Veena Gupta Vs DCIT (Madras High Court)
The Madras High Court initially dismissed the writ petition by an order dated 04.11.2025. However, while finalising the detailed order, the Court entertained a doubt as to whether the conclusion reached earlier was correct. Upon re-examining the documents, chronology of events, and the legal position laid down by the Supreme Court in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal, the High Court recalled its earlier dismissal order to ensure a fair disposal of the case.
The Court considered Paragraph 28 of the Ashish Agarwal judgment and Paragraphs 112 and 114 of the Rajeev Bansal judgment. In Ashish Agarwal, the Supreme Court held that reassessment notices issued under the unamended Section 148 of the Income-tax Act between 01.04.2021 and 30.06.2021 would be deemed to be show-cause notices under Section 148A(b) of the substituted regime. The Assessing Officer was required to provide relevant information and material to the assessee within thirty days, grant two weeks for a reply, and thereafter pass an order under Section 148A(d) before issuing a fresh notice under Section 148. All statutory defences, including limitation under Section 149, were expressly kept open.
In Rajeev Bansal, the Supreme Court re-examined Ashish Agarwal and addressed whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) applied after 01.04.2021 and whether reassessment notices issued under the new regime were valid. The Court clarified that after 01.04.2021, the Income-tax Act must be read with the substituted provisions, and TOLA continues to apply only to the extent of relaxing limitation periods. It further explained how the period during which notices were deemed stayed, along with the time granted for furnishing information and replies, had to be excluded while computing limitation. Notices issued beyond the surviving limitation period were held to be time-barred and liable to be set aside.
Applying these principles, the Madras High Court examined the facts relating to Assessment Year 2016–17. A notice under Section 148 of the old regime was issued on 30.06.2021, which was the last date of limitation as extended under TOLA, since the alleged income escaping assessment was less than ₹50 lakh. Following the Ashish Agarwal ruling, this notice had to be treated as a notice under Section 148A(b). The relevant timeline showed that the assessee was issued a notice under Section 148A(b) on 20.05.2022, submitted a reply on 03.06.2022, and the Assessing Officer thereafter passed an order under Section 148A(d) and issued a fresh notice under Section 148 on 28.07.2022.
The Court noted that the old-regime notice dated 30.06.2021 was issued on the very last day of limitation. After excluding the thirty days granted to the Department to supply material and the two weeks granted to the assessee to respond, no further time survived for issuance of a notice under Section 148 of the new regime. As clarified in Rajeev Bansal, only the limited benefit of seven days under the fourth proviso to Section 149, as amended with effect from 01.04.2021, could be availed.
Accordingly, the Assessing Officer was required to issue the fresh notice under Section 148 within seven days from the date of the assessee’s reply, i.e., on or before 10.06.2022. Since the notice was actually issued on 28.07.2022, the Court held that it was beyond the permissible time limit.
Consequently, the proceedings initiated by the notice dated 30.06.2021, the subsequent notice under Section 148A(b), the order under Section 148A(d) dated 28.07.2022, and the notice under Section 148 dated 28.07.2022 were all held to be barred by limitation. The writ petition was therefore allowed, the impugned proceedings were set aside, no costs were awarded, and the connected miscellaneous petitions were closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
