Reopening Notice Issued in July, But the Time Limit Had Expired in June

Vardhaman Gem Exports Pvt. Ltd. Vs ITO (ITAT Mumbai)

Mumbai ITAT quashes ₹29.65 crore in additions after applying the surviving limitation period explained in Rajeev Bansal

The amount of alleged escaped income may cross ₹50 lakh, and the Department may have information about bank deposits. Neither fact gives the AO extra time to issue a notice under section 148. That distinction decided the appeals in Vardhaman Gem Exports Pvt. Ltd. v. ITO, ITA Nos. 5397 and 5352/Mum/2026, pronounced by the Mumbai ITAT on 23 September 2026.

The dispute concerned AYs 2013–14 and 2014–15. Following reassessment, the AO made additions under section 68 read with section 115BBE of ₹20,76,17,499 and ₹8,89,55,823, respectively. The assessee challenged the alleged accommodation entries and credits in its Axis Bank account. It also questioned the reopening, the approval obtained for the notices, the absence of a DIN, and the denial of cross-examination.

There had already been one round before the Tribunal. The first appellate orders were set aside in June 2025, and the matters were sent back to the CIT(A) for fresh adjudication after giving the assessee a reasonable hearing. In the second round, the CIT(A) again confirmed the AO’s action. The assessee returned to the Tribunal, where the appeals turned on a narrower question: were the fresh notices under section 148, issued on 29 July 2022, still within time?

How much time remained?

The AO had originally issued notices under the old section 148 on 29 June 2021. Under the Supreme Court’s decision in Union of India v. Ashish Agarwal, those notices were treated as show-cause notices under the substituted section 148A(b). The Department then supplied the relevant information and material to the assessee on 25 May 2022. No reply was filed. Orders under section 148A(d) followed on 27 or 28 July 2022, and fresh section 148 notices were issued on 29 July 2022.

The assessee relied on the Supreme Court’s later decision in Union of India v. Rajeev Bansal to argue that the conversion of the old notices did not give the AO a fresh, open-ended period. The balance of the original limitation period had to be calculated, after excluding the period allowed under the applicable directions. Since the original notices were dated 29 June 2021 and the extended terminal date was 30 June 2021, only two days survived on the inclusive method applied by the Tribunal.

The Tribunal accepted that calculation. The assessee’s two-week period to respond to the information supplied on 25 May 2022 expired on 8 June 2022. The limitation clock resumed on 9 June 2022. With only two days remaining, the normal outer date was 10 June 2022. Even after allowing the Revenue the benefit of the seven-day minimum under the fourth proviso to section 149, the outer date would be 15 June 2022.

The order also considered an alternative calculation more favourable to the Revenue. Assuming that the Department could take until 2 June 2022 to supply the material, the two-week response period would run until 16 June 2022. On that assumption, and even after allowing the seven-day minimum, the outer date would be 23 June 2022. The actual notices were issued on 29 July 2022. They were late under either calculation.

Why the ₹50 lakh threshold did not save the notices

For an older assessment year, the conditions in section 149(1)(b) concerning the amount and nature of the alleged escaped income may permit a notice to be considered. The Tribunal explained, however, that satisfying those conditions does not extend the separate limitation period worked out under Rajeev Bansal. The alleged deposits and the size of the proposed additions could not restore time that had already expired.

The Tribunal referred to the Supreme Court’s holding that compliance with section 149 limitation is a jurisdictional precondition and that notices issued beyond the surviving period are liable to be set aside. It found that the CIT(A) had not examined the July 2022 notices in light of that ruling. Information suggesting escapement of income could not cure the absence of jurisdiction to issue the notices when they were issued.

Accordingly, the Tribunal quashed the orders under section 148A(d), the fresh notices under section 148, the resulting reassessment proceedings and the assessment orders dated 21 March 2023 for both years. The assessee’s appeals were allowed. The Tribunal did not separately decide the objections concerning sanction, DIN, the asset condition, the additions on merits or cross-examination; those questions became academic once the reassessments were quashed on limitation.

Author’s comments

The useful feature of this decision is its date-by-date computation. In cases involving old section 148 notices issued during the 2021 transition, it is not enough to check whether the fresh notice was issued after following section 148A. The date of the original notice, the date on which material was supplied, the response period and the surviving balance of limitation must all be examined.

The case also keeps two requirements distinct. The ₹50 lakh condition may be relevant to whether an older year can be reopened under section 149(1)(b). It does not answer whether the AO issued the eventual notice within the time still available. Here, even the calculation most favourable to the Revenue ended on 23 June 2022. A notice dated 29 July 2022 could therefore not sustain additions of nearly ₹29.65 crore, irrespective of what those additions might have yielded on merits.

Cases Discussed

• Union of India & Ors. v. Rajeev Bansal, [2024] 167 taxmann.com 70 (SC) / [2024] 469 ITR 46 (SC) — Relied upon and applied by the Tribunal to compute the surviving limitation period. The Tribunal noted the Supreme Court’s inclusive computation, held that compliance with section 149 limitation is a jurisdictional precondition, and applied the principle that notices issued beyond the surviving period are time-barred and liable to be set aside.
• Union of India v. Ashish Agarwal (Supreme Court) — Applied for treating the original notices issued under section 148 on 29 June 2021 as show-cause notices under section 148A(b); the Tribunal also considered the thirty-day period contemplated in that decision while examining the assessee’s alternative limitation computation.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These two appeals by the assessee are directed against two separate orders, both dated 26.02.2026, passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the CIT(A)”], under section 250 read with section 254 of the Income-tax Act, 1961[hereinafter referred to as “the Act”], for the assessment years 2013-14 and 2014-15. Since the appeals involve an identical jurisdictional issue arising from a common set of material facts, they were heard together and are being disposed of by this common order.

2. Brief Facts are such that the Assessing Officer completed the reassessments for both the assessment years under section 143(3) read with section 147 of the Act by separate orders dated 21.03.2023. In the assessment year 2013-14, an addition of Rs.20,76,17,499/- was made under section 68 read with section 115BBE of the Act. In the assessment year 2014-15, the corresponding addition was Rs.8,89,55,823/-.

3. The first appellate orders passed by the learned CIT(A)-48, Mumbai, on 17.10.2024 were set aside by the Tribunal vide order dated 13.06.2025 in ITA No.6556/Mum/2024 for the assessment year 2013-14 and ITA No.6551/Mum/2024 for the assessment year 2014-15. The matters were restored to the learned CIT(A) for fresh adjudication after affording reasonable opportunity of hearing to the assessee. In the second round, the learned CIT(A), by the impugned orders dated 26.02.2026, again confirmed the action of the Assessing Officer. The assessee is, therefore, in further appeal before us.

4. The grounds raised by the assessee for the assessment year 2013-14 are reproduced as under:

1. The Ld. AO has erred in issuing the notice u/s 148 of the Act and Ld. CIT(A) has erred in confirming the same.

2. The Ld. AO has erred in issuing notice u/s 148 of the Act on 29.06.2021 (which was treated notice u/s 148A of the Act as per order dated 04.05.2022 rendered by the Hon’ble Supreme Court in the case of Ashish Agarwal) with the permission of PCIT (Central), Mumbai-1, whereas as per amended section (from 01.04.2021) 151 of the permission of Pr. CCIT, Pr. DGIT, CCIT of DGIT is required if the reopening of the case is after 3 years, Hence notice u/s 148A is invalid.

3. The Ld. AO has erred in issuing notice u/s 148 of the Act without DIN, and there is no reason mentioned on the notice itself for issuing notice u/s 148 without DIN.

4. The learned AO has grossly erred in making an addition of ₹20,76,17,499/- as the addition on account of bogus transaction and credit in Axis bank and treated as accommodation entries and added u/s 68 hence the same should be deleted and also the Ld. CIT(A) has erred in confirming the same.

5. The Ld. AO has erred in not providing the opportunity for cross-examination. It is therefore prayed that the addition should be deleted to meet the ends of justice and also the Ld. CIT(A) has erred in confirming the same.

6. The appellant reserves the right to add, alter, amend, or withdraw any grounds of appeal.

5. The grounds raised for the assessment year 2014-15 are reproduced verbatim as under:

1. The Ld. AO has erred in issuing the notice u/s 148 of the Act and Ld. CIT(A) has erred in confirming the same.

2. The Ld. AO has erred in issuing notice u/s 148 of the Act on 29.06.2021 (which was treated as notice u/s 148A of the Act as per order dated 04.05.2022 rendered by the Hon’ble Supreme Court in the case of Ashish Agarwal) with the permission of PCIT (Central), Mumbai-1, whereas as per amended section (from 01.04.2021) 151 of the permission of Pr. CCIT, Pr. DGIT, CCIT of DGIT is required if the reopening of the case is after 3 years, Hence, notice u/s 148A is invalid.

3. The Ld. AO has erred in issuing notice u/s 148 of the Act without DIN, and there is no reason mentioned on the notice itself for issuing notice u/s 148 without DIN.

4. The case of the assessee is not a fit case to be reopened under section 148 of the Income Tax Act, as there is no asset involved. Hence, the order passed under section 147 should be quashed and also the Ld. CIT(A) has erred in confirming the same.

5. The learned AO has grossly erred in making an addition of ₹8,89,55,823.00/- as an addition on account of bogus transactions and credit in Axis bank and treated as accommodation entries and added u/s 68, hence the same should be deleted, and also the Ld. CIT(A) has erred in confirming the same.

6. The Ld. AO has erred in not providing the opportunity for cross-examination. It is therefore prayed that the addition should be deleted to meet the ends of justice and also the Ld. CIT(A) has erred in confirming the same.

7. The appellant reserves the right to add, alter, amend, or withdraw any grounds of appeal.

6. During the course of hearing, the learned Authorised Representative (AR) submitted that the jurisdictional challenge raised in ground no.1 goes to the root of the reassessment proceedings. Referring to the synopsis and the documents placed in the paper books for both the years, the learned AR submitted that the original notices under section 148 were issued on 29.06.2021. By virtue of the decision of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal, the said notices were treated as show-cause notices under section 148A(b) of the Act.

7. The learned AR submitted that the relevant information and material were supplied to the assessee along with the communication dated 25.05.2022. The assessee did not furnish a reply. Therefore, after excluding the period during which the deemed notices remained stayed and the further period of two weeks allowed to the assessee, only the balance period surviving as on the date of the original notices was available to the Assessing Officer for completing the proceedings contemplated under section 148A and issuing the fresh notices under section 148.

8. The learned AR relied upon the decision of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC) / [2024] 469 ITR 46 (SC), and submitted that the notices issued under section 148 on 29.07.2022 were beyond the surviving period of limitation. It was accordingly contended that the fresh notices, the resultant reassessment proceedings and the assessment orders dated 21.03.2023 were without jurisdiction and liable to be quashed.

9. The learned Departmental Representative, on the other hand, relied upon the assessment orders and the impugned orders passed by the learned CIT(A).

10. We have considered the rival submissions and carefully perused the material placed on record. The controversy before us is confined to whether the fresh notices issued under section 148 on 29.07.2022 were within the period of limitation computed in accordance with the decision of the Hon’ble Supreme Court in Rajeev Bansal.

11. The material dates emerging from the departmental documents placed in the paper books are as follows:

12. In respect of the assessment year 2014-15, the copy of the order under section 148A(d) placed at pages 7 to 9 of the paper book bears the date 27.07.2022, whereas the assessment order narrates that the order under section 148A(d) was passed on 28.07.2022. This discrepancy of one day is immaterial because, on either date, the order was passed substantially beyond the surviving period of limitation.

13. In Rajeev Bansal, the Hon’ble Supreme Court explained that the notices issued under the old regime between 01.04.2021 and 30.06.2021, which were deemed to be notices under section 148A(b), retained the balance period available between the date of the original notice and 30.06.2021. The period from the date of the deemed notice until the supply of relevant information and material was required to be excluded. The further period of two weeks granted to the assessee for furnishing a reply was also required to be excluded. Upon expiry of the excluded period, the Assessing Officer was required to consider the reply, pass an order under section 148A(d) and issue a notice under section 148 within the surviving period.

14. Paragraph 112 of the judgment illustrates the computation by treating the period from 01.05.2021 to 30.06.2021 as sixty-one days. Applying the same inclusive method, the period surviving where the original notice was issued on 29.06.2021 would be two days, comprising 29.06.2021 and 30.06.2021.

15. The relevant information and material were admittedly supplied to the assessee on 25.05.2022. Two weeks allowed for furnishing the reply expired on 08.06.2022. Since no reply was filed, the clock of limitation resumed on 09.06.2022. The normal surviving period of two days consequently expired on 10.06.2022.

16. Even if the Revenue is given the benefit of the fourth proviso to section 149 and the remaining period is enlarged to seven days, the outer limit would expire on 15.06.2022. The orders under section 148A(d), passed on 27.07.2022 or 28.07.2022, and the consequential notices under section 148, issued on 29.07.2022, were thus manifestly beyond limitation.

17. The synopsis filed by the assessee also contains an alternative computation which proceeds on an assumption more favourable to the Revenue, namely, that the period available for supplying the relevant information and material continued until 02.06.2022, being the thirty-day period contemplated in Union of India v. Ashish Agarwal. The alternative computation, after applying the inclusive method explained in paragraph 112 of Rajeev Bansal, may be set out as under:

18. Thus, even by adopting the alternative computation most favourable to the Revenue and by granting the benefit of seven days under the fourth proviso to section 149, the limitation could not extend beyond 23.06.2022. The notices issued under section 148 on 29.07.2022 were, therefore, beyond the surviving period and barred by limitation.

19. In paragraph 113 of Rajeev Bansal, the Hon’ble Supreme Court held that compliance with the limitation prescribed under section 149 is a jurisdictional precondition. The operative conclusion in paragraph 114(h) reads:

“All notices issued beyond the surviving period are time barred and liable to be set aside.”

20. The aforesaid declaration of law squarely governs the present appeals. The Assessing Officer had no jurisdiction to issue the fresh notices under section 148 on 29.07.2022 after expiry of the surviving period. The fact that the alleged escaped income exceeded Rs.50,00,000/- or was stated to be represented by deposits in a bank account may satisfy the monetary or asset-related conditions under section 149(1)(b), but it cannot extend the surviving period of limitation determined in accordance with Rajeev Bansal. Limitation constitutes an independent and mandatory jurisdictional requirement.

21. The learned CIT(A) did not examine the validity of the fresh notices in the light of the law subsequently declared by the Hon’ble Supreme Court in Rajeev Bansal. Reliance upon the existence of information suggesting escapement of income cannot cure a notice issued beyond the statutory period. Jurisdiction must exist before the merits of the alleged escapement can be examined.

22. We, therefore, hold that the notices issued under section 148 on 29.07.2022 for both the assessment years were barred by limitation. Consequently, the orders passed under section 148A(d), the notices issued under section 148, the reassessment proceedings initiated pursuant thereto and the assessment orders dated 21.03.2023 are quashed.

23. Ground no.1 in each appeal is accordingly allowed. In view of our decision on the foundational jurisdictional issue, the remaining grounds concerning the validity of sanction, absence of DIN, applicability of the asset condition, additions on merits and denial of cross-examination have become academic and do not require separate adjudication.

24. In the result, both the appeals filed by the assessee are allowed.

Order pronounced in the open court on 23.09.2026.