ITS India Pvt. Ltd. Vs The Assessing Officer (ITAT Mumbai)
Repeated Section 148A(b) Notices Cannot Keep Reopening Alive: Mumbai ITAT Quashes Reassessment
Summary: Once an assessee has replied to a show cause notice under section 148A(b), can the Assessing Officer issue further notices and treat the last reply as the starting point for passing the order under section 148A(d)? The Mumbai ITAT rejected that approach in ITS India Pvt. Ltd. It held that the later notices, issued without a request from the assessee for more time or a rehearing, could not rescue an order passed after the prescribed time limit. The consequence was substantial. The Tribunal held the section 148A(d) order invalid, found that the subsequent section 148 notice had no valid foundation, and quashed the reassessment as void from inception. The reassessment had disallowed a short term capital loss of ₹10,51,86,870; the Tribunal did not examine that disallowance on merits.
An Earlier Assessment Was Reopened
ITS India Pvt. Ltd., engaged in manufacturing, repairing and upgrading equipment used in oil and gas exploration, filed its return for AY 2014-15 declaring a loss of ₹13,97,58,569. A scrutiny assessment under section 143(3) was completed on 22 December 2016, determining a loss of ₹1,26,24,570 under the normal provisions and a book loss of ₹10,51,86,870 under section 115JB.
The AO later sought to reopen the assessment over the allowance of the company’s short term capital loss and issued a notice under section 148 on 8 April 2021. Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, the AO proceeded under the substituted reassessment framework and issued a show cause notice under section 148A(b) on 21 May 2022.
The company replied on 6 June 2022, objecting to the reopening and asking that the proceedings be dropped. The AO then issued another section 148A(b) notice on 29 June 2022, to which the company replied on 4 July 2022. A third notice followed on 10 August 2022, communicating additional information and asking for a response by 12 August. The company replied on 17 August 2022, reiterating its stand.
The AO ultimately passed the section 148A(d) order on 26 August 2022, issued a section 148 notice and completed reassessment on 26 May 2023. He disallowed the short term capital loss and determined total income at ₹9,25,62,300. The NFAC dismissed the company’s appeal. :
Which Reply Started the Clock?
Before the ITAT, the company argued that it had answered the first section 148A(b) notice on 6 June 2022. Under the provision then applicable, the AO was required to pass the section 148A(d) order within one month from the end of the month in which the reply was received. The company had not asked for an extension to file that reply. In its submission, the order passed on 26 August was therefore late.
The Department contended that the company’s final reply was received on 17 August and that the 26 August order was within time if measured from that date.
The Tribunal examined the statutory sequence and the contents of the notices. It found that the company’s reply dated 6 June 2022 was a response to the first show cause notice and contained no request for further time. The later replies likewise contained no request for an extension. On the Tribunal’s reading, the AO could not repeatedly issue section 148A(b) notices on his own initiative and thereby move the starting point for the section 148A(d) deadline.
Change of Officer Did Not Require a Fresh Notice
The second notice said that further explanation or documents were being sought because of a change in incumbency under section 129. The Tribunal found that this did not justify starting the show cause process again.
Under section 129, a succeeding income tax authority may continue proceedings from the stage reached by its predecessor. The assessee may demand that an earlier part of the proceeding be reopened or that it be reheard. ITS India had made no such demand. The succeeding officer could therefore have continued from the stage already reached, after the first notice and reply, instead of issuing another section 148A(b) notice.
The Tribunal also considered the relevant provisos to section 149 governing exclusion or extension of time. It observed that even after allowing for those provisions, the AO would have had time only until 23 August 2022. The section 148A(d) order was passed three days later, on 26 August.
Reassessment Quashed on Jurisdiction
The ITAT characterised the subsequent notices as an attempt to obtain more time for passing the section 148A(d) order. It held that the order was barred by limitation. Without a valid section 148A(d) order, the AO had no authority on these facts to issue the consequential notice under section 148. The reassessment order under section 147 read with section 144B was accordingly declared non est and void ab initio, and the NFAC’s order was set aside.
The other grounds, including those concerning the short term capital loss, were left open without adjudication.
Author’s Comments
This decision turns on a precise chronology: notice on 21 May, reply on 6 June, further notices initiated by the AO, and order on 26 August 2022. The Tribunal did not treat every later communication as legally irrelevant. It examined why each was issued and whether the assessee had sought additional time or a rehearing. Here, the second notice cited a change of officer, while the third supplied additional information; neither arose from an assessee’s request to extend the original response period.
The order is therefore useful where repeated section 148A(b) notices are used to argue that limitation should run from a later reply. It establishes, on these facts, that the AO cannot reset the statutory clock simply by issuing successive notices. The underlying capital loss remains undecided on merits; the assessee succeeded because the statutory procedure for assuming reassessment jurisdiction was not completed in time.
Cases Discussed/Relied Upon
- Union of India Vs Ashish Agarwal (Supreme Court); Civil Appeal No. 3005 of 2022; Decision Date: 04/05/2022 — Applied. The reassessment proceedings arose from the Supreme Court’s directions treating old-regime section 148 notices as section 148A(b) show-cause notices and requiring the AO thereafter to follow the substituted statutory procedure. The Tribunal reproduced the Supreme Court’s directions while deciding the limitation issue. :chatgpt-content-reference{index=”11″}
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The captioned appeal by the assessee arises out of order dated 12.12.2025 passed by National Faceless Appeal Centre (NFAC), Delhi, pertaining to Assessment Year 2014-15.
2. In Ground No. 1, the assessee has challenged the validity of the assessment order passed under Section 147 read with Section 144B of the Income-tax Act, 1961 (in short, “the Act”).
3. Since the issue raised in this ground is a purely legal and jurisdictional issue, going to the root of the matter, we deem it appropriate to address this issue at the very outset. However, for deciding the issue, we need to discuss few relevant facts. The assessee is a resident corporate entity and is stated to be engaged in the business of manufacturing, repairing and upgrading of high-quality drilling and other equipment used in oil and gas exploration. For the assessment year under dispute, the assessee filed its return of income on 29.11.2014, declaring a loss of Rs.13,97,58,569/-. The return of income so filed by the assessee was selected for scrutiny, and assessment in case of the assessee was originally completed under Section 143(3) of the Act vide order dated 22.12.2016, determining loss under the normal provisions of the Act at Rs.1,26,24,570/- and book loss under Section 115JB at Rs.10,51,86,870/-. Subsequently, based on some information indicating that income assessable to tax has escaped assessment due to allowance of assessee’s claim of ‘short-term capital loss’, the Assessing Officer reopened the assessment under Section 147 of the Act by issuance of notice dated 8.4.2021 under Section 148 of the Act. However, based on the decision of the Hon’ble Supreme Court in case of Union of India vs. Ashish Agrawal, Civil Appeal No. 305 of 2022, judgment dated 04.05.2022, the Assessing Officer issued a show-cause notice under Section 148A(b) of the Act on 21.5.2022, seeking assessee’s response on or before 6.6.2022, (wrongly mentioned as 06.5.2022 due to typographical error). In response to the notice issued under Section 148A(b) of the Act, the assessee furnished its reply/objection before the Assessing Officer on 06.06.2022, challenging the validity of reopening of the assessment and requested the Assessing Officer to drop the proceedings initiated under Section 147 of the Act. Thereafter, on 29.6.2022, the Assessing Officer issued one more notice under Section 148A(b) of the Act, seeking assessee’s response on or before 04.07.2022. In reply to the said notice, the assessee furnished its reply on 4.7.2022, reiterating the stand taken earlier and requested the Assessing Officer to drop the proceedings initiated under Section 147 of the Act. Again, on 10.8.2022, the Assessing Officer issued one more notice under Section 148A(b) of the Act, communicating some additional information while directing the assessee to furnish its reply by 4 p.m. on 12.8.2022. In response to the said notice, the assessee furnished its reply on 17.8.2022, reiterating the submissions made earlier. On 26.8.2022, the Assessing Officer passed an order under Section 148A(d) of the Act, disposing of the objections of the assessee holding that there is escapement of income within the meaning of Section 147 of the Act. Hence, he issued notice under Section 148 of the Act after obtaining approval from the competent authority. Ultimately, the Assessing Officer completed the assessment under Section 147 read with Section 144B of the Act vide order dated 26.05.2023, determining the total income of the assessee at Rs.9,25,62,300/- after disallowing the claim of short-term capital loss of Rs.10,51,86,870/-.
4. Against the assessment order so passed, the assessee preferred an appeal before learned first appellate authority, inter alia, on the ground that the assessment order is void ab initio due to invalid assumption of jurisdiction under Section 147 of the Act. The first appellate authority, however, did not find merit in the grounds raised by the assessee, hence, dismissed the appeal.
5. Before us, learned counsel appearing for the assessee drew attention to Section 148A of the Act and submitted that after issuance of show cause notice under Section 148A(b) of the Act, the assessee has to furnish its reply within the time granted. He submitted, once the assessee furnishes its reply, the Assessing Officer has to pass an order under Section 148A(d) of the Act within a period of 30 days from the end of the month in which the assessee furnishes its reply. Learned counsel submitted, in response to the first show-cause notice issued under Section 148A(b) on 21.5.2022, the assessee had furnished its reply on 06.06.2022. Therefore, the Assessing Officer had time to pass the order under Section 148A(d) of the Act within a period of 30 days from end of June 2022. Whereas, he submitted, the Assessing Officer passed the order under Section 148A(d) of the Act on 26.8.2022, much beyond the period of limitation. Thus, he submitted, not only the order passed under Section 148A(d) is invalid, but even the notice under Section 148 of the Act issued in pursuance thereof is invalid. Thus, he submitted, impugned assessment order, being wholly without jurisdiction and void ab initio, has to be quashed.
6. Learned Departmental Representative (DR) submitted, the first appellate authority has dealt with assessee’s objection regarding the validity of reopening of the assessment and has decided the issue against the assessee. Proceeding further, he submitted, the final reply of the assessee was furnished on 17.8.2022, whereas, the order under Section 148A(d) of the Act was passed on 26.8.2022, well within the period of 30 days provided under the statute. Hence, the proceedings cannot be declared invalid.
7. We have considered rival submissions and perused the materials on record. We have already discussed the chronology of dates and events relating to reopening of the assessment under Section 147 of the Act under the new regime. Admittedly, in pursuance to the directions of the Hon’ble Supreme Court in case of Union of India and Others vs. Ashish Agrawal (supra), the Assessing Officer issued the show-cause notice under Section 148A(b) of the Act on 21.5.2022, requiring the assessee to furnish its reply/objection by 06.06.2022. In response to the said notice, the assessee did furnish its reply/objection on 06.06.2022. Keeping in perspective the aforesaid primary facts, let us examine the legal position. In case of Union of India and Others vs. Ashish Agrawal (supra), the Hon’ble Supreme Court issued the following directions:
(i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assesees can reply to the show-cause notices within two weeks thereafter:
(ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts.
Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required:
(iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted);
(iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act. 2021 and in law shall continue to be available.”
8. As could be seen from the observations contained in paragraph 10(iii) above, the Hon’ble Supreme Court issued a clear direction to the Assessing Officer to pass order in terms of Section 148A(d) of the Act and thereafter issue notice under Section 148 of the Act, as per the procedure laid-down under Section 148A of the Act. At this stage, it is necessary to look at the unamended provisions of Section 148A, applicable to the present appeal:
“[Conducting inquiry, providing opportunity before issue of notice under section 148.
148A. The Assessing Officer shall, before issuing any notice under section 148,—
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.
(d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.”.
Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.]”
9. Since the Hon’ble Supreme Court, in case of Union of India versus Ashish Agrawal (supra), had dispensed the enquiry contemplated under Section 148A(a) of the Act in cases where notices were issued under Section 148 of the unamended Act between the period from 1.4.2021 till the date of judgment dated 4.5.2022, procedural aspect laid down under Section 148A of the Act would kick in with the issuance of notice under Section 148A(b) of the Act. The Assessing Officer has to issue a show-cause notice to the assessee requiring to furnish reply within a period of not less than seven days but not exceeding thirty days from the date on which the notice was issued. Of course, the period for furnishing the reply can be extended by the Assessing Officer based on an application made by the assessee in this behalf.
10. Section 148A(c) provides for consideration of assessee’s reply furnished in response to the show-cause notice under Section 148A(b) of the Act. Upon consideration of the reply of the assessee, the Assessing Officer has to pass an order under Section 148A(d) of the Act with the prior approval of the specified authority, stating whether it is a fit case for issuance of notice under Section 148 of the Act. However, the Assessing Officer has time limit to pass the order within one month from the end of the month in which the reply to the show-cause notice is furnished by the assessee or within such extended time allowed to the assessee to furnish the reply.
11. In the facts of the present appeal, in response to the show-cause notice issued under Section 148A(b) of the Act on 21.5.2022, the assessee furnished its reply on 6.6.2022, objecting to issuance of notice under Section 148 of the Act. On a careful reading of the said objection/reply, a copy of which is placed at page 53 of the paper book, we do not find any request by the assessee to extend the time to furnish reply. Thus, going by the date on which the assessee furnished its reply to the show-cause notice issued under Section 148A(b) of the Act, the Assessing Officer should have passed the order under Section 148A(d) of the Act on or before 30.7.2022. Obviously, the Assessing Officer did not do so, but passed the order under Section 148A(b) of the Act on 26.8.2022, much beyond the period of thirty days provided under Section 148A(d) of the Act. A careful reading of Section 148A of the Act suggests that it lays down stepwise procedure culminating in passing of the order under Section 148A(d) of the Act, disposing of assessee’s objection, thereby opening the window for issuance of notice under Section 148 of the Act. In the facts of the present appeal, instead of adhering to the timeline provided under Section 148A(d) of the Act, the Assessing Officer issued another notice under Section 148A(b) on 29.6.2022. A copy of the said notice is reproduced hereunder:
“Ref: This office letter dated 24-05-2022
Please refer to the above.
In this regard, you are hereby requested to submit any further explanation/documentary evidences, if any, in support of your case on or before 04.07.2022. The above information/detail is being called upon due to change in incumbency as per the provisions of Section 129 of the Income-tax Act, 1961.”
12. A plain reading of the contents of the notice reveals that this notice was issued only due to change in incumbency and to meet the conditions contained under Section 129 of the Act. In the said notice, the assessee was granted time to furnish reply on or before 04.07.2022. In response to the said notice, the assessee again furnished its reply on 4.7.2022, reiterating its earlier stand. However, thereafter again, on 10.8.2022, the Assessing Officer issued one more notice in the case, providing some additional information and requiring the assessee to furnish its reply by 4 p.m. on 12.8.2022. In response to the said notice, the assessee again dutifully furnished its reply on 17.8.2022, reiterating its earlier stand. In none of these replies, starting from the reply to the first show-cause notice, the assessee ever asked for extension of time to furnish its reply. The Assessing Officer, suo motu, has gone on issuing notices under Section 148A(b) of the Act, one after another. At this stage, it needs to be examined whether there was any necessity for issuing a second notice under Section 148A(b) of the Act on 29.6.2022, with the alibi of meeting the requirement of Section 129 of the Act. Section 129 reads as under:
“129. Whenever in respect of any proceeding under this Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor :
Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.”
13. On a plain reading of the aforesaid provision, it becomes absolutely clear that the succeeding officer may continue the proceeding from the stage at which the proceeding was left by his predecessor, except, where the assessee demands that the previous proceeding or any part thereof, be reopened or that he be reheard.
14. In the facts of the present appeal, there is no such demand/request by the assessee as contemplated under the proviso to Section 129 of the Act. Thus, even going by the provision contained under Section 129 of the Act, the Assessing Officer should have continued the proceeding from the stage at which the proceeding was left by his predecessor. In other words, since the predecessor officer has already issued the show-cause notice under Section 148A(b) of the Act, the Assessing Officer should have carried forward the proceeding from that stage instead of again issuing a show-cause notice under Section 148A(b) of the Act to the assessee. At this stage, we may refer to the provision contained under Section 149 of the Act, as it stood prior to its amendment by the Finance Act, 2024, with effect from 1.4.2024.
15. Section 149 of the Act provides the limitation for issuance of notice under Section 148 of the Act. The time limit under sub-section (1) can be further extended as per the fifth and sixth provisos contained therein. As per the fifth proviso, for the purpose of computing period of limitation for issuance of notice under Section 148 of the Act, the time or extended time allowed to the assessee under show cause notice issued under Section 148A(b) of the Act has to be excluded. Whereas, the sixth proviso provides, in addition to the time allowed under the fifth proviso, a further period not exceeding seven days is available to the Assessing Officer to pass an order under Section 148A(d) of the Act. Even if we exclude the period provided under the fifth and sixth provisos to Section 149 of the Act, the Assessing Officer would have had time to pass the order under Section 148A(d) of the Act on or before 23rd August 2022, whereas the order under Section 148A(d) was passed on 26.8.2022, even beyond the extended period of limitation provided under Section 148A(d) read with fifth and sixth provisos to Section 149 of the Act. Thus, in the facts of the present appeal, it is well established that the order under Section 148A(d) of the Act was not passed within the prescribed period of limitation.
16. In our view, the subsequent notices issued under Section 148A(b) of the Act on 29.6.2022 and 10.8.2022 do not meet the requirements of the provisions contained under Sections 148A, 149 and 129 of the Act. We are of view that the Assessing Officer has proceeded to issue the subsequent notices under Section 148A(b) of the Act simply for the purpose of gaining extension of time to pass the order under Section 148A(d) of the Act. In our view, the Assessing Officer has adopted such tactics as a clever ruse to circumvent the process of law. Hence, we cannot accept it. Thus, on overall analysis of the facts and materials placed on record, due understanding and interpretation of the relevant statutory provisions, and based on the observations made in the foregoing paragraphs, we hold that the order passed under Section 148A(d) of the Act is barred by limitation hence invalid. Thus, once it is held so, there is no authority with the Assessing Officer to issue notice under Section 148 of the Act, which is a fundamental requirement for proceeding under Section 147 of the Act.
17. In view of aforesaid, we declare the impugned assessment order to be non est and void ab initio. Accordingly, we quash the same. The order of passed by the first appellate authority is set aside.
18. In view of our decision in Ground No. 1, the other grounds have become academic and do not require adjudication for the purpose of deciding the present appeal. Hence, they are kept open.
19. In the result, the appeal is allowed in the terms indicated above.
Order pronounced in the open court on /09/2026.
