RSD Containers Private Limited Vs ITO (ITAT Jaipur)
The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) in RSD Containers Pvt. Ltd. vs. ITO (AY 2017-18, order dated 06 August 2025) quashed a reassessment notice and the consequent assessment order issued under Sections 147 and 148 of the Income Tax Act, 1961. The Tribunal held that the notice was issued beyond the permissible limitation period and without proper sanction from the specified authority as required under Section 151 of the Act, rendering the proceedings invalid in law.
At the outset, the assessee’s counsel did not press several grounds, confining the dispute to three technical issues — (1) validity of sanction, (2) time-barred reassessment, and (3) failure to provide material relied upon by the Assessing Officer (AO). The case pertained to a notice originally issued on 2 June 2021 under the old Section 148 regime, later deemed to be a notice under Section 148A(b) following the Supreme Court’s ruling in Union of India v. Ashish Agarwal. The AO subsequently issued a fresh notice under the new regime on 28 July 2022 after obtaining approval from the Principal Commissioner of Income Tax (PCIT-2), Jaipur.
The Tribunal observed that by virtue of Ashish Agarwal and the subsequent judgment in Union of India v. Rajeev Bansal (2024) 167 taxmann.com 70 (SC), reassessment notices issued between 1 April 2021 and 30 June 2021 under the old regime are to be treated as deemed notices under the new Section 148A(b). The Supreme Court in Rajeev Bansal had clarified the interplay between the Ashish Agarwal decision and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The Court held that the limitation period for issuing reassessment notices stood extended till 30 June 2021 due to the pandemic-related relaxations under TOLA. The “surviving time” for the Revenue was to be computed as the number of days between the date of issuance of the deemed notice and 30 June 2021, with the clock resuming after the assessee’s reply to the show cause notice.
Applying this principle, ITAT Jaipur calculated the surviving time in this case as 28 days — from 2 June 2021 (date of the deemed notice) to 30 June 2021. The assessee had responded on 13 June 2022; hence, the AO had only until 11 July 2022 to issue a valid notice. Since the notice under the new regime was issued on 28 July 2022, beyond the 28-day period, it was held to be time-barred and therefore void.
The Tribunal further examined the requirement of sanction under Section 151 of the new regime, which mandates approval from the Principal Chief Commissioner (PCCIT) or equivalent authority if the reassessment notice is issued beyond three years from the end of the relevant assessment year. Here, as the notice pertained to AY 2017-18 and was issued on 28 July 2022 — more than three years later — approval from the PCCIT was required. However, sanction had been obtained from the PCIT-2, Jaipur. Citing the Supreme Court’s detailed discussion in Rajeev Bansal and a coordinate bench ruling of ITAT Mumbai (ITA No. 1406/Mum/2024), the Tribunal reaffirmed that the hierarchical level of approval was jurisdictional, not procedural. A notice issued with sanction from an improper authority is void ab initio.
The Tribunal noted that the Rajeev Bansal judgment emphasized that Section 151 acts as a safeguard against mechanical reopening of assessments and clearly differentiates the sanctioning authorities based on the time elapsed. The new regime requires prior approval from higher authorities after three years, and such sanction cannot be relaxed merely because the notice was deemed to have originated under the old regime. Consequently, the Jaipur bench ruled that the sanction obtained from the PCIT was invalid and the notice issued without proper authorization was bad in law.
Additionally, the Tribunal found merit in the assessee’s grievance that the AO had failed to furnish the underlying material forming the “reason to believe.” Only a screenshot was provided, which did not constitute valid evidence. Referring to the Rajasthan High Court’s decision in Micro Marbles Pvt. Ltd. v. ITO (2022) 457 ITR 569 (Raj), the Tribunal reiterated that non-supply of material relied upon for reopening vitiates the entire proceedings as it violates the principles of natural justice. The High Court in that case had ruled that sufficiency of material and its disclosure to the assessee are distinct requirements, and failure to supply the same invalidates the reassessment even if sufficient information existed.
The Tribunal also took note of a comparable case of Rachit Jain (AY 2016-17) where reassessment proceedings were dropped due to unreliable or incorrect information. Applying the same reasoning, ITAT Jaipur held that the failure to share material evidence prevented the assessee from presenting an effective defence.
Given these findings, the Tribunal concluded that (i) the reassessment notice issued under Section 148 was time-barred, (ii) it lacked proper sanction under Section 151, and (iii) the assessment violated natural justice due to non-supply of relied-upon material. Consequently, the notice dated 28 July 2022, the reassessment order dated 11 May 2023, and all related proceedings were quashed. The appeal of the assessee was accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
