MITHIL SURESH DHOTRE ,PUNE vs. ITO WD-8(1), PUNE

आदेश /ORDER

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 („the Act‟) for AY 2015-16 on 01.08.2025, emanating from the Assessment Order u/s 147 r.w.s. 144 r.w.s. 144B of the Act, dated 21.03.024.

ITA No. 2167/PUN/2026 Submission of Ld. AR :

Submission of Ld. DR :

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Income-tax Act, 1961 prohibits assessee from raising the jurisdictional issue before Hon'ble bench after lapse of considerable time. 2. As regards, the Additional ground 1 is revised by the assessee and filed on 22.07.2026 is as below:-

'On the facts and circumstances of the case the notice issued under section 148 dated 06.04.2022 was beyond the time limit prescribed under section 149(1). Consequently, the reassessment proceedings initiated pursuant to such notice are without jurisdiction and liable to be quashed.

At the outset it is requested to dismiss the additional grounds raised by the assessee, as the same were not raised before lower authority. Without waiving revenue's right to oppose additional ground filed at admission stage, the submission w.r.t issue of validity of notice u/s 148 for AY 2015- 16 is submitted and the same may kindly be considered.

Facts of the case

The assessee is a individual and no return of Income for AY 2015-16 has been filed by the assessee. As per the information in the possession of the AO, high value transactions were carried out by the assessee during FY 2014-15. In view of this information, the AO issued notice u/s 148A(b) on 23.03.2022 and allowed the assessee time till 30.03.2022 to respond. However, assessee failed to respond and AO passed order u/s 148A(d) and issued notice u/s 148 on 06.04.2022. The order u/s 147 rws 144B was passed on 11.03.2024 determining total income at Rs.54,05,000/-.

Since the additional ground no. 1 & 2 was not made before Ld. CIT(A), no adjudication was done on the issue of validity of 148 notice.

Appeal before Hon.ITAT

Is notice u/s 148 issued in case of assessee is hit by 1st proviso to Section 149(1)?

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5.1 As per the first proviso to section 149(1) of the new regime, no notice shall be issued for the relevant assessment year beginning on or before 01.04.2021, if such notice could not have been issued at that time on account of being time-barred as per clause (b) of 149(1) of the old regime (Reassessment provisions as applicable before 01.04.2021). Under the old regime, notice u/s 148 could be issued for up to 6 years. Thus, for AY 2015-16, the time available for issuing notice u/s 148, as per old law, was till 31.03.2022. Therefore, as per the new section 149(1) rws first proviso to section 149(1), the time- barring for AY 2015-16 was 31.03.2022, if the escaped income was more than Rs.50 Lakhs. In the case of the assessee, the escaped income was more than Rs. 50 lakhs and therefore, time limit to issue the notice was 31.03.2022. The AO issued notice u/s 148A(b) on 23.03.2022 and allowed the assessee time till 30.03.2022 to respond. However, assessee failed to respond and AO passed order u/s 148A(d) and issued notice u/s 148 on 06.04.2022. As per the fifth proviso to section 149 (1)(b),

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Thus, after exclusion of 7 days which were allowed to the assessee, as per notice u/s 148A(b), the notice u/s 148 was within 31.03.2022. Therefore, the AO has rightly issued notice u/s 148 for AY 2015-16 on 06.04.2022. After excluding the period of 7 days provided to the assessee for replying to the notice u/s 148A(b), legally notice u/s 148 was issued before 31.03.2022 ie within the time limit prescribed u/s 149 after exclusion of the period allowed to the assessee under notice u/s 148A(b).

Is notice u/s 148 dated 06.04.2022 in the case of assessee valid under new regime ?

5.2 The notice u/s 148 was issued on 06.04.2022. Therefore, it was case of reassessment beyond the three year period. So, it had to qualify the test of section 149(1)(b). Therefore, following conditions needed to be fulfilled

a. Amount of escapement of income is more than 50 Lakhs

b. Sanctioning authority should be PCCIT.

Further, the procedure prescribed in section 148A needed to be followed. In the case of the assessee, the escapement of income is

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more than 50 Lakhs and sanctioning authority is PCCIT, Pune. Further, notices u/s 148(b) was issued on 23.03.2022. Order u/s 148(d) was passed on 06.04.2022. Subsequently, notice u/s 148 was issued on 06.04.2022 and after applying time exclusion as per fifth proviso, it was deemed to be within 31.03.2022. Thus, it is a valid notice as per section 149(1)(b) rws first and fifth proviso.

Does first proviso gets precedence over the fifth proviso ?

5.3 It is necessary to look into the purpose of use of "Proviso" in legal drafting. A proviso to a section or sub-section is a legal clause that begins with the words "Provided that...". Its primary purpose is to qualify, exclude, limit, or create an exception to the main, general enactment, taking out of it a specific situation that would otherwise fall within its scope. For eg. In case of new amended section 149(1), the first proviso to new section 149(1) restricts the time period for issuing reassessment notices for AY 21-22 and earlier AYrs by linking it to time limits prescribed under the old Section 149 (un-amended) and does not allow the benefit of extended time limits under new law. For eg. though a notice u/s 148 is issued in say, January 2022 and new section 149(1) allows reassessment upto ten years, no notice u/s148 can be issued for say AY 2012-13 in January, 2022. This is due to the first to proviso to new section 149(1) which limits reassessment as per old section 149(1) where the time limit up to 6 years was prescribed. Thus, we see that first proviso limits or qualifies or excepts the time limits given in the main sub-section (1).

5.3.1 Now, let us see what purpose 5th proviso to section 149(1) serves. The relevant proviso is reproduced below

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (6) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

The proviso starts with the words " that for the purposes of computing the period of limitation as per this section". Thus, it is evident that while computing the period of limitation of three years or ten years, the time excluded as per this proviso should be considered. This proviso excludes the time allowed to the assessee as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order of any court. Thus, this proviso stops the clock of limitation at the moment stay/injunction/notice u/s 148A(b) is issued and restarts only when stay/injunction is lifted or time allowed as per notice u/s 148A(b) ends. Thus, this proviso excludes certain mandated time in special cases, creating an exception to time lines as per main sub-section.

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5.4 It is a trite law that section as a whole should be read together and not in parts. No one proviso should be considered having primacy over the other. The doctrine of harmonious construction is a fundamental rule of statutory interpretation used to resolve conflicts between different provisions of a statute or between multiple statutes. It mandates that seemingly contradictory provisions should be interpreted to give effect to both, ensuring that no provision is rendered useless or dead, as the legislature is presumed not to create inconsistencies. Provisions must not be read in isolation but as part of the entire statute, aligning with the overall legislative intent.

Further support is available from the Delhi High Court in BKR Capital (P.) Ltd. [2026] 187 taxmann.com 10.The SLP filed by the assessee is dismissed by the Hon'ble Supreme Court in the case as reported in [2026]187 taxmann.com 10739SC) dt. 29.05.26. In paragraph 12 of the High Court order, the Revenue's written submission, which was expressly noticed by the Court, argued that section 149(1) must be read as one composite limitation framework. The First Proviso cannot be interpreted in isolation from the Fifth Proviso providing exclusion of time. The Court accepted this approach and held that the first proviso merely prevents retrospective enlargement of limitation and does not override the statutory exclusion mechanism. Accordingly, where proceedings under section 148A(b) are initiated within limitation, the period allowed to the assessee must be excluded while computing limitation. An interpretation rendering the exclusion proviso otiose is impermissible.

Provision for benefit of Taxpayer

5.5 New reassessment regime was brought in to safeguard the interests of the taxpayers and bring in transparency in the reassessment proceedings. Hence, new section 148A was introduced where in opportunity is given under section 148A(b) to the taxpayer of being heard in respect of the information in the possession of the department. It is in this context the fifth proviso excludes the time or the extended time allowed u/s 148A(b) notice. This is beneficial provision and in the interest of the transparency. Treating this proviso as redundant does not serve any purpose

New Machinery after 01.04.2021

5.6 It is pertinent to note that Supreme Court in various decisions and most famously in Union of India v. Ashish Agarwal [2022]444ITR1(SC) has stated that after 01.04.2021, the procedure for reassessment should be the new regime brought in by the FA 2021. Now, as per first proviso to section 149(1) of the new regime, as on 01.04.2021, the AY 15-16 was "live year or actionable year" ie the farthest department

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can go back and reassess, provided other conditions such quantum of escapement etc. are satisfied. Hence, after 01.04.2021, for initiating reassessment proceedings for AY 2015-16, new machinery of reassessment such as section 148A had to be used. This will include notices u/s 148A(b), order u/s 148A(d) etc. Now, when these sections are to be given full effect all relevant provisions related to these sections have to be considered. The fifth proviso to section 149(1) provides exclusion of time or extended time allowed to the assessee to reply to notice u/s 148A(b). To ignore this proviso would be curtail the operation of the section 148A.

5.6.1 Once the first proviso is satisfied (i.e., the year was "actionable" on 01.04.2021 for AY 2015-16), the computation of the actual date of expiry for that "actionable" year must be done in accordance with the current statutory framework, which includes the provisions of section 148A and fifth proviso to section 149(1). To hold otherwise would be to suggest that for any year beginning on or before 01.04.2021, the Revenue must comply with the new Section 148A (natural justice) but is denied the time-exclusion benefits under fifth proviso to specifically provided to facilitate that compliance. This would create a legislative absurdity where the Revenue is burdened with more procedures but stripped of the time to complete them. It can also be argued that if the machinery of the old regime was used for AY 2015-16 then notice u/s 148 would have been well within time as it is compliance with section 148A procedures which had necessitated extra time.

Impinges on powers of Judiciary

5.6.2 The subordination of the fifth proviso to the first proviso also results in impinging on the powers of judiciary. This proviso excludes the time allowed to the assessee as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order of any court. Thus, this proviso stops the clock of limitation at the moment stay/injunction is granted and restarts only when stay/injunction is lifted. Now, let us suppose a scenario when fifth proviso is rendered un- operational. Suppose notice u/s 148(b) for AY 2015-16 is issued on 10.03.2022 and assessee files writ against the notice in High Court. High Court grants stay on 15.03.2022. The stay is vacated on 07.04.2022 and writ is dismissed. Then will the reassessment proceedings be barred by limitation as the time barring date was 31.03.2022? This scenario leaves revenue with no recourse. It also impinges on the powers of the judiciary. This surely is not the intention of the legislature. The courts should prefer an interpretation that makes a statute effective, operative, and functional rather than one that defeats its purpose or renders it meaningless. Harmonious construction of the new reassessment regime is necessary as it was

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brought in to safeguard the interests of the taxpayers and bring in transparency in the reassessment proceedings.

Decision of Bombay High Court in Hexaware Technologies

Thus, the Hon'ble Bombay High Court has clearly mentioned how the section 149 has to be read. First exclusion provisos such as fifth and fourth (fifth/sixth in HC order as by FA 2023, three new provisos related search were introduced and fifth proviso became fifth proviso) and then the test of first proviso should be applied. Thus, in the case of the assessee, at first instance if the exclusion of fifth proviso is applied then the notice is within 31.03.2022 and thus, passes the test of first proviso.

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Conclusion : The interpretation that views the first proviso as an overriding "veto" over the rest of the section goes against the established principles of law. The first proviso specifies that a notice cannot be i.ssued if it "could not have been issued at that time" under the old law. This phrase "at that time" refers to the limitation status as of 01.04.2021. Since AY 2015-16 was not barred as of 01.04.2021, the first proviso does not prohibit the issuance of the notice; it merely limits the Revenue's ability to use the new 10-year window for cases that were already dead under the 6-year window. To give primacy to the first proviso over the fifth proviso fails the test of harmonious interpretation. It also creates absurd situation where after 01.04.2021, the Revenue is expected to comply with the new Section 148A (natural justice) but is denied the time-exclusion benefits specifically provided to facilitate that compliance. The fifth proviso to Section 149(1) is essential to the working of the new assessment. Any interpretation which renders fifth proviso otiose is not as per the letter and spirit of the law. Lastly, the fifth proviso accommodates the Judicial intervention. The overruling of the fifth proviso may lead to unintended consequence of impinging on the scope of exercise of the powers by Constitutional courts. Further, the para 30 of the decision of Jurisdictional High Court in Hexaware Technologies Limited [2024] 162 taxmann.com 225 (Bombay)/[2024] 464 ITR 430 (Bombay) supports the above contention of the Revenue. 7.1 The ratio of BKR Capital directly supports the Revenue case. In the present case also, notice under section 148A(b) was issued within the live period. After excluding the statutory period granted to the assessee under the fifth proviso to section 149(1), the notice under section 148 falls within limitation. This reasoning complements the Bombay High Court decision in Hexaware Technologies, both requiring harmonious construction of all provisos to section 149(1). 7.2 Thus, in view of the above, though the notice u/s 148 was issued on 02.04.2022, through the application of fifth proviso to section 149(1) is legally indistinguishable from a notice issued on or before 31.03.2022. In view of the above discussion, it is prayed that the reassessment proceedings may kindly be upheld. Submitted for kind consideration.”

Findings & Analysis :

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Admittedly, notice u/s 148 was issued on 02.04.2022 for AY 2015-16.

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“notwithstanding anything contained in the specified Act.” Section 3(1), therefore, overrides the time limits for issuing a notice under Section 148 read with Section 149 of the Income Tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re- assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income Tax Act, PART C including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015- 2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: ……………. f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA;……………. 11. In the case of Spicy Sangria Hotels Pvt. Ltd. (supra), the Hon’ble Bombay High Court held as under: “2. The above Writ Petition is filed to quash and set aside the Notice dated 28th July 2022 issued under Section 148 of the Income Tax Act, 1961. The assessment year in question is A.Y.2015-16. As far as this assessment C) year is concerned, the Hon'ble Supreme Court in the case of Union of India Vs. Rajeev Bansal [2024] 469 ITR 46 (SC) in paragraph 19(f) has recorded the concession made by the learned ASG that for the A.Y.2015-16, all notices issued on or after 1st April 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation And Other Laws (Relaxation And Amendment of Certain Provisions) Act, 2020. 3. Admittedly in the facts of the present case, the Notice issued under Section 148 is after 1st April 2021 (namely, on 28th July 2022). This being the case, we find that in the facts of the present case, the Notice issued under Section 148 dated 28th July 2022 would have to be dropped and cannot be proceeded with further. 4. We accordingly quash and set aside the said notice dated 28th July 2022 issued under Section 148 of the IT Act.” 12. We also find the Pune Tribunal in the case of Vishnu Subhash Agarwal (supra) in turn relying on the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra) has taken a similar view on the impugned issue in favour of the assessee by observing as under: “13. We find since the notice u/s 148 of the Act has been issued after the statutory due date as per the decision of the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal (supra), therefore, such notice for reopening being barred by limitation has to be quashed. We accordingly, quash the reassessment notice issued by the Assessing Officer. Since the assessee succeeds on this legal ground i.e. validity of re-assessment proceedings, therefore, the grounds challenging the addition on merit are not being adjudicated being academic in nature. The grounds raised by the assessee are accordingly allowed.”

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Order pronounced in the open Court on 25th August, 2026

Sd/- Sd/- (PAVAN KUMAR GADALE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER

पुणे/Pune; दिन ांक/Dated : 25-08-2026 Ravi Kumar Digitally signed by Ravi Kumar Ravi Kumar Date: 2026.08.25 15:20:46 +05'30' आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent 3. The concerned Pr. CIT, Pune 4. DR, ITAT, „B‟ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण,पुणे / ITAT, Pune