ITO WARD 23 2 1, MUMBAI, MUMBAI vs. JAGDISH LALCHAND LAKHANI, MUMBAI

आदेश / ORDER

PER SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER:

This appeal is filed by the Revenue against the order of the learned CIT(A)-NFAC, Delhi, dated 21.01.2026 for the assessment year 2016-17.

“1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) NFAC erred in holding that the notice u s 148 of the Income Tax Act dated 19/07/2022 was issued beyond the period of limitation as prescribed under Section 149 of the Act, without properly appreciating the correct computation methodology laid down by the Hon’ble Supreme Court in Union of India vs Rajeev Bansal. 2. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) NFAC erred in computing the surviving time limit as 26 days instead of correctly computing it, and in not properly considering (a) whether the date of supply of information to the assessee was the date of dispatch OR date of receipt of the letter dated 28/05/2022, (b) the additional time that may have been effectively allowed to the assessee beyond the initial 14 day period, and (c) the correct methodology of counting the surviving days (inclusive vs exclusive of terminal dates) 3. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) NFAC erred in allowing the appeal solely on the jurisdictional limitation ground without examining the merits of the additions made in the assessment order, thereby failing to discharge the appellate function in its entirety and causing prejudice to the Revenue 4. Without prejudice to Ground 1, whether on the facts and in the circumstances of the case and in law, the learned CIT(A) NFAC ought to have confirmed the addition of Rs. 56,00,000 u s 69A of the Income Tax Act, 1961 read with Section 115BBE, as the assessee failed to explain the source of cash loan given to Sh Chaturbhuj Batra, the fact of which was established through the ITSC proceedings, seized documents, and the assessee s own implicit admission in his reply dated 18/04/2023

7.1 I have carefully gone through the submissions made by the assessee. During the course of appellate proceedings assessee has challenged the validity of notice issued U/s 148 dated 19.07.2022 that it is beyond limitation period provided U/s 149 of the Act as amended by Finance Act 2021. 7.2 The Hon'ble Apex Court in the case of Union of India Vs Rajeev Bansal held as under: "105. A direction issued by this Court in the exercise of its jurisdiction under Article 142 is an order of a court. The third proviso to Section 149 of the new regime provides that the period during which the proceeding sunder section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under section 148A(b) and the date of the decision of this Court in Ashish Agarwal (supra), the assessing officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show cause notices were deemed to have been stayed by order of this Court from the date of their issuance (somewhere from 1 April 2021 till 30 June 2021) till the date of decision in Ashish Agarwal (supra), that is, 4 May 2022. 106. In Ashish Agarwal (supra), this Court directed the assessing officers to provide relevant information and materials relied upon by the Revenue to the assesses within thirty days from the date of the judgment. A show cause notice is effectively issued in terms of Section 148A(b) only if it is supplied along with the relevant information and material by the assessing officer. Due to the legal fiction, the assessing officers were deemed to have been inhibited from acting in pursuance of the Section 148A(b) notice till the relevant material was supplied to the assesses. Therefore, the show cause notices were deemed to have been stayed until the assessing officers provided the relevant information or material to the assesses in terms of the direction issued in Ashish Agarwal (supra). To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices. 107. The third proviso to Section 149 allows the exclusion of time allowed for the assesses to respond to the show cause notice under section149A(b) to compute the period of limitation. The third proviso excludes "the time or extended time allowed to the assessee." Resultantly, the entire time allowed to the assessee to respond to the show cause notice has to be excluded for computing the period of limitation. In Ashish Agarwal(supra), this Court provided two weeks to the assesses to reply to the show cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to Section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices. b. Interplay of Ashish Agarwal with TOLA 108. The Income-tax Act read with TOLA extended the time limit for issuing reassessment notices undersection 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. [Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021. 109. If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. AP Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom."] 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices 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) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section149. 111. The clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime. 112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May2021 and 30 June 2021] to issue a notice under section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on 18 August 2022." The Income-tax Act read with TOLA extended the time limit for issuing reassessment notices undersection 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. 7.3 In view of the above, Computation of limitation period as per the decision of Apex Court in the case of Union of India Vs Rajeev Bansal is worked out as under: Sl. No Particulars Dates / Days 1 Assessment Year 2016-17 2 Period of limitation U/s 149 (3 years or 6 years) 6 years 3 Original period of limitation as per the IT Act read with TOLA Act 31.03.2021 4 Extended period of limitation as per the IT Act read with TOLA Act 30.06.2021 5 Date of issuance of original notice U/s 148 04.06.2021 6 28.05.2022 The date on which SCN U/s 148A(b) issued in pursuance of Ashish Agarwal Judgment 7 11.06.2022 Reply filed in response to SCN issued U/s 148A(b) [ 14 days of time allowed to file reply. Accordingly deemed date of reply works out to] 8 26 Days Days to be added to the date till which reply is filed i.e., 11.06.2022, from the date of issuance of original 148 notice till the expiry of period as extended by TOLA [ From 04.06.2021 to 30.06.2021] 9 Last date for issuance of notice U/s 148 [ 11.06.2022 + 26 days] 07.07.2022 10 The actual date of issuance of notice U/s 148 19.07.2022 11 NO Whether Notice u/s 148 issued under the new regime is within the time period or not 7.4 In view of the Apex Court Judicial pronouncement in the case of Union of India Vs Rajeev Bansal, the notice issued U/s 148 dated 19.07.2022 is invalid being issued beyond time limit. Hence, order passed U/s 147 r.w.s 144B of the act dated 21.04.2023 is infructuous, bad in law and is liable to be deleted.

Order pronounced in the open court on 09/09/ 2026

Sd/- Sd/- PRABHASH SHANKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 09/09/2026 Prabhat Copy to: ITO WARD 23 2 1, MUMBAI, 512, 5TH FLOOR, PIRAMAL CHAMBERS, 1 LALBAUG,, MUMBAI-400012, MAHARASHTRA

JAGDISH LALCHAND LAKHANI, 701, PINTOS PARK VIEW, PLOT NO 457, 2 24TH ROAD, BANDRA W, MUMBAI-400050, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE