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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI MAKARAND VASANT MAHADEOKAR
Per Smt. Beena Pillai, JM: Present appeal filed by assessee arises out of order dated 23/08/2025 passed by NFAC, Delhi [hereinafter “the Ld. CIT(A)”] for assessment year 2015-16 on following grounds of appeal:-
1. 1. 1. “1. The Commissioner of Income-tax (Appeals) at the National Faceless Appeal Centre (NFAC) (hereinafter referred to as the CIT(A)) erred in upholding the action of the officer at the Assessment Unit hereinafter referred to as the Assessing Officer) in issuing notice under section 148 of the Act. The appellant contends that on the facts and in the circumstances of the case and in law, the issue of notice under section 148 is without jurisdiction and hence, the consequent assessment order needs to be quashed. The appellant further, contends that on the facts and in the circumstances of the case and in law, the issue of notice under section 148 dated 26.07.2022 has resulted into parallel/ simultaneous proceedings by the Department under section 147 of the Act inasmuch as the proceedings of reassessment commenced by issue of notice under section 148 dated
since dropped by letter dated 17.01.2023) and hence, the consequent assessment order needs to be quashed 2. The specified authority under section 151 erred in not granting an appropriate approval as required under section 151 of the Act. The appellant contends that on the facts and in the circumstances of the case and in law, the approval granted by the authority under section 151 of the Act is mechanical and without application of mind, and therefore, the notice issued under section 148 by the Assessing Officer is bad in law and hence, the consequent assessment order needs to be quashed 3. The authority under section 148B erred in not granting an appropriate approval as required under section 148B of the Act. The appellant contends that on the facts and in the circumstances of the case and in law, the approval granted by the authority under section 148B of the Act is mechanical and without application of mind, and therefore, the consequent assessment order is bad in law and needs to be quashed 4. The CIT(A) erred in upholding the action of the Assessing Officer in making an addition of Rs 1,26,49,760, by holding the consideration on sale of long-term capital assets being, shares of Solis Marketing Limited to be non-genuine and thereby not allowing exemption under section 10(38) of the Act. The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in considering the capital gains on sale of long-term capital assets being, shares of Solis Marketing Limited to be non-genuine inasmuch as the said shares have been purchased during an earlier year are investments; the same being sold shall necessarily give rise to capital gains and the impugned shares being long-term capital asset, the capital gains are long-term capital gains in respect of which the Assessing Officer ought to have allowed exemption of section 10(38) of the Act; accordingly, the impugned addition under section 68 of the Act is not justified. The appellant further, contends that the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the assessment order has been framed in violation and utter disregard to the principles of natural justice inasmuch as, amongst others, the Assessing Officer has not given the documents/ statements on oath to the appellant for rebuttal, which are in his possession and on which he has relied upon and has not given an opportunity to the appellant to cross examine the persons whose statement the Assessing Officer has relied upon. The appellant further, contends that the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the Assessing Officer has not proved that the cash emanated from the coffers of the appellant. The appellant craves leave to add to, alter or amend the aforestated grounds of appeal
.”
2. Brief facts of the case are as under:-
Assessee is an individual and filed its return of income for the year under consideration on 29/08/2015 declaring total income at Rs.9,08,250/-. Case was reopened based on information received from the DDIT(Inv.) Unit- 6(3), New Delhi. It was alleged that, assesse was a beneficiary of bogus long term capital gain/loss of a penny stock company, namely, M/s. Solis Marketing Limited (previously known as Surya Marketing Limited). Based on various analysis and also the submissions filed by assessee, the assessment was completed by making addition in the hands of assessee of Rs. 1,26,49,760/- u/s 68 of the Act being amount invested in the penny stock of the alleged company.
Aggrieved by the order of Ld.AO, assesse preferred appeal before Ld.CIT(A) who upheld the addition made by Ld.AO.
Aggrieved by the order of Ld.CIT(A), assessee in is appeal before this Tribunal.
At the outset, Ld.AR submitted that Ground Nos. 1-3 raised by assessee is against the notice issues u/s 148 of the Act dated 26/06/2022 to be bad in law as it is issued beyond the period of limitation. He submitted that, first notice issued by assessee for the year under consideration was on 03/05/2021, which was under the old law. The said notice was subsequently treated to be the deemed 3.1. Accordingly notice u/s 148A(b) was issued to assessee on 27/05/2022 followed by the order passed u/s 148A(d) on 26/07/2022. Consequently, notice u/s 148 was issued on even date being 26/07/2022. The Ld.AR submitted that, present assessment year being 2015-16, the notice under old law should have been issued on or before 31/03/2021 was treated to be the deemed notice under the new provisions. He submitted that Hon’ble Supreme Court while considering the issue in case of UOI vs. Rajeev Bansal reported in [2024] 167 taxmann.com 70, has categorically observed that TOLA does not apply to AY 2015-16 and, therefore, the last date to issue notice under the new provisions of Section 148 of the Act was on 31/03/2021. However, in the present context, the impugned notice was issued on 26/07/2022 and, therefore, is clearly beyond the period of limitation. The Ld.AR further relied on the following decisions:- Hon’ble High Court of Karnataka in the case of Mohammed Yaseen vs. ITO reported in [2025] 175 taxmann.com 280 (Karnataka) ITAT Mumbai Bench in the case of ACIT vs. Thakurdas Jhamtani reported in [2025] 174 taxmann.com 782 (Mumbai-Trib.)
On the contrary, the Ld.DR relied on the orders passed by authorities below, however, could not controvert the arguments advanced by Ld.AR on the issue of notice u/s 148 dated 26/07/2022 being issued beyond the period of limitation.
We have perused the submissions advance by both sides in light of the record placed before us.
We refer to the categorical observation of the Hon’ble Supreme Court in the case of UOI vs. Rajeev Bansal (supra), which is as under:-
Mr. N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID- 19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income-tax Act; b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re- assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re assessment for previous assessment years; c. The relaxations provided under section 3(1) of TOLA apply "notwithstanding anything contained in the specified Act." Section 3(1), therefore, overrides the time limits for issuing a notice under section 148 read with Section 149 of the Income-tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA 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 TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below:
Assessment Within 3 Expiry of Within six Expiry of Year years Limitation Years Limitation read with read with TOLA for (2) TOLA for (4) (1) (2) (3) (4) (5) 2013-2014 31-3-2017 TOLA not 31-3-2020 30-6-2021 applicable 2014-2015 31-3-2018 TOLA not 31-3-2021 30-6-2021 applicable 2015-2016 31-3-2019 TOLA not 31-3-2022 TOLA not applicable applicable 2016-2017 31-3-2020 30-6-2021 31-3-2023 TOLA not applicable 2017-2018 31-3-2021 30-6-2021 31-3-2024 TOLA not applicable f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; g. Section 2 of TOLA defines "specified Act" to mean and include the Income-tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income-tax Act. Therefore, TOLA continues to apply to the Income T a x Act even after 1 April 2021; and h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income-tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra).”
From the above it is clear that, Ld. Additional Solicitor General had admitted to the position of the notices that has to be issued within a particular date after AY 2013-14 to 2017-18. Under such admitted circumstances, on behalf of the revenue, the Hon’ble Supreme Court had observed as under:-
“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. The Revenue accepts that without application of TOLA, the time limit for issuance of reassessment notices after 1 April 2021 expires for assessment years 2013-2014, 2014-2015, 2015- 2016, 2016-2017, and 2017-2018 in the following manner: (i) for the assessment years 2013-2014 and 2014-2015, the six year period expires on 31 March 2020 and 31 March 2021 respectively; and (ii) for the assessment years 2016-2017 and 2017-2018, the three year period expires on 31 March 2020 and 31 March 2021 respectively ………………….” “"4. Before we proceed, we need to bear in mind three important Periods: i. The period up to 30 June 2021 - this period is covered by the provisions of the Income Tax Act read with TOLA; ii. The period from 1 July 2021 to 3 May 2022 - the period before the decision of this Court in Ashish Agarwal (supra); and iii. The period after 4 May 2022 the period after the decision of this Court in Ashish Agarwal (supra). This period is covered hy the directions issued by PART F this Court in Ashish Agarwal (supra) and the provisions of the Income Tax Act read with TOLA. a. Third proviso to Section 149 95. The third proviso to Section 149 reads thus: "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."
The third proviso excludes the following periods to calculate the period of limitation: (i) the time allowed to the assessee under Section 148A(b); and (ii) the period during which the proceedings under Section 148A are "stayed by an order or injunction of any court" ……………………….” “114. In view of the above discussion, we conclude that: a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions; b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021; c. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148; d. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside;”
Respectfully following the above view taken by Hon’ble Supreme Court, as well as the decisions cited by Ld.AR, we are of the view that, the impugned notice dated 26/07/2022 is barred by limitation and deserves to be quashed. As we have quashed the notice u/s 148, the consequential assessment proceedings become bad in law. As a result, the additions made therein do not have any legs to stand in the eyes of law.
In the result, appeal filed by assessee stands allowed.
Order pronounced in the open court on 31/12/2025