KHILAN NAVINCHANDRA PATEL,SURAT vs. INCOME TAX OFFICER, CIRCLE-1(3), SURAT

आयकर अपीलीय अधिकरण, सूरत न्यायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No. 571/SRT/2026 (AY: 2016-17) Khilan Navinchandra बनाम/ The ITO, Patel, 6/2201, Nagar Circle-1(3), Aayakar Vs. Sheri, Mahidharpura, Bhawan, Majura Gate, Surat-395001 Surat-395001 (Assessee/Appellant) (Revenue/Respondent) PAN: AQVPP0093K Assessee by Shri P M Jagasheth, CA Revenue by Shri Ashish Kumar, Sr. DR Date of Hearing 01.07.2026 Date of Pronouncement 09.07.2026 आदेश / O R D E R Per B.M. Biyani, AM: Feeling aggrieved by order of first-appeal dated 09.03.2026 passed by learned Commissioner of Income-tax (Appeals), NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 22.05.2023 passed by learned Assessment Unit of Income-tax Department [“Ld. AO”] u/s 147 r.w.s. 144 & 144B of the Income-tax Act, 1961 for Assessment-Year [“AY”] 2016-17, the assessee has filed this appeal.

Page 1 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 (i) The assessee-individual filed his return of income of AY 2016-17 declaring a total income of Rs. 37,19,510/- u/s 139 which was duly assessed through an assessment-order u/s 143(3).

(ii) Subsequently, on the basis of information in his possession revealing accommodation in the form of bogus capital gain from penny stocks undertaken by assessee, the AO issued initial notice dated 25.06.2021 u/s 148 to re-open assessee’s case u/s 147 on the strength of the time-limit extended by The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [“TOLA”]. Since a new set of provisions for re-assessment u/s 147 was introduced in Income-tax Act w.e.f. 01.04.2021, there arose controversies with regard to the issuance of notices u/s 148 after 01.04.2021 and the litigation travelled to Hon’ble Supreme Court in Ashish Agarwal (2022 SCC Online SC 543) dated 04.05.2022 in which the Hon’ble Supreme Court gave certain directions. Accordingly, after considering the decision of Ashish Agarwal, the Ld. AO issued a fresh notice dated 21.07.2022 u/s 148 to assessee for making assessment u/s 147 [after completing the procedure of section 148A(d)], which culminated into passing of an order of re-assessment dated 22.05.2023. By this order of re-assessment, the Ld. AO re-assessed assessee’s total income at Rs. 1,13,14,658/- after making an addition of Rs. 75,95,148/-.

Page 2 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 (iii) Aggrieved by aforesaid order of re-assessment, the assessee carried matter in first-appeal whereupon the Ld. CIT(A) dismissed assessee’s appeal and upheld the AO’s order for non-prosecution by assessee.

(iv) Still aggrieved, the assessee has come in next appeal before us.

“1. On the facts and circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in re-opening the assessment u/s. 147 of the Act and Issuing notice u/s.148 of the Act. 2. On the facts and circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition Rs. 75,95,148/- on account of sale of share treated as alleged accommodation entity and added to the income by invoking the provision of section u/s. 68 of the Act. 3. On the facts and circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred invoking the provision of section 115BBE of the Income Tax Act, 1961. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed ex-parte order and hence, the case may please be set aside and restored back to the CIT(A) or AO. 5. On the facts and circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in initiated penalties proceeding u/s. 271(1)(c) of the Act. 6. It is therefore prayed that the above addition/penalty may please be deleted as learned members of the tribunal may deem it proper.” 4. By means of Ground No. 1, the assessee is challenging the legality of re-assessment framed by Ld. AO u/s 147. The assessee is claiming that the notice issued by AO u/s 148 to frame assessment u/s 147 was time-barred.

Page 3 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 5. Ld. AR for assessee submitted that the Ld. AO issued initial notice u/s 148 on 25.06.2021, which was within the extended time limit as per TOLA. That, as per decision of Hon’ble Supreme Court in Ashish Agarwal (supra), all notices issued u/s 148 during the period from 01.04.2021 to 30.06.2021, were saved and deemed to be the notices in terms of section 148A(b) i.e. under the new/substituted regime of re-assessment u/s 147 w.e.f. 01.04.2021 through Finance Act, 2021. That, the Hon’ble Supreme Court, also issued direction that the assessing officer shall supply the information/ material available with Revenue for framing assessment u/s 147 to assessee within 30 days from date of Judgement of Hon’ble Supreme Court (i.e. from 04.05.2022) and grant two weeks’ time to assessee to file reply. Only thereafter, the assessing officer shall pass order u/s 148A(d) and after completing such procedure of section 148A, may issue a fresh notice u/s 148. It was further held that all defences which may be available to the assesses including those available u/s 149 and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.

Page 4 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 notice u/s 148 of the Act was issued on 25.06.2021, the Ld. AO had only 5 days “surviving time” available upto 30.06.2021 (Ld. AR narrated that the AO shall have minimum 7 days as per provision of law). Therefore, new notice u/s 148 of the Act was required to be issued within the survival period of 7 days from the last date on which the assessee was required to file reply to the notice u/s 148A(b) issued by AO. Since in present case, the AO issued notice u/s 148A(b) to assessee on 26.05.2022, the assessee was having two weeks’ time to file reply uptill 09.06.2022. The assessee, however, filed reply on 17.06.2022 which the AO considered and accepted. Thereafter, the Ld. AO was having time period to issue notice u/s 148 uptill 24.06.2022 [17.06.2022 + 7 days]. That means, the AO could issue new/subsequent notice u/s 148 by 24.06.2022 only. However, the Ld. AO has issued new/subsequent notice u/s 148 dated 21.07.2022 which is barred by limitation and hence invalid. Consequently, the assessment-order passed by Ld. AO is also invalid.

Page 5 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 9. In rejoinder, Ld. AR submitted that all notices issued by Ld. AO have been filed by him in Paper-Book. Further, he has also compiled the chart of chronology of events taking into account those notices as well as the law settled by Hon’ble Supreme Court in Ashish Agarwal (supra) and Rajeev Bansal (supra). Hence, there is no purpose in remanding this matter to AO. He requested the bench to decide this matter and quash the assessment- order passed by AO.

Page 6 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 480/SRT/2025, Kanchan Devi Agarwal Vs. ITO, order dated 23.12.2025 wherein the Co-ordinate Bench has accepted assessee’s claim. We re-produce below the relevant portion of order of ITAT for an immediate reference:

“10. The contention of the assessee is that the Assessing Officer was required to pass order under Section 148A(d) of the Act and also issue notice under Section 148 of the Act within the surviving period of three days (which was extended to seven days) of filing its reply on 06.06.2022. Thus, the Assessing Officer had time limit till 14.06.2022 only to take these actions. However, the order under Section 148A(d) of the Act and the notice under Section 148 of the Act was issued on 25.07.2022 i.e. beyond the period of seven days from its reply on 06.06.2022 and thus the notice was barred by limitation. 11. 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 shall be treated as show cause notice issued u/s 148A(b) of the Act of the new provisions. Further, the Hon’ble Court 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 was summarized by the Apex Court in the case of Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC) 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 information to the assessee, time begins to run for the assesses to respond to the show cause notices. [Emphasis supplied.] 12. 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 Court is as under:

Page 7 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 110. 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 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

Page 8 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 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. [Emphasis supplied.] 13. The Hon’ble Supreme Court had thus categorically held that 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 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 28.06.2021 which was treated as deemed notice u/s 148A(b) of the Act. Since this notice was issued on 28.06.2021, 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 three days 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 06.06.2022, the time limit available to the Assessing Officer to issue the notice u/s 148 of the Act was till 08.07.2022 only. As the notice in the present case was issued on 25.07.2022, the same is found to be beyond the limitation period. 14. 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

Page 9 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 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 case of Ashish Agarwal (supra) would be valid notice or not in view of the decision of the Hon'ble Apex Court in case of Rajeev Bansal (supra):

SCA NO AY Date of notice No of days of Date of under section surviving time providing 148 under available information TOLA 30.06.2021 under section 148A(b)

6387/2023 2013-2014 17.06.2021 13 26.05.2022 5688/2023 2014-2015 09.06.2021 21 23.05.2022

22260/2022 2016-2017 30.06.2021 I 23.05.2022

2017-2018 2017-2018 996/2023 I 24.05.2022

Due date of Due date of SCA NO Date of order Last date for filing reply reply:- under section issuance of 148A(d) and notice under notice under section 148 as section 148:- per surviving time:-

09.06.2022 04.06.2022 6387/2023 29.07.2022 22.06.2022

06.06.2022 - 5688/2023 27.07.2022 27.06.2022

Page 10 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17

07.06.2022 06.07.2022 22260/2022 30.07.2022 14.06.2022

11.06.2022 10.06.2022 996/2023 19.07.2022 18.06.2022

Page 11 of 12

Khilan Navinchandra Patel ITA Nos.571/SRT/2026 - AY : 2016-17 referred therein, we are inclined to hold that the impugned notice dated 21.07.2022 issued by Ld. AO u/s 148 is time-barred and therefore invalid. Consequently, the impugned assessment-order passed by Ld. AO u/s 147 does not survive and the same is hereby quashed. The legal ground raised by assessee is thus allowed.

Order pronounced in open court on 09/07/2026

Sd (SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat दिन ांक / Dated : 09/07/2026 *ak, Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order

UE COPYAssistant Registrar/Sr. PS Income Tax Appellate Tribunal Surat Bench, Surat

Page 12 of 12