ITAT Visakhapatnam Quashes Reassessment as Section 148 Notice Time-Barred

By Adv (CA) Vijay Gupta Income Tax Judiciary March 21, 2026

TaxGuru Citation: 2026 taxguru.in 3434
Case Name: Srinivasa Rao Sirivuri Vs ITO (ITAT Visakhapatnam)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2015-16
Courts: All ITAT, ITAT Visakhapatnam

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Srinivasa Rao Sirivuri Vs ITO (ITAT Visakhapatnam)

ITAT Visakhapatnam Quashes Reassessment as Section 148 Notice Held Time-Barred Under Pre-Amended Section 149(1)(b)

The ITAT Visakhapatnam in quashed the reassessment proceedings for AY 2015-16 on the ground that the notice issued under Section 148 on 03.04.2022 was time-barred under the limitation prescribed in Section 149(1)(b) as it stood prior to the Finance Act, 2021. The Tribunal observed that the six-year limitation period for reopening the assessment expired on 31.03.2022, and therefore the notice issued after this date was invalid. Relying on the Supreme Court’s ruling in Union of India v. Rajeev Bansal, it held that the first proviso to Section 149 prohibits revival of reassessment proceedings that were already time-barred under the old law, and the extended limitation under the amended provisions cannot be applied retrospectively. Consequently, the Tribunal held that the Assessing Officer lacked jurisdiction to initiate reassessment, and the assessment order passed under Sections 147, 144 and 144B treating cash deposits as unexplained under Section 69A was quashed, without examining the merits of the additions.

Facts:

The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dt. 20.12.2024, which arose from the assessment order passed by the Assessing Officer under section 147 read with sections 144 and 144B of the Income-tax Act, 1961 dated 21.02.2024 for the Y. 2015-16.
The Assessing Officer, on the basis of information flagged under the Risk Management Strategy formulated by the CBDT, observed that during the relevant previous year the assessee had made substantial cash deposits amounting to Rs.72,85,010/- in his current account bearing number 225811100000034 maintained with Andhra Bank, later merged with Union Bank of India, and that the assessee had not filed any return of income for the said year. Based on this information, proceedings under section 147 of the Act were initiated and a notice under section 148 dated 03.04.2022 was issued to the assessee.
The assessee failed to file his return of income in response to the notice issued under section 148 dated 03.04.2022 and did not comply with the notices issued under section 142(1) of the Act. Consequently, the Assessing Officer issued a notice under section 144 dated 02.02.2024 calling upon the assessee to explain why the assessment should not be completed to the best of his judgment under section 144 of the Act.
Subsequently, the Assessing Officer obtained the bank statement of the Assessee’s account number 225811100000034 from Andhra Bank under section 133(6) of the Act. On examination of the bank account, it was observed that during the relevant year the assessee had made total cash deposits of Rs.89,57,554/-. As the assessee did not provide any explanation regarding the source of these deposits, the Assessing Officer treated the entire amount of Rs.89,57,554/- as unexplained money under section 69A of the Act and determined the total income at Rs.89,57,554/- by order dated 21.02.2024 passed under section 147 read with sections 144 and 144B of the Act.
Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which was dismissed by order dated 20.12.2024. The said order was served upon the assessee on 01.01.2025.
The assessee thereafter filed an appeal before the Income Tax Appellate Tribunal on 28.07.2025. The appeal ought to have been filed on or before 02.03.2025, resulting in a delay of 148 days, which was noted by the Tribunal as a delay of 150 days in filing the appeal.
In support of the application for condonation of delay, the assessee filed an affidavit stating that he was a patient of buccal mucosa cancer, had undergone surgery on 08.10.2014, and had taken radiotherapy from 06.11.2014 to 02.01.2015 at Mahatma Gandhi Cancer Hospital and Research Institute, Visakhapatnam. He further stated that he was unwell during January 2025 and remained under treatment from 10.01.2025 to 10.07.2025, due to which he was unable to attend to his affairs and could not file the appeal within the prescribed time.
During the course of appellate proceedings before the Tribunal, the assessee also raised additional grounds challenging the validity of the reassessment proceedings. It was stated that the assessment had been completed under section 147 read with sections 144 and 144B vide order dated 21.02.2024 pursuant to notice issued under section 148 on 03.04.2022 for Assessment Year 2015-16.
On examination of the record, the Tribunal noted as a matter of fact that the notice under section 148 dated 03.04.2022 had been issued beyond the time limit prescribed under clause (b) of sub-section (1) of section 149 of the Act as it stood prior to the Finance Act, 2021, since for Assessment Year 2015-16 the period of six years expired on 31.03.2022.
In view of this factual and legal position, the Tribunal held that the reassessment proceedings initiated on the basis of the notice dated 03.04.2022 were barred by limitation and consequently quashed the assessment order dated 21.02.2024 passed under section 147 read with sections 144 and 144B of the Act for want of valid assumption of jurisdiction.

Issues:

1. The impugned appellate order dated 20.12.2024 passed by the learned Commissioner of Income Tax (Appeals) NFAC, Delhi is unjust and uncalled for.

2. The learned Commissioner of Income Tax (Appeals) ought to have considered the grounds of appeal judiciously, in the interests of justice.

3. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.89,57,554/- made by the Assessing officer u/s 69A r.w.s 115BBE of the I T.Act towards unexplained cash deposits in the Bank Account are not at all warranted in view of the facts and circumstances of the case.

4. The learned Commissioner of Income Tax (Appeals) ought to have held that the provisions of 115BBE are not applicable to the case of Appellant.

5. The learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the so called impugned aggregate cash deposits of Rs.89,57,554/-was fully explainable sources, as the said fully explainable sources which represents sales turnover of the appellant who is engaged in textile business. So the appellant has got no objection to assess his business income at 8% on the impugned aggregate cash deposits of Rs.89,57,554/- which represented nothing but his sales turnover on presumptive basis u/s.44AD of the I.T.Act, in the interests of justice.

6. The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the cash deposits mentioned in the proceedings issued under clause (d) of the Sec.148A of the Income tax Act were of Rs.72.85 lakhs and whereas the cash deposits assessed in the impugned Assessment Order were Rs.89.58 lakhs and hence there was a significant difference between these two amounts and this fact may kindly be considered in the interests of justice.”

7. Assessment in the case of the appellant was completed u/s 147 r.w.s. 144 r.w.s 144B vide order dt.21.02.2024. This is a case of reassessment and the same was initiated by notice u/s 148 of the Act issued on 03.04.2022.

8. The above mentioned notice dt.03.04.2022 issued u/s 148 is invalid for the following reasons:

9. Firstly, the impugned assessment year is A.Y.2015-2016 and the notice u/s 148 was issued on 03.04.2022 which falls after expiry of 6 years from the end of the relevant assessment year. As such, the notice is barred by limitation by virtue of 1″ proviso to S.149(1) of the Act.

10. Thirdly, the notice was issued by the JAO. After the introduction of ‘E-Assessment of Income Escaping Assessment Scheme, 2022’ w.e.f. 29.03.2022, the notice u/s 148 shall be issued in faceless manner by the FAO. However, the notice in the case of the appellant was issued by the JAO. Hence, the notice is invalid.

11. The above legal issues were not raised before the lower authorities due to inadvertence. However, all the issues are purely legal in nature and the relevant facts are already on record. Hence, the appellant prays the hon’ble ITAT Visakhapatnam Bench to kindly admit the following Additional Grounds of Appeal and pass appropriate orders in the interest of rendering substantial justice.”

Observation:

The Hon’ble Court observed that the appeal filed by the assessee arose from the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 20.12.2024, which in turn emanated from the assessment order passed by the Assessing Officer under section 147 read with sections 144 and 144B of the Income-tax Act, 1961, dated 21.02.2024, for the Assessment Year 2015-16, which had been framed pursuant to a notice issued under section 148 dated 03.04.2022.
The Hon’ble Court observed that the primary issue for determination was the sustainability of the reassessment proceedings and the validity of the notice issued under section 148 dated 03.04.2022 in light of the limitation prescribed under section 149(1)(b) of the Act as it stood prior to its amendment by the Finance Act, 2021. The Court noted that for A.Y. 2015-16, the statutory period of six years from the end of the relevant assessment year expired on 31.03.2022, whereas the impugned notice had been issued on 03.04.2022, thereby rendering it beyond the prescribed limitation period.
The Hon’ble Court observed that the Revenue sought to justify the notice by relying upon the amended provisions of section 149 introduced by the Finance Act, 2021; however, such reliance was untenable in view of the first proviso to section 149(1), which expressly provides that no notice under section 148 shall be issued for an assessment year beginning on or before 01.04.2021 if such notice could not have been issued at that time on account of being beyond the time limit specified under the unamended provisions.
The Hon’ble Court observed that the scope and effect of the first proviso to section 149(1) had been authoritatively interpreted by the Hon’ble Supreme Court in Union of India & Ors. v. Rajeev Bansal (2024) 340 CTR 865 (SC), wherein it was held that the proviso acts as a legislative embargo against revival of reassessment proceedings which had already become time-barred under the pre-amended law, and that the extended limitation introduced by the Finance Act, 2021 cannot be applied retrospectively to reopen such concluded matters. The Hon’ble Court inferred from the said judgment that any notice issued after the expiry of limitation under the old regime would be void and without jurisdiction notwithstanding the amendments brought into force from 01.04.2021.
The Hon’ble Court further observed that a similar principle had been reiterated by the Hon’ble High Court of Karnataka in Independent & Public Spirited Media Foundation & Ors. v. ACIT, W.P. No. 8848 of 2023, decided on 09.2025, wherein it was emphasized that reassessment proceedings must strictly conform to statutory time limits and that executive action cannot override or dilute the legislative safeguards embedded in the limitation provisions of the Income-tax Act. The Court noted that the High Court had underscored that the reassessment jurisdiction is a creature of statute and must be exercised strictly within the framework of the Act, failing which the proceedings are liable to be struck down as without authority of law.
The Hon’ble Court observed that in the present case, it was an admitted factual position borne from the record that the notice under section 148 dated 03.04.2022 had been issued beyond the limitation period prescribed under section 149(1)(b) as it stood prior to amendment, and therefore, in view of the statutory bar contained in the first proviso to section 149(1), the notice was invalid and incapable of conferring jurisdiction upon the Assessing Officer to reopen the assessment for A.Y. 2015-16.
The Hon’ble Court observed that once the very assumption of jurisdiction under section 147 was found to be bad in law, the entire reassessment proceedings stood vitiated, and consequently the assessment order passed under section 147 read with sections 144 and 144B dated 21.02.2024, wherein an addition of Rs. 89,57,554/- had been made by treating the cash deposits as unexplained money under section 69A read with section 115BBE, could not be sustained and was liable to be quashed.
The Hon’ble Court observed that since the reassessment itself was held to be invalid on jurisdictional grounds, it was not necessary to examine the merits of the additions made by the Assessing Officer or the contentions raised by the assessee regarding the nature of the cash deposits, applicability of section 115BBE, or the alternative claim that the deposits represented business turnover assessable on presumptive basis under section 44AD.
The Hon’ble Court therefore concluded that the notice issued under section 148 dated 03.04.2022 being barred by limitation under section 149(1)(b) read with the first proviso thereto, the reassessment proceedings initiated under section 147 were void ab initio, and the consequential assessment order dated 21.02.2024 was quashed for want of valid assumption of jurisdiction.