Section 148 Reassessment Notice Quashed as Time-Barred Under Section 149: ITAT Cochin

Binu Joy Kondody Vs ITO (ITAT Cochin)

The appeal before the Income Tax Appellate Tribunal (ITAT), Cochin Bench, arose from the order of the Commissioner of Income Tax (Appeals)/NFAC dated 14.10.2025 for Assessment Year (AY) 2015-16. The assessee challenged the validity of the reassessment proceedings initiated under Sections 148 and 147 of the Income Tax Act, 1961, contending that the notice under Section 148 was barred by limitation under Section 149. The assessee also raised grounds relating to residential status as a Non-Resident until September 2014, denial of opportunity, violation of principles of natural justice, and additions made by the Assessing Officer (AO).

According to the assessment order, the AO received information that the assessee had not filed a return of income for AY 2015-16 despite cash deposits in bank accounts exceeding ₹50 lakh during FY 2014-15. Following the procedure under Section 148A, a notice under Section 148 was issued on 06.05.2022. The assessee stated that he had remained a Non-Resident till September 2014 and that the deposits represented proceeds of NRE deposits and savings used for living expenses. The AO held that sufficient details were not furnished and completed the reassessment under Sections 147 read with 144 on 14.02.2024 by treating ₹16,67,740 as unexplained investment under Section 69 read with Section 115BBE and adding interest income of ₹1,15,186, resulting in a total assessed income of ₹17,82,926.

The CIT(A)/NFAC dismissed the appeal on both legal and factual grounds, observing that the assessee had not produced proof of Non-Resident status or documentary evidence supporting the explanation regarding the cash deposits and alleged family settlement. The assessee then appealed before the Tribunal and also filed a stay application against the disputed demand.

Before the Tribunal, the assessee primarily argued that the notice issued under Section 148 on 06.05.2022 was barred by limitation. It was submitted that under Section 149 as amended by the Finance Act, 2021, read with the first proviso, the last date for issuing notice under the old regime for AY 2015-16 was 31.03.2022, and even after considering the exclusions available under the third and fourth provisos, the last permissible date would have been 16.04.2022. Since the notice was issued on 06.05.2022, it was contended to be invalid. The assessee further submitted that the AO had invoked the extended limitation applicable to escaped income represented by assets exceeding ₹50 lakh, whereas the reassessment ultimately resulted in additions of only ₹17,82,926.

The Revenue argued that the show cause notice under Section 148A(b) had been issued on 28.03.2022, the assessee was granted time until 06.04.2022 to respond, and the order under Section 148A(d) along with the notice under Section 148 was issued on 06.05.2022. According to the Revenue, the notice remained within limitation after excluding the period contemplated under the third and fourth provisos to Section 149.

The Tribunal examined the chronology of events, noting that the last date for issuing a notice under the erstwhile Section 149(1)(b) for AY 2015-16 was 31.03.2022, the show cause notice under Section 148A(b) was issued on 28.03.2022, the order under Section 148A(d) was passed on 06.05.2022, and the notice under Section 148 was also issued on 06.05.2022. The Tribunal identified the core issue as whether the notice dated 06.05.2022 fell within the permissible period of limitation.

After reproducing the relevant provisions of Section 149, the Tribunal held that for AY 2015-16 the six-year limitation under the old regime expired on 31.03.2022. It observed that the first proviso to substituted Section 149(1) barred issuance of a notice under the new regime where such notice could not have been issued under the old regime. The Tribunal held that since the notice was issued on 06.05.2022, after expiry of the old limitation period, it was barred by the first proviso. It further held that exclusion of time under the third and fourth provisos relating to Section 148A proceedings could not revive a notice already barred by limitation under the first proviso.

The Tribunal referred extensively to the Supreme Court decision in Union of India and others v. Rajeev Bansal (2024) 469 ITR 46, reproducing portions of the judgment dealing with the first proviso to Section 149(1). It noted the Supreme Court’s observations that a notice under the new reassessment regime for assessment years beginning on or before 1 April 2021 cannot be issued if the six-year limitation under the old regime had expired, and that notices invoking the old six-year limitation would have to be dropped where escaped income was less than ₹50 lakh.

The Tribunal further observed that Section 149 prescribes the limitation for issuing a notice under Section 148 and not for issuing the show cause notice under Section 148A(b). It held that although compliance with Section 148A is mandatory, procedural compliance cannot validate a notice issued beyond the statutory limitation prescribed under Section 149. The Tribunal also rejected the Revenue’s contention that the exclusions under the third and fourth provisos extended the limitation in the present case, holding that those provisions could not override the restriction contained in the first proviso. While doing so, the Tribunal referred to Assistant Commissioner of Income-tax v. Godrej Industries Ltd. [2024] 160 taxmann.com 13 (Bombay) and Assistant Commissioner of Income-tax v. Devika Fibres (P.) Ltd. [2023] 153 taxmann.com 18 (Gujarat).

The Tribunal also referred to the Karnataka High Court decision in Mohammed Yaseen v. Income Tax Officer [2025] 175 taxmann.com 280 (Karnataka), wherein notices issued after expiry of limitation for AY 2015-16 were held to be impermissible.

Applying these principles, the Tribunal concluded that the notice issued under Section 148 on 06.05.2022 for AY 2015-16 was invalid and barred by limitation. It held that the first proviso to substituted Section 149(1) constituted a statutory bar because the six-year limitation under the old regime expired on 31.03.2022, and neither compliance with Section 148A nor exclusions under the third and fourth provisos could cure the limitation defect. Consequently, the reassessment order passed under Sections 147 read with 144 dated 14.02.2024 was set aside and quashed. Since the appeal succeeded on the legal issue, the remaining grounds were treated as academic. The assessee’s appeal was allowed. As the reassessment order itself was quashed, the stay application was dismissed as infructuous.

Cases Discussed

• Mohammed Yaseen v. Income Tax Officer [2025] 175 taxmann.com 280 (Karnataka).
• Assistant Commissioner of Income-tax v. Godrej Industries Ltd. [2024] 160 taxmann.com 13 (Bombay).
• Union of India and others v. Rajeev Bansal (2024) 469 ITR 46.
• Assistant Commissioner of Income-tax v. Devika Fibres (P.) Ltd. [2023] 153 taxmann.com 18 (Gujarat).

FULL TEXT OF THE ORDER OF ITAT COCHIN

This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 14.10.2025 vide DIN & Order No: ITBA/NFAC/S/250/2025-26/1081729928(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the AY 2015-16.

2. The assessee has raised the following grounds of appeal: –

A. The orders of the authorities below, in so far as they are against the appellant, are opposed to law, facts and circumstances of the case.

B. The reopening of assessment U/ s 148 of the Act in the present case is illegal. The income escaped assessment for the year as per the assessment order was only for Rs. 17,82,926/-. With a mala fide intention to raise the assessee’s income to cross the monetary bar prescribed U/s 149, he had added certain incomes for the relevant year twice. Although the assessing authority has later found that the total income for the previous year does not exceed 50 lakhs, he initiated proceedings for reopening of the assessment U/s 148 arbitrarily.

C. The authorities below ought to have find that the reassessment could not be done after the prescribe period under section 149, i.e. after three years since the alleged income has not been exceeded 50 lakhs rupees. Thus, period of reopening of reassessment U/ s 148 has come to an end by the year 2019. But, by ignoring such a bar to initiate proceedings, the AO has initiated reassessment proceedings.

D. Regardless of the valid objection pointing out this illegality in reassessment proceedings before the appellate authority, he also confirmed the demand and dismissed the appeal.

E. Additionally, the assessing officer as well as the appellate authority has ignored the fact that the Appellant was a Non-Resident till the month of September of the year 2014-15. The residential status of the appellant has not been considered while deciding the appeal by the appellate authority entirely. The appellant has not received sufficient opportunity to produce relevant documents in support of this claim.

E. The assessing authority is not justified in completing assessment by ignoring the explanations and documents submitted by the appellant.

F. The rejection of the appeal without hearing the appellant is in violation of the principles of natural justice. The Commissioner ought to have granted an opportunity of hearing to the appellant before rejecting the appeal. In so far as this is not done, the appellate order confirming the addition made by the assessing authority, is liable to be cancelled. The appellant is ready to produce all the relevant documents at the time of hearing before the Hon’ble Tribunal.

I. Other ground will be raised at the time of hearing.

3. The brief facts of the case are that as per the information available with the AO, the assessee did not file his return of income for the AY 2015-16, however, the assessee had made transactions in the form of cash deposits in bank exceeding Rs.50 lakhs during the FY 2014-15. Accordingly, the AO after following due procedure u/s 148A of the Act issued notice to the assessee u/s 148 of the Act on 5.2022 for AY 2015-16. In response to the said notice also, the assessee did not file any return of income and consequently the statutory notices u/s 142(1) of the Act as well as show cause notices were issued to the assessee. However, the assessee except by submitting that he was a NRI till September, 2014 and some of his earning, he had saved in the form of NRE deposit etc. was closed and proceeds were deposited in his Catholic Syrian Bank for meeting living expenses etc and hence the money deposited was never his income taxable under the Act, did not respond further to any of the notices despite various opportunities given to the assessee. The AO in absence of any details submitted by the assessee or any response to show cause added an amount of Rs.16,67,740/- as unexplained investment u/s 69 r.w.s. 115BBE of the Act of the Act under the head “income from other sources”. Similarly, the total interest received amounting to Rs.1,15,186/-(Rs.97,383/- + Rs.17,803/-) was also added as “income from other sources”. Thus, the AO concluded the assessment proceedings on a total assessed income of Rs.17,82,926/- (Rs.16,67,740/- + Rs.1,15,186/-) by passing order u/s 147 r.w.s. 144 of the Act on 14.2.2024.

4. Aggrieved by the aforesaid order of AO passed u/s 147 r.w.s. 144 of the Act dated 14.2.2024, the assessee preferred an appeal before the ld. CIT(A)/NFAC.

5. The ld. CIT(A)/NFAC dismissed the appeal of the assessee not only on the legal ground as raised by the assessee but also on the merit of the case by holding that the assessee had neither given any proof regarding his being an NRI till August, 2014 nor any documentary evidence of receiving cash out of any explained sources of his so-called family settlement.

6. Again, aggrieved by the order of ld. CIT(A)/NFAC, the assessee has filed the present appeal before this Tribunal. The assessee has also filed stay application in SA 3/Coch/2026 praying to grant stay of disputed demand amounting to Rs.15,92,309/-.

7. Before us, the ld. AR of the assessee at the outset by raising the legal ground vehemently argued that the notice issued u/s. 148 of the Act dated 06/05/2022 are barred by limitation. The ld. AR of the assessee submitted that as per the provisions of section 149 of the Act as introduced by Finance Act 2021, which prescribed the time limit for issuance of notice u/ s. 148 of the Act states that no notice u/s. 148 of the Act shall be issued to the assessee at any time in a case for the relevant AY beginning on or before first day of April, 2021, if such notice could not have been issued at that time on account of the beyond the time limit specified under the provisions of clause (b) of sub-section(1) of section 149 as they stood immediately before the commencement Finance Act, 2021. Further, the ld. AR of the assessee submitted that in the present case, the last date for issuance of notice u/s. 148 of the Act under the erstwhile section 149(1)(b) for AY 2015-16 is only up to 31st March 2022. Further, even if we consider the permissible exclusion/ extension under 3^rd and 4th proviso as stood then, the notice the u/s. 148 could have been issued on or before 16/04/2022. However, in the present case the notice was issued on 06/05/2022 and accordingly the notice is time barred and subsequent proceedings including re-assessment order passed are void-ab-initio. Without prejudice, the ld. AR of the assessee submitted that the ld. AO exceeded his jurisdiction by invoking the extended period as per the provisions contained in section 149(1)(b) of the Act especially when the income addition were made to the tune of Rs. Rs.17,82,926/- only which is way below Rs.50 lakhs as prescribed.

8. The ld. DR on the other hand with regard to the above legal ground raised by the assessee vehemently submitted that the show cause notice u/s 148A(b) of the Act was issued on 28/03/2022 by giving time to the assessee to respond up to 06/04/2022. Further, as the assessee did not respond to the show cause notice, the AO passed the order u/s 148A(d) of the Act on 06/05/2022 and accordingly submitted that the order u/s 148A(d) of the Act as well as notice u/s 148 of the Act, both dated 06/05/2022 are well within the limitation period in view of 3rd and 4th proviso of section 149 of the Act as stood then.

9. We have heard the rival submissions and perused the material available on record. Undisputedly, in the present case, the AO by invoking the extended period as per the amended provisions of Section 149(1)(b) of the Act had issued notice u/s 148 of the Act for the Asst. year 2015-16 on 06/05/2022, however concluded the reassessment proceedings on 14/02/2024 by adding alleged escaped income of Rs.17,82,926/- only. On perusal of the assessment order, we take note of the fact that the main allegation of the AO was that the assessee had made certain investments in time deposits, cash deposits in Saving Bank Account, the total value of which were exceeding 50 lakhs and accordingly had reason to believe that income relatable to the investments/ cash deposits were not explained & same had escaped assessment for the Asst. year 2015-16. The AO invoked the extended period since the above investments/income fall in the category of ‘asset’ as per explanation to section 149(1) and the income escaping assessment represented in the form such assets, amounts to more than fifty lakh rupees. During the course of assessment proceedings, the assessee submitted that he was a NRI till September, 2014 and some of his earnings, which he had saved in the form of NRE deposit etc. was closed and proceeds were deposited in his Catholic Syrian Bank for meeting living expenses etc and hence the money deposited was never his income taxable under the Act. The AO disbelieved the same, however restricted the additions to Rs. 16,67,740/- as unexplained investment u/s 69 of the Act and also added interest received amounting to Rs. 1,15,186/- as income from other sources.

9.1 Now coming to the contention/argument of the assessee that the notice issued u/s 148 of the Act is barred by limitation and therefore the consequent proceedings need to be set aside & quashed. Undisputedly, the notice u/s 148 of the Act for the assessment year 2015-16 was issued on 06/05/2022. Prior to this, a show-cause notice (SCN) u/s 148A(b) of the Act was issued on 28/03/2022, granting 9 days for a reply, and an order u/s 148A(d) of the Act was subsequently passed on 06/05/2022 as the assessee did not respond to the SCN. Now, it is apposite here to note down the chronological date of event for a better appreciation of fact which are detailed below-

Thus, the core issue revolves around whether the issuance of the Section 148 notice on May 06, 2022, for AY 2015-16, falls within the permissible time limits or not?

9.2 Before proceeding further, it is apposite here to mention the relevant provisions of the Act as it stood then which are as follows-Time limit for notice.

149. (1) No notice under section 148 shall be issued for the relevant assessment year,-

(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before l’ day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause(b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:

Provided further that the provisions of this sub-section shall not apply in case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31′ day of March, 2021:

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause(b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.

Explanation.- For the purposes of clause (b) of this sub-section, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.

9.3 On going through the above provisions, we take note of the fact that for the AY 2015-16, the old 6 years limit expired on March 31, 2022. Therefore, the notices issued between 01/04/2021 and 31/03/2022, for escaped income of Rs. 50 lakhs or more, could be valid if section 148A procedures were followed and the notice was not time-barred under the old law as of 31/03/2021. However, the notices issued after 31/03/2022, would generally be invalid as they would have become time-barred under the old law, failing the test of the first proviso to section 149(1) of the Act. Thus, the validity of the notice issued u/s 148 of the Act on 06/05/2022, for AY 2015-16, is primarily governed by the first proviso to the substituted Section 149(1) of the Act. This proviso stipulates that no notice under Section 148 shall be issued for an assessment year beginning on or before April 1, 2021, if such notice could not have been issued under the time limits of the old regime (pre-Finance Act, 2021). It is an undisputed fact that for AY 2015-16, the last date for issuing a notice under the old regime was March 31, 2022. Since the notice was issued on May 06, 2022, it was issued after this cut-off date, rendering it time-barred under the old law. Consequently, the first proviso to the amended Section 149(1) acts as a bar, making the notice invalid, irrespective of the procedural compliance with Section 148A of the Act. We are also of the opinion that the exclusion of time under the 3rd & 4th provisos to Section 149(1) of the Act for Section 148A proceedings does not revive a notice that was already time-barred under the old regime as per the first proviso. We are also of the considered opinion that the extended time limits of the new regime do not apply at all if the old limitation period had already expired as on 31/03/2022 & therefore the exclusions under the 3rd & 4thprovisos to Section 149(1) of the Act as stood then does not arise at all. Thus, under the unamended Section 149(1)(b) of the Act, a notice under Section 148 of the Act could generally be issued within six years from the end of the relevant assessment year, provided the income escaping assessment amounted to or was likely to amount to one lakh rupees or more. Therefore, the last date for issuing a notice for AY 2015-16 under the old regime was March 31, 2022. Thus, the first proviso to amended section 149(1) acts as a statutory bar, preventing the issuance of a notice under Section 148 for an assessment year like AY 2015-16 (which began on or before April 1, 2021) if such notice could not have been issued under the time limits of the old law. As stated earlier, the time limit for issuing a notice for AY 2015-16 under the old law expired on March 31, 2022. The notice in question was issued on May 06, 2022, which is after March 31, 2022. Consequently, the condition precedent for issuing a notice for AY 2015-16 under the new regime, as laid down by the first proviso to Section 149(1), is not met. The notice, having been issued after the expiry of the time limit under the old law, is therefore invalid.

9.4 The Hon’ble Supreme Court in the case of Union of India and others vs. Rajeev Bansal reported in (2024) 469 ITR 46 meticulously analyzed the first proviso to Section 149(1)(b) of the new regime. The relevant paragraphs are reproduced below-

“45. The first proviso to Section 149( 1)(b) provides thus:

“149. (1) No notice under section 148 shall be issued for the relevant assessment year, –

a. If three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

b. If three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in possession of books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April 2021, if such notice could not have been issued at that time on account of being immediately beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:”

[Emphasis supplied]

46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the “time limits specified under the provisions of” 149(1)(b) of the old regime. Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime.

47. In CTO v. Biswanath Jhunjhunwalla 1996 com 1141 (SC)/[1996] 5 SCC 626 the Bengal Sales Tax Rules 1941 empowered the Commissioner to revise any assessment within four years from the date of assessment. Subsequently, the State Government issued a notification following the law to extend the time limit from four years to six years from the date of assessment. The extension of the time limit was challenged by the respondents on the ground that the assessments which had attained finality because of the expiry of the period of four years could not be reassessed. This Court observed that it was the clear intention of the notification to permit the Commissioner to revise any assessment made or order passed, provided the assessment had not been made before six years. It was held that if the legislative intention is clear and the language is unambiguous, full effect must be given to the legislative intention by reading the notification as applying not only to the incomplete assessments but also to assessments that had reached finality because of lapse of the earlier prescribed period. The principle that emanates from Biswanath Jhunjhunwalla (supra) is that the courts should give full effect to the legislative intention of granting reassessment powers to assessing officers unless the legislature, by express provision, states otherwise.

48. Notices have to be judged according to the law existing on the date the notice is issued. Section 149 of the old regime primarily provided two time limits: (i) four years for all situations and (ii) beyond four years and within six years if the income chargeable to tax which escaped assessment amounted to Rupees one lakh or more. After 1 April 2021, the time limits prescribed under the new regime came into force. The ordinary time limit of four years was reduced to three years. Therefore, in all situations, reassessment notices could be issued under the new regime if not more than three years have elapsed from the end of the relevant assessment year. For example, for assessment year 2018-2019, the four year period would have expired on 31 March 2023 under the old regime. However, if the notice is issued after 1 April 2021, the three year time limit prescribed under the new regime will be applicable. The three year time limit will expire on 31 March 2022.

49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149( 1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149( 1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.

50. Another important change under section 149(1)(b) of the new regime is the increase in the monetary threshold from Rupees one lakh to Rupees fifty lakhs. The old regime prescribed a time limit of six years from the end of the relevant assessment year if the income chargeable to tax which escaped assessment was more than Rupees one lakh. In comparison, the new regime increases the time limit to ten years if the escaped assessment amounts to more than Rupees fifty lakhs. This change could be summarized thus:

51. Given Section 149( 1)(b) of the new regime, reassessment notices could be issued after three years only if the income chargeable to tax which escaped assessment is more than Rupees fifty lakhs. The proviso to Section 149(1)(b) limits the retrospectivity of that provision with respect to the time limits specified under section 149(1)(b) of the old regime.

52. In Ashish Agarwal (supra), this Court held that the benefit of the new regime must be provided for the reassessment conducted for the past periods. The increase of the monetary threshold from Rupees one lakh to Rupees fifty lakh is beneficial for the assesses. Mr Venkataraman has also conceded on behalf of the Revenue that all notices issued under the new regime by invoking the six year time limit prescribed under section 149( 1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.

53. The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.

ii. TOLA can extend the time limit till 31 June 2021

54. The proviso to Section 149(1)(b) of the new regime uses the expression “beyond the time limit specified under the provisions of clause (b) of sub section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021.” Thus, the proviso specifically refers to the time limits specified under section 149( 1)(b) of the old regime………”

9.5 Thus, the Apex Court held that “no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; if it is barred at the time when the notice is sought to be issued because of the ‘time limits specified under the provisions of 149(1)(b) of the old regime” (Para 46). This means that for AY 2015-16, a notice under the new Section 148 could only be issued if it was not time-barred under the old regime’s Section 149(1)(b) of the Act. Further, the Apex Court held that for the AY 2015-16, the six-year limitation period under the unamended Section 149(1)(b) expired on March 31, 2022 (six years from the end of the relevant assessment year, i.e., March 31, 2016). The Supreme Court explicitly stated that “a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice” (Para 49).

9.6 Further, we are of the considered opinion that section 149 of the Act stipulates the time limit to issue the notice u/s 148 of the Act 86 not for the issuing the SCN u/s 148A(b) of the Act. This time limit has nothing to do with the issuance of show cause notice u/s 148A(b) of the Act & passing of the order u/s 148A(d) of the Act unlike in section 151 of the Act which categorically prescribed the specified authority for sanction for issue of notice for the purposes of both section 148 as well as section 148A of the Act. We are of the opinion that provisions of section 148A proceedings are completely different with that of the 148 proceedings. After the amendment in Finance Act, 2021 the proceedings u/s 148 of the Act can only be commenced after completion of 148A proceedings, however subject to certain exceptions. Before issue of the notice u/s 148 of the Act, the AO shall conduct an enquiry, provide an opportunity of being heard to the assessee by serving SCN and after considering the reply furnished if any, decide, on the basis of material available on record including the reply of the assessee whether or not it is a fit case to issue notice u/s 148 of the Act by passing an Order. Thus the section 148A of the Act is complete code in itself. The contention of the assessee is that the notice issued u/s 148 of the Act dated 06/05/2022 is barred by limitation as per the 1st proviso to amended section 149(1) of the Act. Further section 149 of the Act stipulates the time limit for issue of the notice u/s 148 of the Act & therefore the contention of the Revenue that the SCN u/s 148A(b) was issued within the stipulated time period prior to the issue of notice u/s 148 is not at all tenable. The procedural compliance with Section 148A, while necessary, cannot validate a notice issued u/s 148 of the Act that is fundamentally flawed due to being issued beyond the statutory period of limitation.

9.7 Now coming to another contention of the Revenue that the notice under section 148A(b) of the Act was issued on 28/03/2022 by which assessee was asked to give response/ objection to the same within 06/04/2022. In response to the same, assessee did not respond to the SCN. On a plain reading of 3rd proviso to Section 149 of the Act as stood then, the time period of 9 days allowed to assessee to give response/ objection needs to be excluded. Further as per 4th proviso a period of 7 days need to be excluded. The assessing officer had passed the order u/s. 148A(d) on 06/05/2022 and issued the notice u/s. 148 of the Act on 06/05/2022, which very well falls within the limitation period. In this regard we are of the considered opinion that undisputedly the erstwhile third proviso to amended section 149(1) of the Act allows for the exclusion of the time taken for Section 148A proceedings. However, this exclusion is for computing the period of limitation as per section 149 of the Act. It does not override the first proviso to Section 149(1) of the Act, which acts as a threshold condition for the applicability of the new regime to old assessment years. If a notice was already time-barred under the old law, the exclusion of time under the 3^rd or 4thprovisos cannot revive it. The exclusion cannot override the fundamental bar imposed by the first proviso to Section 149(1) of the Act. As stated earlier the first proviso to amended section 149(1) acts as a statutory bar, preventing the issuance of a notice under Section 148 of the Act for the assessment year like AY 2015-16 (which began on or before April 1, 2021) if such notice could not have been issued under the time limits of the old law. We are of the considered opinion that first proviso to section 149(1) of the Act is a restriction and the erstwhile 3rd& 4th Provisos (which allow for exclusion of time for certain events) cannot override this fundamental restriction. The first proviso acts as a gatekeeper. This means that even if there were delays due to assessee’s response or court stays, these exclusions cannot revive a notice that is already time-barred by the first proviso. In Assistant Commissioner of Income-tax v. Godrej Industries Ltd. [2024] 160 taxmann.com 13 (Bombay), for AY 2014­15, the High Court held that the validity of a notice must be judged on the law existing on the date of issuance of the Section 148 notice. It emphasized that “the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under section 148 could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices” (Para 15). This means that if the notice is already time-barred under the old regime as per the first proviso, the exclusion of time for Section 148A proceedings under the 3rd proviso or 4th provisos cannot revive it. Further, the Hon’ble Gujarat High Court in the case of Assistant Commissioner of Income-tax v. Devika Fibres (P.) Ltd. [2023] 153 taxmann.com 18 (Gujarat) clearly stated that “the notice which could not have been issued in the old regime period due to becoming time barred as per then operating provision, would also not be permissible to be issued post 01-4-2021” (Para 5.4.6). Thus, the embargo of the six-year limitation under the old regime continues in the new regime for assessment years prior to 2021-22.

9.8 Further, under the similar facts & circumstance & for similar AY 2015-16, the Hon’ble High Court of Karnataka in the case of Mohammed Yaseen v. Income Tax officer reported in [2025] 175 taxmann.com 280 (Karnataka) held as under-

“5. As rightly contended by the learned counsel for the petitioner, the material on record discloses that the impugned proceedings is relating to the Assessment Year 2015-16 in respect of the petitioner; however, it is an undisputed fact that the respondents issued impugned notice at Annexure-A2 under Section 148 of the I.T. Act on 01.04.2022, beyond the period of limitation and the same has already been held not to be permissible by the Apex Court in Rajeev Bansal’s case (supra), which reads as under:-

“19(e). The Finance Act, ([2021]) 431 ITR (St.) 52) substituted the old regime for reassessment with a new regime. The first proviso to Section 149 does not expressly bar the application of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 3 of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-Tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to assessment years 2013-14, 2014-15, 2015-16, 2016-17, and 2017-18 will be within the period of limitation as explained in the tabulation below:

19(f). The Revenue concedes that for the assessment year 2015-16, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020;

49. The first proviso to Section 149( 1)(b) requires the determination of whether the time limit prescribed under Section 149(1)(b) of the old regime continues to exist for the assessment year 2021-22 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten-years prescribed under Section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-13, the ten-year period would have expired on March 31, 2023, while the six-year period expired on March 31, 2019. Without the proviso to Section 149( 1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-13 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.

6. Subsequently, in Nehal Ashit’s case (supra) also, the Apex Court reiterated the very same position and dismissed the appeal filed by the Revenue on the ground that the notice issued after 01.04.2022 was barred by limitation and the impugned proceedings are not permissible beyond period of limitation. In the instant case, it is an undisputed fact that the impugned proceedings is relating to the Assessment Year 2015-16, while the impugned notice under Section 148 of the Act dated 01.04.2022 was issued beyond/after 01.04.2021 which is impermissible in law and barred by limitation and consequently, the impugned orders/notices etc., deserve to be quashed.

7. In the result, I pass the following:-

‘ORDER

(i) Petition is hereby allowed.

(ii) The impugned orders/Notices at Annexures-Al, A2, B, Cl, Dl and El dated 01.04.2022, 01.04.2022, 15.03.2022, 09.03.2022, 27.08.2024 and 27.08.2024 respectively and subsequent orders/notices issued by the l’ respondent are hereby quashed.

9.9 In view of the above discussions & respectfully following the decision of the Hon’ble Apex Court as well as Hon’ble High Court, we are of the considered opinion that the notice issued under Section 148 of the Income Tax Act, 1961, on May 06, 2022, for Assessment Year 2015-16, is invalid & bad in law. The first proviso to the substituted Section 149(1) acts as a statutory bar, as the six-year limitation period under the old regime for AY 2015-16 expired on March 31, 2022. The procedural compliance with Section 148A or the exclusion of time under the 3rd or 4th erstwhile provisos cannot override this fundamental jurisdictional defect of limitation. Since we have held the notice dated 06/05/2022 issued under section 148 of the Act to be barred by limitation & therefore the consequent order passed u/s 147 r.w.s 144 of the Act deserve to be set- aside & accordingly quashed. Further, since we have adjudicated the sole legal ground in favour of the assessee, the other grounds raised by the assessee becomes academic.

10. In the result the appeal filed by the assessee is allowed.

SA 3/Coch/2026:

11. Since we have already dispose of the appeal in ITA No.1041/Coch/2025 in favour of the assessee and quashed the assessment order dated 14/2/2024 itself and therefore, this stay application filed by the assessee becomes infructuous and accordingly dismissed.

12. In the result, the stay petition filed by the assessee in SA 3/Coch/2026 is dismissed.

13. In the combined result, the appeal filed by the assessee in ITA No.1041/Coch/2025 is allowed and the SA 3/Coch/2026 filed by the assessee is dismissed.

Order pronounced in the open court on 2ⁿd July, 2026