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Facts
The revenue filed an appeal against the order of the Ld. CIT(A) who quashed the reassessment notice as barred by limitation for AY 2017-18. The assessee, a jeweller, had filed its return and the AO had information regarding large cash deposits during demonetization that were unexplained. A reassessment notice under Section 148 was issued.
Held
The Tribunal concurred with the Ld. CIT(A)'s view that the reassessment notice dated July 31, 2022, was barred by limitation. Since the root cause of the assessment (the notice) was held to be beyond the period of limitation, the entire assessment proceedings were quashed as bad in law.
Key Issues
Whether the reassessment notice issued under Section 148 for AY 2017-18 was barred by limitation, considering the applicability of TOLA and Supreme Court decisions, and whether the additions made on merits survive if the notice is invalid.
Sections Cited
148, 148A, 151, 68, 149, 3(1)
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI JAGADISH
ORDER Per Smt. Beena Pillai, JM: Present appeal filed by revenue arises out of order dated 20/06/2025 passed by NFAC - New Delhi [hereinafter “the Ld. CIT(A)”] for assessment year 2017-18 on the following grounds:- “
1. 1. 1. 1. 1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the notice under Section 148 dated July 31, 2022, for A.Y. 2017-18 was barred by limitation.
2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred by not adjudicating on the merits of the addition of Rs. 2,36,89, 124/ - made under Section 68 of the Income Tax. Act, 1961, and by restricting the order only to the grounds challenging the legal validity of the reassessment.
3. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the reassessment notice was time- barred by misinterpreting the Hon'ble Supreme Court's decision in Union of India v. Ashish Agarwal. (2023) 1 SCC 617 and Union of India v. Rajeev Bansal (2024) SCC OnLine SC 2693 and failing to correctly apply the statutory limitation periods under the Income Tax Act, 1961, including the extended timelines under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)”
2. At the outset, the Ld.DR pointed out that Ground No.1 raised by revenue challenges the decision of Ld.CIT(A) in quashing the assessment order by holding that, the notice issued u/s 148 of the Act dated 31/07/2022 was barred by limitation. 2.1. The Ld.DR submitted that, assessee is a company who filed its return of income for the assessment year 2017-18 on 09.10.2017 declaring total income of Rs.37,93,890/-. The Ld.AO had, in his possession, information that during the F.Y. in the bank Account with A/c No. 10181990000097 maintained with The Shamraon Vithal Cooperative Bank Ltd., there was total debit amount of Rs.43,50,84,007/- and total credit amount of Rs.43,95,26,289/- during the relevant year. He submitted that, there are also High value cash deposits during the demonetization period and that, these funds were found to be immediately transferred to other jewellers without any economic rationale. Ld. DR submitted that, the nature and source of the high cash deposits during the demonetization period, debits and credits in the Bank A/c of the assessee company stood unexplained before the Ld.AO. Ld.DR submitted that, the notice u/s 148 was issued on 31.07.2022 with the approval of specified authority as provided u/s 151 following the different steps of the procedure entailed by section 148A of the Act. 2.2. He submitted that, subsequently notices were issued on various dates as per details mentioned at para 2 of the impugned order. Ld. AO after considering the explanation, submission etc. furnished by assessee and upon perusal of the documents determined the total income of the assessee for the year under consideration at Rs.2,74,83,014/-, and addition of Rs.2,36,89,124/- u/s 68 was made.
Aggrieved by the assessment order, assessee preferred appeal before Ld.CIT(A).
Before Ld.CIT(A), assessee challenged the reassessment u/s 148 of the Act to be bad in law. It was submitted that, the said ground was considered by Ld.CIT(A) following the decision of Hon’ble Supreme Court in the case of UOI vs. Rajeev Bansal reported in [2024] 167 taxmann.com 70. He submitted that, the dates relevant for the issue has been considered by Ld.CIT(A) in the impugned order as under:-
Particulars Date Notice u/s. 148 issued under the OLD law 30.06.2021 Date of decision of Hon’ble Supreme Court in UOI 04.05.2022 vs. Ashish Agarwal (supra) Maximum Time limit to provide material (30 days) 03.06.2022 from the date of the decision of SC Date on which Assessing Officer actually provided Not provided material Assuming the date of deemed notice as issued pursuant to the direction of Hon’ble Supreme Court in UOI vs. Ashish Agarwal deemed as the day of 25.05.2022 providing the material (though not actually provided) Yes, reply was Whether Assessee filed reply within time (within 2 filed on weeks i.e. 09.06.2022) 06.06.2022 Assessing Officer issued new notice u/s. 148 31.07.2022 Based on the above dates, Ld.CIT(A) held that the notice dated 31/07/2022 was barred by limitation and, therefore, was invalid. Ld.DR thus submitted that, accordingly, the appeal of the assessee was allowed on this legal issue without entering into the merits of the case. 3.2. On the contrary, the Ld.AR relied on the order passed by Ld.CIT(A). We have perused the submissions advance by both the sides in light of the records placed before us.
At the outset, we agree with the view adopted by Ld.CIT(A) on the legal issue raised. However, it is noted in para 3 of the impugned order that, Ld.CIT(A) has not considered the extended time under TOLA to present facts of the case as per following observations of Hon’ble Supreme Court in case of UOI vs. Rajeev Bansal (supra):- 19. 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 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).” [ 4.1. Form the above, it is clear that when a notice issued under the old provisions of Section 148 is treated to be issued within the period of 3 years of the new provision, the time limit available to the revenue to complete the procedure u/s 148A is on or before 31/06/2021. However, in principle, we concur with the view taken by Ld.CIT(A) and the same is upheld. Accordingly, Ground No. 1 & 3 raised by revenue stands dismissed.
As the root cause of assessment has been held to be issued beyond the period of limitation, the entire assessment proceedings deserve to be quashed as it is bad in law. As a result, additions made on merits, do not survive. Accordingly, Ground No. 2 raised by revenue stands dismissed. In the result, appeal filed by revenue stands dismissed. Order pronounced in the open court on 31/12/2025 Sd/- Sd/- (JAGADISH) (BEENA PILLAI) Accountant Member Judicial Member Mumbai Dated: 31/12/2025 SC Sr. P.S.