GIANT CONSTRUCTION COMPANY,CHENNAI vs. DCIT, CC-1(4), CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai-18, both dated 08.10.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2017-18.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 2 :: and railways. A search action was conducted u/s 132 of the Act upon Shri C P Anbunathan on 22.04.2016 and Shri P Janakar on 10.05.2016. During the course of search upon Shri P Janakar, the business premises of the assessee was also searched. Upon analysis of the material seized in the course of the search at Shri P Janakar, it was gathered that, they contained various transactions and notings of receipts of the assessee. Accordingly, proceedings u/s 153C of the Act was initiated in the matters of the assessee and notice u/s 153C of the Act for AY 2017-18 was issued on 30.11.2018. The assessee filed the return of income on 05.12.2018. Notices u/s 143(2) & 142(1) issued by the AO, were partly complied with by the assessee. The AO had inter alia requisitioned the details of sundry creditors with confirmations, which was not furnished by the assessee. The AO accordingly added the outstanding sundry creditors of Rs.10,96,92,359/- for want of evidence. Being aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A). The assessee is found to have furnished the details of sundry creditors by way of additional evidence. The Ld. CIT(A) admitted the same and called for a remand report from the AO. The AO in his remand report stated that, out of total creditors of Rs.10,96,92,359/-, creditors to the extent of Rs.10,20,14,272/- have confirmed the balances against the assessee. The AO further observed that, though the remaining three creditors viz., M/s Raj Enterprises [in short ‘Raj’], M/s Shree Sivabalaji Steels [in short

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 3 :: ‘SSS’] and M/s Vinayaga Industrial Corporation [in short ‘VIC’] had confirmed transactions with the assessee but found discrepancies in the ledgers furnished by them, which aggregated to Rs.76,72,087/-. The Ld. CIT(A) also noted a minor difference of Rs.6,000/- in the case of one creditor, which he chose to ignore. The Ld. CIT(A) following the reasoning set out in the remand report retained addition to the extent of Rs.76,72,087/- and deleted the balance addition of Rs.10,20,20,272/-. Aggrieved by the Ld. CIT(A)’s action, the assessee has come in appeal before us which is titled ITA No.3214/Chny/2025.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 4 :: on 28.07.2022. Notices u/s 143(2) and 142(1) of the Act was issued and served upon the assessee. After examining the details furnished by the assessee, the AO completed the reassessment u/s 147/143(3) vide order dated 28.03.2023 after making addition of Rs.7,05,108/- u/s 40A(3) of the Act. On appeal the Ld. CIT(A) confirmed the addition, aggrieved by which the assessee has filed the present appeal in ITA No.3213/Chny/2025.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 5 :: 6. Coming to the discrepancies in relation to closing balances of Raj and SSS, it is seen that, the Ld. CIT(A) had quantified the same in the following manner:-

Sl. Creditor Cl. Bal. on Cl. Bal. on Difference No. 31.03.2017 31.03.2017 as per as per assessee creditor 1 Raja Enterprises 65,00,000 1,35,562 63,64,438 2 Shree Shivabalaji Steel 12,87,940 NIL 12,87,940

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 6 ::

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 7 ::

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 8 :: 9. Also the confirmation issued by Raj, copy of which was placed at Page 56 of paper book, is also reproduced hereunder:-

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 9 ::

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 10 :: 31.03.2017 cannot be said to be bogus. The addition of Rs.63,64,438/- confirmed by the Ld. CIT(A) on account of Raj is held to be unsustainable.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 11 :: observed that, the lower authorities themselves had found more than 93% of the closing balance of creditors to be verifiable and therefore these discrepancies in the confirmation(s) issued by the creditor(s) being plausible, are found to have been reasonably explained. We thus are in the agreement with the Ld. AR that, the closing balances of both the creditors, Raj and SSS was not bogus. We accordingly direct the AO to delete the addition of Rs.76,52,378/- made on account of unreconciled creditors. Therefore, Ground No. 4 stands partly allowed.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 12 :: Agarwal (444 ITR 1). The Ld. AR pointed out that, the notice(s) issued under section 148 issued between July, 2022 and September, 2022 was nothing but substitution of the notices which were issued under TOLA by the Revenue between 1st April 2021 and 30th June 2021. This according to him, was fortified by directions of the Hon'ble Apex Court to exclude the period from 30th June, 2021 till 4th May, 2022 the date of decision in case of Ashish Agarwal (supra) and exclusion of the time till the information is provided to the assessee as required under section 148A(b) of the Act i.e. exclusion of 14 days for filing reply or raising objections by the assessee and thereafter, the order u/s 148A(d) and notice u/s 148 of the Act is required to issued between surviving time as per TOLA i.e. from the date of issuance of notice under TOLA till 30th June, 2021 as explained by Hon'ble Apex Court in paragraph nos. 94 to 112 in case of Rajeev Bansal (supra). Since the surviving period was less than 1 day, the Ld. AR submitted that, the fourth proviso of section 149(1) of the Act would come into play and therefore the time limit would stand extended to 7 days. The Ld. AR thus claimed that, having regard to the date of supply of information by the AO, the date on which the reply was filed by the assessee and the surviving period read with fourth proviso to Section 149 of the Act, the last date for issuance of notice u/s 148 of the Act was 21.06.2022, and that the AO had issued the notice on 28.07.2022, which in his view, was barred by limitation.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 13 :: 13. Per contra, the Ld. DR appearing for the Revenue submitted that the impugned notice was issued within the period of limitation and thus supported the action of the AO.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 14 :: equitable standards. Subsequently, the Hon'ble Supreme Court in the case of Rajeev Bansal (supra) explained the defenses pertaining to the limitation periods prescribed under the new Section 149 of the Act and the timelines which was available with the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The Hon’ble Supreme Court also explained the concept of surviving or balance time limit which is to be calculated by computing number of days between dates of issuance of deemed notice and 30.06.2021. The relevant Paras 108 to 112 of the judgment is reproduced hereunder:-

“108. The Income-tax Act read with TOLA extended the time limit for issuing reassessment notices under section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. [Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.'] Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that 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 the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021. 109. If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 15 :: corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. A P Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing there from. 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 assessees 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."

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 16 :: 15. From the above observations, the sequitur which emerges is that, firstly, the date of issuance notice u/s 148 under the old regime reckoned to be the date of issuance of the deemed notices u/s 148A(b); secondly, the period from the date of the issuance of the deemed notice till the supply of relevant information and material by the AO to the assessee is to be excluded from the computation of the period of limitation; thirdly, a period of two (2) weeks is to be granted to the assessee to reply to the show-cause notice and such period is also to be excluded in terms of third proviso to Section 149 of the Act, fourthly, when the response of the assessee to the show-cause notice is received, then the reckoning of the time-limit for issuance of notice u/s 148 of the Act commences. So, after the receipt of reply, the AO is required to consider the reply of the assessee u/s.148A(c); take a decision u/s.148A(d) based on the available material and the reply of the assessee; and then issue a notice u/s.148 if he is of the view that it was a fit case for reassessment. The Hon’ble Supreme Court has given an illustration to compute the surviving time available with the AO to issue the notice u/s 148 of the Act. It has been made abundantly clear by the Apex Court that, the calculation of surviving time would begin from the period when the first notice u/s.148 was issued under old regime till the last date of limitation for issuance of notice u/s.148 of the old regime; and that period has been reckoned as the surviving time period left for the ld. AO while issuing notice u/s.148

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 17 :: under the new regime. So whatever surviving time is left, the AO has to issue notice within that surviving time. The relevant findings of the Hon’ble Supreme Court in this regard, was as follows:-

“114. ….. (g) The time during which the show-cause notices were deemed to be stayed is from the date of issuance of the deemed notice between April 1, 2021 and June 30, 2021 till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Agarwal, and the period of two weeks allowed to the assessees to respond to the show-cause notices; and (h) 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 the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. All notices issued beyond the surviving period are time barred and liable to be set aside;" 16. If in case the surviving time, like here in this case, is less than seven (7) days, because original notice u/s.148 under the old regime was issued on 30.06.2021 and the last date on which notice could have been issued under old regime was up till 30.06.2021; then the surviving time left would stand extended upto seven (7) days by virtue of the fourth proviso to Section 149 of the Act.

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 18 :: Sl Particulars Date Surviving No. Days Date of issuance of notice u/s 148 of the Act under 30.06.2021 1 old regime Last date of issuance reopening as Per TOLA [since 30.06.2021 1 2 information value less than Rs.50 lacs in AY 2017- 18] Since the time period available is less than 7 days, 7 3 the same is extended as per 4th proviso of section 149(1) Date of supply of information as per the decision of 31.05.2022 4 UOI Vs Ashish Agarwal Two weeks’ time period allowed to the Assessee to 14.06.2022 5 reply to the notice 6 Date of response by the Assessee 14.06.2022 7 Last date for issuance of notice u/s 148 of the Act 21.06.2022 9 within the surviving time period [14.06.2022 + 7 days] Date of passing order u/s 148A(d) and issuance of 28.07.2022 10 notice u/s 148 of the Act

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 19 :: High Court in the case of Dhanraj G Kella Vs ITO (177 taxmann.com 194) wherein it was held as under:-

“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 Date of providing under section 148 of surviving time information under 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 Date of order Last date for issuance of filing reply reply:- under section notice under section 148 as 148A(d) and per 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,

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 20 :: quashed and set aside. Subsequent proceedings, if any, undertaken by the respondent would not survive and are also quashed and set aside. 19. Accordingly, we hold that notice u/s. 148 dated 28.07.2022 is barred by limitation, and consequently, the re-assessment proceedings as well as the impugned order dated 28.03.2023 and the addition made therein, is held to be ab initio void.

Order pronounced on the 6th day of May, 2026, in Chennai.

Sd/- Sd/- (इंटूरी रामा राव) (एबी टी. वर्की) (INTURI RAMA RAO) (ABY T. VARKEY) न्यानयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनांक/Dated: 6th May, 2026. KB आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकरआयुक्त/CIT, Chennai / Madurai / Salem / Coimbatore. 4. ववभागीयप्रविविवि/DR 5. गार्डफाईल/GF

ITA Nos.3213 & 3214/Chny/2025 (AY 2017-18) Giant Construction Co. :: 21 ::