’ble Apex Court in the case of Rajeev Bansal (Supra) interpreted the applicability of the new law relating to reassessment u/s 147-151 of the Act ,applicable w.e.f 01-04-2021 to notices issued in lieu of the direction of the Hon’ble apex court in Ashish Agarwal (supra) and laid down the concept of surviving period for issuance of notice u/s 148 of the Act of the new regime after receiving reply of the assessee to notice u/s 148A(b) of the Act. The Hon’ble apex court held that the surviving period so available with the AO was the period between the date of issuance of notice u/s 148 of the Act of the old regime(applicable upto 31-03-2021) and the 30th June 2021 i.e. the date upto which the limitation for compliances was extended by TOLA. The relevant portion of the order of the Hon’ble Apex Court contained at para Nos.108-113 of the order, laying down the concept of surviving period for issuance of notice under the new regime of reassessment is as under:

…..

108. The Income Tax Act read with TOLA extended the time limit for issuing reassessment notices under Section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. 163 Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021.

109. If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under Section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income Tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction, 164

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 wasrequired 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.

113. In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under Section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under Section 148 with respect to the relevant assessment years, an assessing officer has to: (1) issue the notices within the period prescribed under Section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under Section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under Section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income Tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred.

…….

8. In the facts of the present case admittedly, only seven days surviving period was available with the AO to issue notice u/s 148 of the Act, since the notice issued u/s 148 of the Act under the old regime was issued on 23rd June 2021 and the extension of limitation as per TOLA was 30th June 2021. The assessee had filed reply to the notice issued u/s 148A(b) of the Act of the new regime on 18th June 2022. Given seven days to issue notice therefore, the notice issued u/s 148 of the new regime ought to have been issued by the AO, as per the decision of the Hon’ble Apex Court in the case of Rajeev Bansal (supra), by the 25th of June 2022 however; the AO has issued notice in the facts of the present case on 25.07.2022.

9. It is abundantly clear, therefore, that the notice issued u/s 148 of the Act in the present case is barred by limitation. The order passed by the AO is therefore is clearly without valid jurisdiction, and is therefore quashed as void ab initio.

10. Ground of appeal No. 1 is allowed.

11. Since I have quashed the assessment order passed, the other grounds of appeal raised by the assessee are not being dealt with by me, as they are mere academic in nature.

12. The appeal of the assessee is accordingly allowed.

Order pronounced in the open court on 12.10.2026.