LALIT DHANUKA,MUMBAI vs. ITO WARD 42 (1)(2), MUMBAI, MUMBAI

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ITA 2558/MUM/2026Status: DisposedITAT Mumbai11 June 20266 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 148 on 29.07.2022 was barred by limitation, as the surviving period of limitation under the old regime, even with the benefit of seven days, had expired before the notice was issued. Consequently, the reassessment order was quashed.

What were the facts?

The assessee's reassessment proceedings were initiated based on information regarding accommodation entries. A notice under Section 148 was issued on 29.07.2022, after the original notice under the old regime was deemed a notice under Section 148A(b) pursuant to the Ashish Agarwal judgment.

What were the issues?

The primary issue was whether the reassessment proceedings and the notice issued under Section 148 were within the period of limitation prescribed by law, considering the interplay of TOLA, the substituted reassessment provisions, and the Supreme Court's judgments in Ashish Agarwal and Rajeev Bansal.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148,Section 148A,Section 69A,Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SMT BEENA PILLAI & SHRI JAGADISH

For Appellant: Shri Ajay Daga a/w Shri Navneet
For Respondent: Shri Surendra Mohan- SR. DR
Hearing: 08.06.2026Pronounced: 11.06.2026

PER JAGADISH, AM:

This appeal is directed against the order dated 25.02.2026 passed by the Ld. CIT(A), NFAC, Delhi for the Assessment Year 2014-15 arising from the assessment order passed u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 ("the Act").

2.

The assessee has raised the following grounds of appeal:

"1. The assessment made in pursuance of notice u/s 148 of the Act is void & illegal and, therefore, bad in law as the notice u/s 148 of the Act dated 29.07.2022 was time barred.

ITA No.2558/M/2026 Lalit Dhanuka The ld. CIT(A) erred in confirming the validity of jurisdiction assumed by the ITO u/s 147 of the Act in as much as the information received did not suggest that the appellant's income chargeable to tax escaped assessment. The ITO's order u/s 148A(d) dismissing the appellant's objections to the show cause issued u/s 148A(b) of the Act without addressing the issues raised by the appellant tantamount to non-consideration of the said objections thereby flouting the mandatory provisions of section 148A(c) of the Act. The assessment made is also void and illegal for not furnishing the report of the DDIT (Inv.) and the statements of the persons relied upon and also for not providing opportunity of cross-examination. Even otherwise, the addition made u/s 69A of the Act is void and illegal. The ld. CIT(A) erred in confirming the addition of Rs.53,61,600/- u/s 69A of the Act. The ld. CIT(A) erred in confirming the addition of Rs.2,68,080/- u/s 69C of the Act." 3. Since Ground No.1 challenges the validity of notice issued u/s 148 and goes to the root of jurisdiction, the same is taken up first. The adjudication of this ground may render the remaining grounds academic.

4.

Briefly stated, the assessee filed return of income declaring total income of Rs.7,44,460/-. The return was processed u/s 143(1) of the Act. Subsequently, based on information received from the Investigation Wing alleging that the assessee had obtained accommodation entries in the scrip of Tilak Ventures Ltd., notice u/s 148 under the unamended provisions of the Act was issued on 25.06.2021.

4.1 The assessment order records that the said notice formed part of the category of notices issued during the period 01.04.2021 to 30.06.2021 which were subsequently considered by the Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal. Pursuant thereto, the original notice was treated as a deemed notice issued u/s 148A(b). Thereafter, information was supplied to the assessee, reply was called for, order u/s 148A(d) was passed on 29.07.2022 and notice u/s 148 under the substituted provisions was issued on the same date. Thereafter assessment was completed u/s 143(3) r.w.s.147

ITA No.2558/M/2026 Lalit Dhanuka making addition of Rs.53,61,600/- u/s 69A and Rs.2,68,080/- u/s 69C of the Act.

4.2 Before the Ld. CIT(A), the assessee challenged the validity of reassessment proceedings as well as the additions on merits. The Ld. CIT(A), however, upheld the action of the Assessing Officer. Aggrieved, the assessee is in appeal before us.

5.

The Ld. Authorised Representative submitted that the notice issued u/s 148 dated 29.07.2022 is barred by limitation in view of the judgment of the Hon'ble Supreme Court in the case of Rajeev Bansal vs. Union of India. It was submitted that the original notice under the old regime was issued on 25.06.2021 and the outer time limit available under TOLA expired on 30.06.2021. Thus, only five days of limitation survived. The Ld. AR submitted that after the notice was deemed to be a notice u/s 148A(b) pursuant to Ashish Agarwal and the assessee filed reply on 08.06.2022, the Assessing Officer could utilize only the surviving period available under the old law. Since the surviving period was less than seven days, the Assessing Officer was entitled to only seven days in terms of the statutory extension recognised by the Hon'ble Supreme Court in Rajeev Bansal. Therefore, according to the Ld. AR, the last date for passing order u/s 148A(d) and issuing notice u/s 148 expired on 17.06.2022. As the impugned notice was issued only on 29.07.2022, the same was barred by limitation.

5.1 The Ld. AR furnished the following chronology:

Particulars Date Notice u/s 148 issued under old regime 25.06.2021 30.06.2021 Last date available under TOLA 5 days Surviving period Information supplied pursuant to Ashish Agarwal 26.05.2022 treated as notice u/s 148A(b)

ITA No.2558/M/2026 Lalit Dhanuka 08.06.2022 Reply filed by assessee Last date available after application of seven days 17.06.2022 rule 29.07.2022 Order u/s 148A(d) 29.07.2022 Notice u/s 148 6. The Ld. Departmental Representative relied upon the orders of the lower authorities. It was submitted that the original notice issued on 25.06.2021 stood validated pursuant to the decision in Ashish Agarwal and therefore the reassessment proceedings were validly initiated.

7.

We have heard the rival submissions and perused the material available on record. The short issue before us is whether notice issued u/s 148 on 29.07.2022 is within the period of limitation prescribed under law.

7.1 The material facts are not in dispute. The original notice under the erstwhile provisions was issued on 25.06.2021. Subsequently, by virtue of the judgment of the Hon'ble Supreme Court in Ashish Agarwal, the said notice was treated as a deemed notice u/s 148A(b). Information was supplied to the assessee on 26.05.2022. The assessee filed reply on 08.06.2022. Thereafter order u/s 148A(d) and notice u/s 148 came to be issued on 29.07.2022.

7.2 The controversy regarding limitation of such reassessment proceedings now stands authoritatively settled by the judgment of the Hon'ble Supreme Court in Rajeev Bansal vs. Union of India (469 ITR 46). The Hon'ble Supreme Court examined the interplay between TOLA, the reassessment provisions substituted by the Finance Act, 2021 and the directions contained in Ashish Agarwal.

7.3 The Hon'ble Supreme Court held that Ashish Agarwal did not create a fresh period of limitation in favour of the Revenue. It was further held that TOLA merely extended the limitation available under the old regime and did not confer a fresh right to reopen. Consequently, after compliance with the

ITA No.2558/M/2026 Lalit Dhanuka procedure contemplated under section 148A, the Revenue could proceed only within the balance period of limitation which survived under the erstwhile provisions.

7.4 The Hon'ble Supreme Court further explained that where the surviving period available to the Revenue is less than seven days, the benefit of seven days would be available for completing the jurisdictional exercise contemplated under sections 148A(d) and 148. Thus, the concept of "surviving period" assumes significance while examining the validity of notices issued pursuant to Ashish Agarwal.

7.5 In the present case, the original notice was issued on 25.06.2021 and the last date available under TOLA was 30.06.2021. Therefore, only five days of limitation survived. Since the surviving period was less than seven days, the Revenue became entitled to only seven days after receipt of assessee's reply to the deemed notice u/s 148A(b).

7.6 The assessee filed reply on 08.06.2022. Consequently, the Assessing Officer was required to pass order u/s 148A(d) and issue notice u/s 148 on or before 17.06.2022. Admittedly, both these jurisdictional actions were undertaken only on 29.07.2022, i.e., more than one month after expiry of the permissible period available under law.

7.7 In our considered view, once the limitation available under the statute expired on 17.06.2022, the jurisdiction itself stood extinguished. The Revenue cannot derive any advantage from Ashish Agarwal because the Hon'ble Supreme Court in Rajeev Bansal has categorically held that Ashish Agarwal did not confer a fresh period of limitation. The Revenue could proceed only within the surviving limitation available under the old regime.

7.8 Respectfully following the judgment of the Hon'ble Supreme Court in Rajeev Bansal vs. Union of India (supra), we hold that notice issued u/s 148 dated 29.07.2022 is barred by limitation and therefore invalid in law. 5

ITA No.2558/M/2026 Lalit Dhanuka Consequently, the assessment framed pursuant to such invalid notice cannot survive.

8.

We accordingly quash the reassessment order passed u/s 143(3) r.w.s.147 of the Act dated 21.05.2023.

9.

Since we have annulled the reassessment proceedings on the legal issue itself, the remaining grounds raised on merits of the additions become academic and are not adjudicated.

10.

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

1.

Order pronounced in the open court on 11/06/2026.

Sd/- Sd/- (BEENA PILLAI) (JAGADISH) Judicial Member Accountant Member Mumbai, Dated: 11/06/2026 PS

Copy of the order forwarded to: 1. Appellant 2. Respondent 3. The CIT 4. The CIT (Appeals) 5. The DR, I.T.A.T. By order

(Assistant Registrar) ITAT, Mumbai

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