MATHIYAZHAGAN,THIRUVARUR vs. ITO, WARD-1,, TIRUVARUR

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated 16.10.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2015-16 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘).

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 2 :: 16. The AO was in possession that assessee had made cash deposits of ₹3,53,37,485/- in his Lakshmi Vilas Bank account. Hence, in order to verify the transaction, the AO reopened the assessment by issuing notice u/s.148 of the Act on 09.04.2022. In response to notice issued, assessee filed his reply on 25.09.2023 but didn’t respond to any other notices thereafter. No documents were filed by the assessee to prove the nature and source of cash deposits except saying that the cash deposit was from his textile business. The AO being not satisfied, added the sum of ₹3,53,37,485/- as unexplained money u/s.69A of the Act by order dated 26.01.2024.

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 3 :: Therefore, we shall first adjudicate the legal issue whether the notice issued u/s.148 of the Act on 09.04.2022 is barred by limitation. The contention of the Ld.AR as regards the legal issue is concerned is that the time limit for issue of notice under section 148 of the Act i.e. six years from the end of the relevant AY expired on 31.03.2022 and therefore the notice issued in assessee's case on 09.04.2022 is time barred and invalid. The assessee's case is that notice could be issued under section 148 of the new regime for assessment year 2015-16 only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2015-16. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. On 31.03.2022, six years has undisputedly elapsed from the end of the relevant assessment year 2015-16. Consequently, in the present case, the AO cannot issue a notice under Section 148 of the new regime for AY 2015-16 on 01.04.2022. And that the Hon'ble Supreme Court in the case of UOI v. Rajiv Bansal, reported in 469 ITR 430 (SC) has clearly held that notice for the year 2015-16 cannot be issued beyond the period of six years.

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 4 :: 5. The Revenue’s contention consistently being taken (though not represented at the time of hearing, written submission) is that in assessee's case the AO issued notice under section 148A(b) on 27.03.2022 and after enquiry passed the order under section 148A(d) on 09.04.2022. And that as per the 3rd proviso to section 149 of the Act for the purpose of computing the period of limitation, the time or the extended time allowed to the assessee as per the show cause notice issued under section 148A(b) or the period during which the proceeding under section 148A is stayed by an order or injunction of any Court shall be excluded. And that as per the 4th proviso to section 149(1) if the additional time during which the proceedings were stayed is less than seven days, the AO gets the extended period for issue of notice by seven days. Therefore, the Revenue’s case is that in assessee's case the extended time would apply for issuing notice under section 148 of the Act. Hence, the notice u/s.148 of the Act is not barred by limitation.

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 5 :: provisions applicable when the notice u/s.148 of the Act was issued reads

as under (as on 01.04.2022) i.e. new regime: -

149 - Time limit for notice. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021 Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: 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:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 6 :: Explanation.—For the purposes of clause (b) of this sub-section, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151 7. The time limits for issue of notice under section 148 of the Act were amended as above w.e.f. 01.04.2021. Prior to the amendment the relevant provisions of section 149(1) of the Act read as under –

149 - Time limit for notice. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; (c) **** Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. (2) & (3) **** 8. The time limit for issue of notice under section 148 of the Act was revised with effect from 01.04.2021 and the Parliament in order to make the amendment prospective introduced the first proviso to section 149(1). The intent of the first proviso is that the revenue does not get the extended time of ten years where the notices were not issued within a period of six years for AYs prior to 2021-22. The said legislative intent has been clearly explained by the Hon'ble Supreme Court in the case of Rajiv

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 7 :: Bansal (supra). The relevant of observations of the Apex Court is

extracted below -

“– 46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of" 149(1)(b) of the old regime. Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime. 47. **** 48. Notices have to be judged according to the law existing on the date the notice is issued. Section 149 of the old regime primarily provided two time limits: (i) four years for all situations and (ii) beyond four years and within six years if the income chargeable to tax which escaped assessment amounted to Rupees one lakh or more. After 1 April 2021, the time limits prescribed under the new regime came into force. The ordinary time limit of four years was reduced to three years. Therefore, in all situations, reassessment notices could be issued under the new regime if not more than three years has elapsed from the end of the relevant assessment year. For example, for assessment year 2018-2019, the four year period would have expired on 31 March 2023 under the old regime. However, if the notice is issued after 1 April 2021, the three year time limit prescribed under the new regime will be applicable. The three year time limit will expire on 31 March 2022. 49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012- 2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses. 50. to 52. *** 53. The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 8 :: time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.” 9. From the perusal of the legislative intent of the first proviso to section 149(1) of the Act and interpretation given by the Hon'ble Supreme Court it is clear that Revenue cannot issue notice under section 148 for assessment years prior to AY 2021-22 if six years from the end of the relevant assessment year has expired on the date of issue of such notice.

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 9 :: 31.03.2022, six years has undisputedly elapsed from the end of the relevant assessment year 2015-16. Consequently, in the present case, the AO cannot issue a notice under Section 148 of the new regime for AY 2015-16 on 09.04.2022. This legal issue is found to be no longer res- integra. In this regard, it will be gainful to look at the following relevant observations of the Hon'ble Supreme Court in the case of Rajeev Bansal (supra) wherein their Lordship’s have made the following observation regarding validity of notice u/s 148 for AY 2015-16, by observing as under: –

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 10 :: March 2023, while the six-year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.” [emphasis given by us] 11. Further, it is noted that the Hon'ble Supreme Court while dismissing the SLP filed by Revenue in the case of ACIT vs. Nehal Ashit Shah in SLP (Civil) Diary No(s). 57209/2024, dated 04.04.2025 held that notice issued u/s 148 after six years from the end of assessment year i.e on or before 31.03.2022 does not survive. While holding so, Hon'ble Apex Court noted at para 5 as under:

"5. In this regard, reference could also be made to paragraph 19(e) and (f) in the case of Union of India vs. Rajeev Bansal, Civil Appeal No.8629 of 2024 on 03.10.2024 (2024 SCC ONLINE 754) under which the learned Additional Solicitor General for India has made a concession insofar as the assessment year 2015-16 is concerned." 12. The above view is noted to have been again reiterated by the Hon’ble Supreme Court in Deepak Steel and Power Ltd. vs. CBDT [2025] 476 ITR 369 (SC) by stating as under;

"5. As the revenue made a concession in the aforesaid decision that is for the assessment year 2015-2016, all notices issued on or after 1st April, 2021 will have to be dropped as they would not fall for completion during the period prescribed under the taxation and other laws (Relaxation and Amendment of certain Provisions Act, 2020). Nothing further is required to be adjudicated in this matter as the notices so far as the present litigation is concerned is dated 25.6.2021". 13. Therefore, in our considered view, the issue of validity of notice u/s.148 issued after 31.03.2022 is no longer res-integra and accordingly we are unable to appreciate the contention of the Ld. DR that the impugned notice issued on 09.04.2022 is valid, which stand is contrary to the consistent stand taken by the Revenue before Hon’ble Supreme Court

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 11 :: as noted supra. Accordingly, the impugned notice dated 09.04.2022 issued u/s.148 of the Act in assessee's case is undisputedly beyond the time limit, hence barred by limitation.

Writ Petition filed under Article 226 of the Constitution of India, to issue a writ of certiorari to call for the records on the file of the Respondent and quash the impugned order under Section 148A(d) of the Act in PAN:ADDPL2229A dated 04.04.2022 in DIN & Notice No.ITBA/AST/F/148A/2022-23/1042464779(1) for the AY 2015-16 along with the impugned notice no.1 issued under Section 148A(b) of the Act in PAN:ADDPL2229A dated 23.03.2022 in DIN & Notice No.ITBA/AST/F/148A(SCN)/2021-22/1041356299(1) for the AY 2015-16 and the impugned notice No.2 under Section 148 of the Act in PAN:ADDPL2229A dated 04.04.2022 in DIN & Notice No.ITBA/AST/S/148_1/2022- 23/1042466733(1) for the AY 2015-16.

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 12 :: 15. In disposing of the above prayer, the Hon’ble Jurisdictional High Court held as follows:-

“2.The issue, as on date is covered by a decision of the Division Bench of the Bombay High Court in Hexaware Technologies Ltd. Vs. Assistant Commissioner of Income Tax [(2024) 162 taxmann.com 225 (Bombay)]. In paras 29 and 30, the Court has examined the issue in the light of the 1st and 3rd proviso to Section 149 of the Income Tax Act, 1961 as in force with effect from 01.04.2021. The 3rd proviso to Section 149 (1) is now the 5th proviso to Section 149 (1) with effect from 01.04.2023. 3. Although, the submissions made by the learned counsel for the respondents appears to be more attractive, I am bound by the decision of the Division Bench of the Bombay High Court in the above case, which had followed an earlier decision rendered in Godrej Industries Vs. The Assistant Commissioner of Income Tax and Ors. rendered on 28.02.2024.” 16. In view of the foregoing discussion on law and the judicial precedents, we hold that notice for A.Y. 2015-16 issued on 09.04.2022 u/s 148 of Act is barred by limitation. Hence, consequent actions are held to be non est in eyes of law and impugned notice u/s 148 issued on 09.04.2022 for AY 2015-16, deserves to be quashed. Since, assessee succeeds on legal issue, the merits of addition is academic.

Order pronounced on the 05th day of June, 2026, in Chennai.

Sd/- Sd/- (बालकृ�न एस) (एबी टी. वक�) (BALAKRISHNAN. S) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, �दनांक/Dated: 05th June, 2026. YS

YASHVI Digitally signed by YASHVIR SINGH R SINGH Date: 2026.07.03 17:31:50 +05'30'

ITA No.3764/Chny/2025 (AY 2015-16) Mathiyazhagan :: 13 :: आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF