VISHNU POUCH PACKAGING PVT. LTD.,AHMEDABAD vs. THE DY.CIT, CIRCLE-4(1)(1), AHMEDABAD

The brief facts of the case are that the assessee had filed its return of income for A.Y. 2014-15 on 22.11.2024 declaring Nil income. The original assessment was completed u/s. 143(3) on 24.09.2016 at total income of Rs. 2,42,95,900/-. Thereafter, the case of the assessee was reopened on the basis of information received that assessee is a beneficiary of accommodation entry of Rs. 2.15 crores taken from one M/s. Seema Enterprise in respect of purchase of raw materials. Accordingly, a notice u/s. 148 of the Act was issued on 30.06.2021. In the course of assessment, the AO noticed that assessee had made total purchase of Rs.11,87,19,968/- from Seema Enterprise. The assessment was completed u/s. 147 r.w.s. 144B of the Act on 30.05.2023 wherein addition of Rs. 11,87,19,986/- was made u/s. 69C of the Act.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was partly allowed. The Ld. CIT(A) had restricted the addition out of bogus purchases to the profit margin of 6%.

Now, the Assessee as well as the Revenue both are in appeal before us. The following grounds have been taken in these appeals:

The Ld. CIT(A) erred in holding the proceedings u/s 147 as valid ignoring the fact that the notice u/s 148A which was the very basis for the proceedings u/s 147 was held to be time barred by Hon'ble Gujarat High Court in Keenara Industries Pvt. Ltd. & Others Vs. The Income Tax Officer Ward-1(1)(3), Surat and Others (Special Civil Application No. 17321 of 2022) vide its Order dated 07/02/2023 in which the appellant was also one of the petitioners having case SCA No 19260 of 2022

The Ld. CIT(A) erred in holding that the order dated 17/05/2023 by Hon'ble Supreme Court in SLP(C) No 9712/2023, arising out of judgement of Gujrat High Court in SCA No 17321/2022 in Keenara Industries Pvt Ltd was applicable to the case of appellant, without appreciating that no SLP was filed in Supreme Court by the Assessing Officer of the appellant against the said order of Gujarat High Court in SCA No 19260/2022. Accordingly, the Gujarat High Court order holding the notice u/s 148A as time barred was still in force in the case of appellant. The Ld. CIT(A) ought to have quashed the assessment order which was passed in proceedings based on time barred notice

The Ld CIT(A) erred in confirming the addition to the extent of Rs 71,23,198 out of addition of Rs 11,87,19,968 made in the Assessment order without appreciating the fact that the purchase was genuine and was supported with plethora of evidence and the Assessment Unit was not able to counter such evidence and held the purchases as bogus only on half-baked, flimsy, cursory and self-contradictory statement of Seema Gupta without any enquiries to establish allegations made. The Ld CIT(A) ignored the fact that the so-called concrete information that the department received, itself confirmed that Seema Enterprises had imported Accra Nuts (Supari) and sold in domestic market. The Ld. CIT(A) ought to have held the purchases made as genuine and deleted the entire addition made as unlawful and unjustified

The Ld CIT(A) erred in invoking the judgements of Gujarat High Court to confirm addition @ 6% of purchases without appreciating that in the case of appellant, there was no bogus purchases at all and hence no addition was called for

The Ld. CIT(A) erred in summarily dismissing the ground No 3 without appreciating the implication of the ground which disputed the action of the Assessment Unit to hold the payment of Rs 11,87,19,968 for making purchases as accommodation entry whereas the information received on Insight Portal alleged that the appellant had received accommodation entry of Rs 2,15,00,000. Thus, the case made out in the assessment order was not at all based on the information received and accordingly deserved to be set aside as unlawful.

Shri Tushar Hemani, the Ld. Senior Counsel, appearing for the assessee submitted at the outset that the notice u/s 148 of the Act issued in this case was barred by limitation. It was explained that the initial notice u/s 148 of the Act was issued on 30.06.2021, which was within the extended time limit as per Taxation and Other Laws Ordnance, 2020 (TOLA). As per the decision of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal [2022] 444 ITR 1 (SC), all the notices issued u/s 148 of the Act during the period from 01.04.2021 to 30.06.2021, were deemed to be notice issued u/s 148A(b) of the Act, as amended by the Finance Act 2021. Further, directions were issued to supply the materials within 30 days and grant further 15 days’ time to the assessee to reply to such notice before passing the order u/s 148A(d) of the Act. The Ld. Sr. Counsel explained that in the present case, the assessee was supplied materials on 18.05.2022 in terms of Section 148A(b) of the Act, to which the assessee had submitted reply on 30.05.2022, though the time available to the assessee was till 2nd June, 2022. Thereafter, the order u/s 148A(d) of the Act was passed by the Assessing Officer on

Per contra, Sh. Kiran Unvekar, Ld. CIT-DR relied upon the order of the lower authorities. He submitted that as per provision of section 148A(d) of the Act, the AO was required to pass the order under that section within a period of one month from the end of the month in which the reply of the assessee to the show cause notice u/s 148A(b) of the Act, was received. The Ld. CIT-DR explained that the order u/s 148A(d) passed in this case was passed within the time limit as prescribed under the Act and the notice u/s 148 of the Act was also issued within the time period. Therefore, there was no infirmity with the notice of the AO.

We have considered the rival submissions and perused the material available on record. The preliminary objection raised by the assessee is

The precise effect of the aforesaid legal fiction and its interplay with the TOLA has subsequently been authoritatively settled by the Hon'ble Supreme Court in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC). The Hon'ble Supreme Court, after examining the statutory scheme and the directions issued in Ashish Agarwal, held that the legal fiction created in Ashish Agarwal has to be carried to its logical consequences. The time surviving under the Income-tax Act read with TOLA on the date of the original notice remains available to the Revenue for completing the proceedings pursuant to the deemed notice, including the issuance of a fresh notice u/s 148 of the substituted regime. The surviving period is to be calculated with reference to the period between the date of issuance of the original notice u/s 148 of the Act and 30.06.2021. The Hon'ble Supreme Court further clarified that, for computing the surviving period, the period during which the deemed show-cause notice was effectively stayed, i.e., from the date of issuance of the original notice till supply of the relevant material, and the period of two weeks granted to the assessee to respond to the show-cause notice,

In paragraph 112 of the judgment, the Hon'ble Supreme Court illustrated the manner of computation by taking an original notice issued on 01.05.2021. It held that the Assessing Officer would have 61 days, being the number of days between 01.05.2021 and 30.06.2021, and that this 61-day period would start running after receipt of the assessee's response. Thus, the limitation surviving under the old regime read with TOLA is carried forward and becomes available to the Revenue after the exclusions recognised by the Court.

Applying the aforesaid principle to the facts of the present case, the original notice u/s 148 was issued on 30.06.2021. Therefore, the surviving period available to the Revenue, calculated up to 30.06.2021, was only one day. The subsequent supply of material on 18.05.2022 and the time allowed to the assessee to respond are liable to be excluded in terms of the law laid down by the Hon'ble Supreme Court. However, after the assessee submitted its response on 30.05.2022, the AO had only the aforesaid surviving period of one day to complete the remaining statutory steps, including passing the order under section 148A(d) and issuing the notice under section 148.

The contention of the Ld. CIT-DR that section 148A(d) permits the Assessing Officer to pass the order within one month from the end of the

Significantly, the Hon'ble Supreme Court has expressly held that the Assessing Officer, after receipt of the assessee's response, is required to consider the reply, take a decision under section 148A(d), and issue a notice under section 148, if warranted, within the surviving time limit. It has further categorically held that a reassessment notice issued beyond the surviving time limit is time-barred. In the present case, the assessee submitted its reply on 30.05.2022. The Assessing Officer, therefore, had only the surviving period of one day available, which was extended to seven days, (from the date allowed for filing reply) for completing the requisite statutory steps, which expired on 09.06.2022. However, the order under section 148A(d) was passed only on 27.07.2022, followed by the notice u/s 148 on the same date. Thus, both the order under section 148A(d) and the consequential notice u/s 148 of the Act were issued substantially beyond the surviving period of limitation.

In view of the foregoing discussion, the contention of the learned Senior Counsel that the notice issued u/s 148 on 27.07.2022 is barred by

An identical issue was decided by the Hon’ble Gujarat High Court in the case of Dhanraj Govindram Kella [2025] (177 taxmann.com 194) (Gujarat). The findings given by the Hon’ble Court on this issue are reproduced below: 65. The alternative contention of the petitioner as to whether notices would be valid notice or invalid notice considering 'surviving time' between the date of the issuance of notices under TOLA and 30th June, 2021 or not is required to be considered and for that each matter has to be considered separately on the basis of the facts of case considering the date of issuance of notices under section 148 under TOLA by the Revenue and thereafter date of supplying information to the assessee and date of passing of order under section 148A(d) and date of issuance of notice under section 148 of the Act so as to consider whether issuance of notice under section 148 of the Act is within 'surviving time' as per the direction of Hon'ble Apex Court in case of Rajeev Bansal (supra) or not. 66. So far as Assessment Years 2013-2014 and 2014-2015 are concerned, the period of three years from the end of the assessment year would be over prior to 20.03.2020 and the period of six years would be over between 20.03.2020 and 30.06.2021. Therefore, the notices issued under section 148 of the Act under old regime between 01.04.2021 and 30.06.2021 as per TOLA, will be a valid notice if the notice under section 148 of the Act under new regime is issued within the period of 'surviving time' as per the directions issued by Hon'ble Apex Court in case of Rajeev Bansal (supra). For the Assessment Years 2016-2017 and 2017-2018 are concerned, the notice issued under section 148 of the Act under old regime between 01.04.2021 and 30.06.2021 under TOLA would be considered to be issued within three years from the end of the relevant assessment year as three years would complete within the period of 20.03.2020 and 30.06.2021. 67. Therefore, in facts of these petitions, following data is required to be considered to find out 'surviving time' to decide as to whether the impugned notices under section 148 of the Act issued under the new regime as per the decision of Hon'ble Apex Court in

In view of the facts as discussed earlier and the judgement of the jurisdictional High Court, the impugned notice dated 27.07.2022 issued u/s 148 of the Act, is held to be invalid notice as the same was issued

Since the assessee succeeds on the legal ground, we do not deem it necessary to adjudicate the grounds taken on merits.

In the result, the appeal of the assessee is allowed.

As held by us in ITA No. ITA No. 1784/Ahd/2025, the very foundation of the reassessment proceeding viz. the notice issued under section 148 of the Act, has been held to be invalid on the ground of limitation. The said finding goes to the root of the jurisdiction of the Assessing Officer to initiate and complete the reassessment proceeding. Once the notice u/s 148 has been quashed as being barred by limitation, the reassessment proceedings founded upon such notice cannot independently survive. Consequently, no addition or assessment made pursuant to such invalid proceedings, can be sustained. The Revenue's appeal, therefore, cannot be considered independently of the jurisdictional finding already recorded in the assessee's case for the same assessment year. Since the very jurisdictional foundation of the assessment have been quashed, the Revenue's grounds have become academic and do not call for separate adjudication on merits. Therefore, the appeal of the Revenue is dismissed.

In the final result, the appeal of the assessee is allowed while the appeal of the Revenue is dismissed.