KINGSTON INFRACON,AHMEDABAD vs. ACIT CIRCLE 3 1 1, AHMEDABAD

The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2016-17 on 29.10.2016 declaring total income of Rs. 86,28,250/-. The case of the assessee was reopened u/s. 147 of the Act on the basis of information received by the AO that the assessee had

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 dismissed. Th

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

Shri Sunil Maloo, the Ld. AR of the assessee requested to first adjudicate the first two grounds, which are legal grounds. He submitted that the notice u/s. 148 of the Act, issued by the AO was barred by limitation. He 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). The Ld. AR explained that as per the decision of Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (2024) 167 taxmann.com 70 (SC), the order u/s 148A(d) of the Act was required to be passed and fresh notice u/s 148 of the Act under the new regime was required to be issued within the time limit surviving under the Income Tax Act read with TOLA. He explained that since the original notice u/s 148 of the Act was issued on 30.06.2021, the Assessing Officer had only one-day surviving time-limit under the Income Tax Act read with TOLA. Therefore, new notice u/s 148 of the Act was required to be issued within one day, which was extended to 7 days, from the date of response of the assessee. The Ld. AR submitted that as the fresh notice u/s 148 of the Act was issued in this case beyond the time limit surviving under the Income Tax Act read with TOLA, the same was barred by limitation.

Per contra, Sh. Kalpesh Rupavatia, Ld. Sr. 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. Sr. DR explained that the order u/s 148A(d) passed

We have carefully considered the submissions of the assessee. Before we decide the issue of limitation, it will be relevant to tabulate the actions taken by the Assessing Officer in the present case: -

The crux of the issue to be decided in this case is whether the order u/s 148A(d) and the notice u/s 148 of the Act, both dated 31.07.2022, were within time. The contention of the assessee is that the Assessing Officer was required to pass order u/s 148A(d) of the Act and also to issue notice u/s 148 of the Act within the surviving period of one day (which was extendable to 7 days) of filing its reply on 13.06.2022, which was till 20.06.2022 only. Since the order u/s 148A(d) of the Act and notice u/s 148 was issued beyond the period of seven days from its reply on 13.06.2022, the same was barred by limitation. On the other hand, the

We have carefully considered the rival submissions. The new section 148A of the Act was introduced w.e.f. 01.04.2021 which required that before issuance of notice u/s 148 of the Act (in other than search cases), the Assessing Officer shall conduct enquiries with reference to the information of escapement of income, if required, and provide an opportunity of being heard to the assessee. After considering the reply of the assessee, the Assessing Officer shall decide, by passing an order, whether it is a fit case for issue of notice under section 148 and serve a copy of such order along with the notice on the assessee. The Assessing Officer shall, before conducting any such enquiries or providing opportunity to the assessee or passing such order, obtain the approval of specified authority. The provision of section 148A of the Act was thus applicable to the cases where the reason for escapement of income was recorded as per the new provisions effective from 01.04.2021. Therefore, the time limit of one month from the end of the month in which the reply of the assessee was received, was available to the AO u/s 148A(d) of the Act, in respect of a regular notice initiated under this new provision w.e.f. 01.04.2021.

In the present case, the original notice u/s 148 of the Act dated 30.06.2021 was issued not under the new provisions, but as per the old provisions of the Act, wherein there was no requirement of any proceeding u/s 148A of the Act. The Hon’ble Supreme Court, in the case of Ashish Agarwal (supra), had directed that all the notices u/s 148 of the Act issued under the old provision between 1 April 2021 and 30 June 2021 shall be treated as show cause notice issued u/s 148A(b) of the Act of the new provision. Thus, this was a case of deemed notice u/s 148A(b) of the Act and the notice u/s 148 of the Act issued on 30.06.2021 under the old provision was deemed as notice u/s 148A(b) of the Act under the new provision. The Apex Court had thus created a legal fiction by deeming the Section 148 notices issued under the old regime as show cause notices under Section 148A(b) of the new regime. The AO, under Section 148A(b) of the Act, had to comply with two requirements: (i) issuance of a show cause notice; and (ii) supply of all the relevant information which formed the basis of the show cause notice. The Supreme Court in the case of Ashish Agrawal (supra) had directed the assessing officers to supply the assesses with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. The effect of this direction on the time-limit for completing the proceedings, was summarized by the Apex Court in the case of Rajeev Bansal (supra) as under: 106. …..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

The Court in the case of Rajeev Bansal (supra) had further held that the entire time allowed to the assessee to respond to the show cause notice had to be excluded for computing the period of limitation. As per the Hon’ble Court, the total time that was excluded for computation of limitation for the deemed notices was: (i) the time during which the show cause notices were effectively stayed, i.e., 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.

The interplay of the directions in the case of Ashish Agrawal with TOLA was examined by the Hon’ble Supreme Court in the case of Rajeev Bansal (supra). The Hon’ble Court had held that only 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 such deemed notice, including issuance of notice u/s 148 of the new regime. The surviving or balance time limit was required to be calculated by computing the number of days between the date of issuance of deemed notice and 30th June, 2021. The reasoning and the relevant part of the judgement of the Hon’ble Court is reproduced below for a clear understanding: 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].

The Hon’ble Supreme Court had thus categorically held that the assessing officers were required to issue the reassessment notice u/s 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA and that all notices issued beyond the surviving period were time barred and liable to be set aside. This time-line was also demonstrated in para 112 of the order with an illustration. In the present case, the original notice u/s 148 of the Act was issued on 30.06.2021 which was treated as deemed notice u/s 148A(b) of the Act. Since this notice was issued on 30.06.2021, the surviving time period available to the Assessing Officer to complete the further proceedings, including the issue of notice u/s 148 of the Act, was one day only, which was extended to seven days. Accordingly, the Assessing Officer was required to pass the order a u/s 148A(d) of the Act and also to issue notice u/s 148 of the Act in this case within a period of seven days from the date of receipt of reply of the assessee. As the assessee had filed its reply on 13.06.2022, the time limit available to the Assessing Officer to issue the notice u/s 148 of the Act was till 20.06.2022 only. As the notice in the present case was issued on 31.07.2022, the same is found to be beyond the limitation period. In view of the explicit direction of the Hon’ble Supreme Court to complete the remaining proceedings within the surviving or balance time period, the provision of section 148A(d) of the Act was overridden to that effect.

The Hon’ble Supreme Court in the case of Rajeev Bansal (supra) had examined the scope of Article 142 and observed as under: 82. Article 142 empowers this Court to pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it. The

It is found that 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.

In view of the facts as discussed earlier and the judgement of the jurisdictional High Court, the impugned notice dated 31.07.2022 issued under Section 148 of the Act, is held to be invalid notice as the same was issued beyond the surviving period, as per the decision of Hon’ble Apex Court in the case of Rajiv Bansal (supra). Accordingly, the ground taken by the assessee is allowed.

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.