DIGISHKUMAR PURSHOTTAMDAS PATEL,AHMEDABAD vs. THE ITO, WARD-7(2)(1), AHMEDABAD

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ITA 2446/AHD/2025Status: DisposedITAT Ahmedabad06 July 2026AY 2017-1811 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 148 of the Income Tax Act was invalid as it was issued beyond the surviving period, as per the decision of the Hon'ble Apex Court in the case of Rajiv Bansal. Consequently, the appeal was allowed on this legal ground.

What were the facts?

The assessee's case was reopened for AY 2017-18 based on information of bogus short-term capital gains. The Assessing Officer made an addition of Rs. 1,79,40,803/-. The assessee's appeal to the CIT(A) was dismissed.

What were the issues?

Whether the notice issued under Section 148 of the Income Tax Act for reassessment was within the prescribed limitation period, considering the directions of the Supreme Court regarding the transition from old to new provisions.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148A,Section 151

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Sunil Maloo, CA
For Respondent: Shri Kalpesh Rupavatia, SR-DR
Hearing: 18.06.2026Pronounced: 06.07.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 22.10.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding u/s 147 r.w.s. 144B of the Income Tax Act [hereinafter referred as “the Act”].

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2017-18 on 05.02.2018 declaring total income of Rs.2,45,47,310/-. The case of the assessee was reopened on the basis of information that he had obtained bogus short-term capital gain (STCG) by trading in shares of Kushal Limited, which was in the nature of accommodation entry. The assessment was completed u/s. 147 r.w.s. 144B of the Act on 29.05.2023 at total income of Rs.4,24,88,113/-, wherein an addition of Rs.1,79,40,803/- was made in respect of bogus short term capital gain.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th

4.

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

1.

Sanctioning Authority-Wrong/invalid approval u/s 151 - For cases beyond three years, prior sanction must be from the Principal Chief Commissioner or Principal Director General (section 151) Here, approval was obtained from the Pr. CIT, which is non est. The assumption of jurisdiction fails on this count alone 2. The reassessment proceedings are void ab initio, as the mandatory sanction under section 151 was not furnished, and in its absence, the consequent proceedings stand wholly vitiated 3. No escapement-Income already disclosed and taxed The very foundation of reopening collapses because the impugned amount of ₹1,79,40,803 was fully disclosed as short-term capital gains in the original return of income and tax was paid thereon Where there is no escapement of income, proceedings u/ss. 147/148 are unsustainable 4. The reassessment is time-barred, as the notice u/s 148 was issued beyond the period of limitation as clarified by the Hon'ble Supreme Court in case of Rajeev Bansal and is therefore unsustainable in law (Surviving Period Working Annexed - Annexure 2) 5. Borrowed satisfaction-No independent belief of escapement u/s 147 - The AO has reopened purely on borrowed satisfaction derived from Insight Portal flags and a third-party search in the so-called "Kushal Group", without conducting any independent enquiry or forming a live-link belief on the 3 Appellant's facts. Reopening on third-party/general alerts, without tangible material qua the Appellant, is bad in law 6. Merits Unsupported re-addition of disclosed STCG as "accommodation entries" The AO has erred in treating the disclosed STCG of ₹1,79,40,803 from shares of Kushal Tradelink Ltd as accommodation entries despite (1) complete contract notes, demat statements, bank trail and broker confirmations, (ii) reporting in the ITR, and (iii) payment of due tax. The finding is conjectural, based on generic third-party material, and contrary to evidence on record 7. Failure to conduct proper enquiry / onus discharged by the Appellant - The Appellant discharged the initial burden by furnishing complete documentary evidences. The AO failed to conduct meaningful verification u/s 131/133(6), ignored the bank-/demat-trail, and proceeded on presumptions, the addition is thus perverse and liable to be deleted. 8. The Appellant reserves the right to add, alter, amend, or modify any of the grounds of appeal during the course of the appellate proceedings

5.

The first five Grounds taken by the assessee are against reopening done u/s. 147 of the Act. Shri Sunil Maloo, the Ld. AR of the assessee submitted that the original notice u/s. 148 of the Act was issued on 22.06.2021 which was within the extended time limit as per Taxation and Other Laws Ordinance, 2020 (‘TOLA’) and the AO had surviving period of 8 days only, as per the decision of Hon’ble Supreme Court in the case Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC). As per the decision of the 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 period from 01.04.2021 to 30.06.2021 were deemed to be notice u/s.148A(b) of the Act as amended by the Finance Act, 2021. Further, the directions were issued to supply the materials within 30 days and grant 15 days’ time to the assessee to reply to such notice before passing the order u/s.148A(d) of the Act. The Ld. AR explained that in the present case the assessee was supplied materials on 21.05.2022 and

4 the assesse had filed a reply on 13.06.2022. Thus, the AO was required to issue fresh notice u/s. 148 of the Act, within surviving period of 8 days from the date of reply, which expired on 21.06.2022. However, the AO had issued fresh notice u/s. 148 of the Act on 29.08.2022 which was beyond the surviving period. In view of these facts, the Ld. AR submitted that the notice issued u/s. 148 of the Act was bared by limitation.

6.

Per contra, Shri Kalpesh Rupavatia, Ld. Sr. DR relied upon the orders of the lower authorities.

7.

We have considered the rival submissions. Before we decide the issue of limitation, it will be relevant to tabulate the chronology of events in the present case.

5 8. The crux of the issue to be decided in this case is whether the order u/s 148A(d) dated 27.08.2022 and the notice u/s 148 of the Act dated 26.07.2022, 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 8 days of filing its reply on 13.06.2022, which was till 21.06.2022 only. Since the order u/s 148A(d) of the Act and notice u/s 148 was issued beyond the period of eight days from its reply on 13.06.2022, the same was barred by limitation.

9.

We have carefully considered the rival submissions. In the present case, the original notice u/s 148 of the Act dated 22.06.2021 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

6 (ii) supply of all the relevant information which formed the basis of the show cause notice.

10.

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 information to the assessee, time begins to run for the assesses to respond to the show cause notices. [Emphasis supplied.] 11. 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. 12. 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]. 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,

8 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. [Emphasis supplied.] 13. 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 22.06.2021 which was treated as deemed notice u/s 148A(b) of the Act. Since this notice was issued on 22.06.2021, 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 eight days only. 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 eight 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 21.06.2022 only. As the notice in the present case was issued on 29.08.2022, the same is found to be beyond the limitation period.

14.

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. 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 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 under No of days of Date of providing section 148 under surviving time information under TOLA available till section 148A(b) 30.06.2021 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 1 23.05.2022 996/2023 2017-2018 30.06.2021 1 24.05.2022 SCA NO Due date of Date of reply:- Date of order Last date for issuance of notice filing reply under section under section 148 as per 148A(d) and surviving time:- notice under section 148:- 6387/2023 09.06.2022 04.06.2022 29.07.2022 22.06.2022 5688/2023 06.06.2022 - 27.07.2022 27.06.2022 22260/2022 07.06.2022 06.07.2022 30.07.2022 14.06.2022 996/2023 11.06.2022 10.06.2022 19.07.2022 18.06.2022 68. It is apparent from the above details that impugned notice under section 148 of the Act is issued beyond the period of 'surviving time' as per the direction of Hon'ble Apex Court in case of Rajeev Bansal (supra)and therefore, such notices would be invalid notices. 69. The impugned notices issued under section 148 of the Act are accordingly quashed and set aside being invalid having been issued beyond the 'surviving time'. Accordingly, impugned orders passed under section 148A(d) of the Act would also not survive and are accordingly, quashed and set aside. Subsequent proceedings, if any, undertaken by the respondent would not survive and are also quashed and set aside. The Hon’ble Court held that since the notices under section 148 were issued beyond period of 'surviving time' as per direction of Supreme Court in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC), such notices were invalid.

15.

In view of the facts as discussed earlier and the judgement of the jurisdictional High Court, the impugned notice dated 29.08.2022 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.

16.

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

17.

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

Order pronounced in the Court on 06/07/2026 at Ahmedabad.

Sd/- Sd/- (SANJAY GARG) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 06th July, 2026 Neelesh, Sr. PS (True Copy) आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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