Reopening Cannot Be Quashed Using New Law Retrospectively – Matter Remanded to CIT(A)

DCIT Vs Novotech Steel & Alloys Private Limited (ITAT Mumbai)

Reopening Cannot Be Quashed Using New Law Retrospectively – Matter Remanded to CIT(A)

Mumbai ITAT held that the CIT(A) erred in quashing a reassessment notice by applying the amended provisions of Section 149 (Finance Act, 2021) retrospectively.

The reassessment notice was issued on 18.03.2020 (pre-amendment regime). However, the CIT(A) quashed it by applying the post-01.04.2021 limitation of 3 years (where escaped income < ₹50 lakh). The Tribunal clarified that such amended provisions cannot be applied to notices issued prior to 01.04.2021, and the validity must be tested under the old law.

Accordingly, the ITAT set aside the CIT(A)’s order and restored the matter back for fresh adjudication, directing that the issue be examined as per the correct legal position. Other grounds were left open. The Revenue’s appeal was partly allowed.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. The present appeal preferred by the Revenue is directed against the Order, dated 09/10/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby Learned CIT(A) had allowed the appeal against the Assessment Order, dated 23/09/2021, passed under Section 147 read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], for the Assessment Year 2015-2016.

2. The Revenue has raised following grounds of appeal:

“1.i Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that assessee’s case is covered by old regime i.e. prior to 01.04.2021 and the notice was issued on 18.03.2020 as per the prevailing provisions of the i.e. within four years from the end of the assessment year”?

1.ii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in overlooking the fact that assessee company was one of the beneficiaries who had entered into bogus penny stock from the exit provider after deducting nominal commission by them?

2. The Ld. CIT (A)’s order is contrary in law and on facts and deserves set aside.”

3. When the appeal was taken up for hearing the letter seeking adjournment was moved on behalf of the Assessee. On perusal of records shows that even on the last date of hearing similar letter seeking adjournment was filed.

4. The Learned Departmental Representative for the Revenue pointed out that the Revenue is aggrieved by the fact that the Learned CIT(A) had adjudicate the grounds raised by the Assessee by applying law that came into force subsequently and therefore, the order passed by the Learned CIT(A) was not sustainable in law.

The Learned Departmental Representative pointed out that in the present case reassessment proceedings were initiated by issuance of notice for the Assessment Year 2015-2016, dated 18/03/2020 under Section 148 of the Act. The Assessing Officer passed Assessment Order under Section 147 read with section 144B of the Act on 23/09/2021. The appeal filed against the aforesaid Assessment Order was instituted before the Learned CIT(A) on 22/10/2021.

By way of Order, dated 09/12/2025, the Learned CIT(A) quashed the notice issued under Section 148 of the Act on 18/03/2020 by applying law which came into effect subsequently from 01/04/2021 holding as under:

“4.6 The notice in the instant case has been issued on 18.03.2020. In such cases where the escaped income is less then Rs. 50 Lakhs, the notice for reopening could not have been issued beyond three years i.e. 31/03/2019. Hence the present notice u/s 148 dated 18.03.2020 is hereby quashed, as being beyond the time limit permissible u/s 149(1). As a result, the impugned reassessment proceedings and the impugned order also stand quashed. The additions/disallowances made therein also do not survive. The addition of Rs. 4,91,570/- u/s 68 is hereby deleted. Since the impugned order falters at the very inception of the proceedings, as the notice is not in accordance with the provisions of section 149(1), no adjudication is required on the merits of the addition made in the impugned order. Further, since the impugned proceedings stand quashed, the remaining grounds of appeal become academic in nature and are not adjudicated upon.”

5. On perusal of above, we find that the Learned CIT(A) had held that notice dated 18/03/2020 was bad in law since income that escaped assessment was less than INR.50 lakhs and the notice of reopening reassessment could not have been issued beyond three years from the end of relevant Assessment Year (i.e. 31/03/2019). We note that the amended provisions on which reliance were placed by the Learned CIT(A) were introduced by Finance Act, 2021 and the same came into effect from 01/04/2021. Thus, the Learned CIT(A) has applied the amended provisions which came into effect from 01/04/2021 with retrospective effect while concluding that the Assessing Officer could not initiated reassessment proceedings after 31/03/2019. In our view the aforesaid approach and reasoning adopted by Learned CIT(A) cannot be countenanced as the same is contrary to law. Accordingly, we set aside the Impugned Order, dated 09/10/2025, passed by Learned CIT(A) with the directions to adjudicate the grounds raised by the Assessee afresh after granting Assessee a reasonable opportunity of being heard. Accordingly, Ground 1.i raised by the Revenue is allowed. Since we have restored the appeal back to the file of Learned CIT(A), Ground No.1.ii and 2 are dismissed as having being rendered infructuous. All the rights and contentions of the Assessee are left open. The Assessee would be at liberty to raise all legal contentions before the Learned CIT(A).

6. In terms of the paragraph 4 above, appeal preferred by the Revenue is partly allowed.

Order pronounced on 22.04.2026.