SETH SUNDERDAS AND SONS,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

PER MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER: This appeal by the assessee is directed against the order dated 06.03.2026 passed by the learned Commissioner of Income- tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the CIT(A)"], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"], for the assessment year 2013-14. The impugned appellate order arises from the reassessment order dated 26.05.2023 passed under section 147 read with section 144B of the Act. The assessee has raised the following grounds of appeal: 1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not setting aside the reassessment order 06.03.2026 as barred by limitation in view of the Hon’ble Supreme Court & Hon’ble Jurisdictional High Court’s decisions. 2. Without prejudice to Ground 1, the Appellant having filed complete documentary evidence in support of the purchases made, erred in summarily rejecting the said evidence solely relying on the report on the report of the Investigation Wing. The learned CIT(A) failed to appreciate that out of the purchases of Rs.1,61,33,249/- during the year from M/s Keshav Impex, the AO has accepted purchases of Rs. 84,76,707/- and chose to disallow only Rs. 76,56,542/-, 3. Without prejudice to Ground 2, the learned CIT(A) failed to appreciate and accept that if at all, the addition on account of bogus purchases ought to be restricted to 5% of the so called bogus purchases as against the total purchases, particularly when the corresponding sales have been accepted. 4. The learned CIT(A) has erred in not adjudicating the ground relating to levy of interest of Rs. 47,316/- under section 234A. On facts and in law, since the Appellant filed its return of income before the due date, no interest is leviable under section 234A of the Act. 5. The Appellant craves leave to add, alter, amend and or delete any of the grounds in appeal. 6. The Appellant prays for appropriate relief. 2. At the outset, we may observe that Ground No.1 refers to the reassessment order as having been passed on 06.03.2026. The

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS record, however, shows that 06.03.2026 is the date of the impugned appellate order, whereas the reassessment order was passed on 26.05.2023. The substance of the ground is a challenge to the validity of the reassessment proceedings on the ground of limitation and, therefore, we proceed to adjudicate the ground accordingly. Facts of the case 3. The assessee is a partnership firm stated to have been engaged in the business of trading and manufacturing of diamonds and gold jewellery. The assessee filed its original return of income under section 139(1) of the Act on 25.09.2013, declaring total income of Rs.72,60,964/-. The return was processed under section 143(1) of the Act. The assessment was thereafter reopened by issuance of notice dated 28.07.2015 under section 148 of the Act on the allegation that the assessee had obtained bogus purchase bills aggregating to Rs.30,43,540/- from Rajan Gems. The reassessment was completed under section 143(3) read with section 147 of the Act on 28.12.2016, determining the total income at Rs.74,13,140/- after estimating the profit element at 5% of the disputed purchases. 4. Subsequently, another notice under section 148 of the Act was issued to the assessee on 30.06.2021 under the erstwhile reassessment regime on the basis of information allegedly received from the Investigation Wing that the assessee was a beneficiary of accommodation entries in the form of purchases aggregating to Rs.76,56,542/- from Shri Anil Babulal Chokhra, proprietor of M/s Keshav Impex. 5. In view of the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC)], the notice dated 30.06.2021 was treated as a show-cause notice under section 148A(b) of the substituted provisions. The assessee was thereafter supplied with the information and material relied upon and was required to furnish its response. The assessee furnished its response on 31.05.2022. The Assessing Officer passed an order under section 148A(d) of the Act on 30.06.2022 and, on the same date, issued a fresh notice under section 148 of the Act.

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS 6. In response to the said notice, the assessee filed its return of income on 09.08.2022, declaring total income of Rs.74,13,140/-. During the reassessment proceedings, the assessee submitted that its aggregate purchases from M/s Keshav Impex during the relevant financial year amounted to Rs.1,61,33,249/-, including VAT of Rs.1,59,734/-. In support of the purchases, the assessee furnished copies of the purchase invoices, ledger account of M/s Keshav Impex, purchase register, confirmation of purchases, VAT audit report and VAT returns for the financial year 2012-13. The assessee also stated that the payments had been made through banking channels. 7. The Assessing Officer, however, observed that the notice issued under section 133(6) to M/s Keshav Impex remained un- complied with and that the assessee had not furnished the transportation and delivery particulars or produced the supplier for verification. The Assessing Officer, therefore, treated purchases amounting to Rs.76,56,542/- as unexplained and made an addition of the entire amount under section 68 of the Act. The total income was accordingly assessed at Rs.1,50,69,680/-. Interest under sections 234A, 234B and 234C was charged and penalty proceedings under section 271(1)(c) of the Act were initiated. 8. The learned CIT(A) dismissed the jurisdictional challenge. The learned CIT(A) observed that the original notice dated 30.06.2021 was issued within the period extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, hereinafter referred to as “TOLA”, and was consequently not time-barred. On merits, the learned CIT(A) upheld the entire addition of Rs.76,56,542/- and dismissed the appeal. 9. Before us, the learned Authorised Representative (AR) submitted that the fresh notice under section 148 of the Act issued on 30.06.2022 was barred by limitation. Referring to the computation placed on record, the learned AR submitted that the original notice under section 148 was issued on 30.06.2021 and, therefore, only one day of the limitation period remained available to the Assessing Officer. 10. The learned AR submitted that the notice under section 148A(b) was issued on 24.05.2022 and the assessee was required

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS to furnish its response by 07.06.2022. The assessee furnished its response on 31.05.2022. According to the learned AR, even if the entire period allowed for furnishing the response, up to 07.06.2022, is excluded and the surviving period of one day is added thereto, the notice under section 148 could have been issued at the latest by 08.06.2022. The order under section 148A(d), as well as the fresh notice under section 148, having been issued only on 30.06.2022, were beyond the permissible period of limitation. 11. The learned AR relied upon the judgment of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal [(2024) 167 taxmann.com 70 (SC); (2024) 469 ITR 46 (SC)], dated 03.10.2024, rendered in Civil Appeal No.8629 of 2024 and connected appeals. It was submitted that the Hon’ble Supreme Court has expressly held that the surviving period under the Act read with TOLA begins to run after receipt of the response of the assessee and that the Assessing Officer is required to complete the proceedings under section 148A and issue the fresh notice under section 148 within such surviving period. 12. The learned Departmental Representative, on the other hand, relied upon the orders of the authorities below. 13. We have considered the rival submissions and perused the material available on record. Since Ground No.1 raises a jurisdictional challenge to the reassessment proceedings, we consider it appropriate to adjudicate the same at the outset. 14. The material dates relevant to the controversy are as under: Particulars Date Original notice under section 148, subsequently 30.06.2021 treated as the deemed notice under section 148A(b) Surviving period as on 30.06.2021 One day Notice supplying information and material under 24.05.2022 section 148A(b), as stated by the assessee Due date for furnishing response 07.06.2022 Response furnished by the assessee 31.05.2022

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS Order under section 148A(d) 30.06.2022 Fresh notice under section 148 30.06.2022 The manner in which the surviving limitation period is required to be computed is no longer res integra. The Hon’ble Supreme Court in Union of India v. Rajeev Bansal (supra) has explained the consequence of the legal fiction created in Ashish Agarwal (supra). The relevant portion of the judgment reads as under: “108. The Income-tax Act read with TOLA extended the time limit for issuing reassessment notices under section 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 2021 under 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. 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.” “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 Section 149. 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 section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 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

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS 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 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 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. 113. In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017- 2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred.” The Hon’ble Supreme Court thereafter concluded in paragraph 114(h) as under: “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;” 15. The above judgment lays down two distinct requirements. First, the original notice issued between 01.04.2021 and 30.06.2021 is treated as a deemed notice under section 148A(b). Secondly, the fresh notice under section 148 of the substituted regime must be issued within the period of limitation that remained available on the date of issuance of the deemed notice. The validity of the original notice under the extended period provided by TOLA does not, by itself, establish the validity of the subsequent notice under section 148. The subsequent notice must

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS independently satisfy the test of the surviving limitation period prescribed by the Hon’ble Supreme Court. 16. In the present case, the original notice was issued on 30.06.2021. Applying the method prescribed in paragraph 108 of Rajeev Bansal (supra), the period surviving between the date of issuance of the deemed notice and 30.06.2021 was only one day. 17. The assessee furnished its response on 31.05.2022. Even if the entire period allowed to the assessee for furnishing its response, up to 07.06.2022, is excluded and the surviving period of one day is allowed thereafter, the fresh notice under section 148 was required to be issued at the latest by 08.06.2022. The Assessing Officer, however, passed the order under section 148A(d) and issued the fresh notice under section 148 only on 30.06.2022. 18. Thus, even after adopting the computation more favourable to the Revenue by excluding the entire period allowed for furnishing the response, the fresh notice dated 30.06.2022 was issued beyond the surviving limitation period. 19. The learned CIT(A) proceeded on the basis that the original notice dated 30.06.2021 was not time-barred because TOLA extended the limitation up to 30.06.2021. While this proposition is consistent with the first part of the judgment in Rajeev Bansal (supra), the learned CIT(A) did not apply the further and equally binding requirement that the fresh notice under section 148 of the substituted regime must be issued within the limitation period surviving after the deemed notice. The validity of the fresh notice dated 30.06.2022 was, therefore, not examined in accordance with paragraphs 108 to 114 of the judgment of the Hon’ble Supreme Court. 20. In view of the foregoing discussion, we hold that the fresh notice issued under section 148 of the Act on 30.06.2022 was beyond the surviving period of limitation and was, consequently, time-barred. The Assessing Officer, therefore, lacked jurisdiction to complete the reassessment pursuant to the said notice. The reassessment order dated 26.05.2023 is accordingly quashed. Ground No.1 raised by the assessee is allowed.

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS 21. Since the reassessment itself has been quashed on the ground of limitation, the grounds concerning the addition of Rs.76,56,542/- on account of the alleged bogus purchases and the alternative plea for restricting the addition to 5% have become academic. Ground Nos.2 and 3 are, therefore, not adjudicated. 22. The levy of interest under section 234A challenged in Ground No.4 is consequential to the reassessment order. Since the reassessment order has been quashed, this ground has also become academic and requires no separate adjudication. 23. Ground Nos.5 and 6 are general in nature and do not require separate adjudication. 24. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 18.08.2026.

Sd/- Sd/- CHALLA NAGENDRA PRASAD MAKARAND VASANT MAHADEOKAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated 18/08/2026 Soumili, PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / The CIT(A) 4. आयकर आयु�(अपील) / Concerned CIT 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मु�बई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.

ITA 4591/MUM/2026 SETH SUNDERDAS AND SONS

आदेशानुसार/ BY ORDER, स�ािपत �ित //True Copy//

उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु�बई मु�बई / ITAT, Mumbai मु�बई मु�बई