MANISHKUMAR DEVJIBHAI AGHARA,RAJKOT, GUJARAT vs. ITO WARD 1, MORBI, MORVI, GUJARAT

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ITA 28/RJT/2026Status: DisposedITAT Rajkot04 May 2026AY 2017-1810 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 148 of the Income Tax Act was time-barred as it was issued beyond the 'surviving time' as per the directions of the Supreme Court in Rajeev Bansal. Consequently, the reassessment order was quashed.

What were the facts?

The assessee's case was reopened for AY 2017-18 due to an investment of Rs. 29,00,000/- in a partnership firm, which was not commensurate with the assessee's return profile. The assessee failed to provide satisfactory replies or documents to the Assessing Officer.

What were the issues?

Whether the notice issued under Section 148 for reassessment was time-barred, and if so, whether the consequent assessment order is valid.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 148,Section 148A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Appellant: Ms Rutvika, Ld. AR
Hearing: 06/02/2026Pronounced: 04/05/2026

आदेश/ORDER

Per Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2017-18, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals) [‘Ld. CIT(A)’], dated 12.11.2025, which in turn arises out of an assessment order passed by the Assessing Officer (assessing officer) u/s. 147 r.w.s. 144 of the Act, on 26.04.2023.

2.

The assessee has raised the following grounds of appeal: “1. The Ld. CIT(A) has erred in law as well as on fact by upholding addition of Rs.29,00,000/- made by Ld. assessing officer being capital introduced by assessee in partnership firm treated as unexplained investment u/s 69 of the Act. 2. The Ld. CIT(A) has erred in law as well as on fact by passing an ex parte order without providing sufficient opportunity of being heard. 3. The Ld. CIT(A) has erred in law as well as on fact by upholding an action of Ld. assessing officer which is issuance of notice u/s 148 dated 11.06.2021 i.e. after expiry of 3 years for AY 2017-18, hence time barred and invalid.”

3.

Succinctly, the factual panorama of the case is that assessee before us is an Individual. The case of the assessee was reopened for the reasons that the assessee had made an investment of Rs.29,00,000/- by way of partner capital in a partnership firm/LLP namely M/s. Lenora Vitrified LLP (PAN-AAGFL4184J). However, on-going through the particulars of return of income filed by the assessee for the relevant year, it was noticed by the assessing officer that the said investment did not commensurate with the return profile of the assessee for assessment year (AY) 2017-18. The assessee filed return of income for A.Y. 2017-18, on 10-10-2017 declaring total income Rs.4,41,690/-. Subsequently, notice u/s 148 of the Income Tax Act, 1961 was issued for AY 2017-18 on 29/06/2022. The case was reopened for the reasons that the assessee had made an investment of Rs.29,00,000/-, by way of partner capital, in a partnership firm/LLP namely M/s. Lenora Vitrified LLP (PAN-AAGFL4184J). However, on-going through the particulars of return of income filed by the assessee for the relevant year, it was noticed by the assessing officer that the said investment did not commensurate with the return profile of the assessee for AY 2017-18. The assessee did not submit any reply in response to notices issued to him. The assessee was asked to furnish copies of Bank statements, loan details if any taken, identity and creditworthiness of the lender/depositor and genuineness of transactions with the Page 2 of 10 help of contra confirmation, ITR details, Copies of bank statements of the lender, details of sources of fund to the tune of Rs.29,00,000/-, invested in the partnership firm/LLP namely M/s Lenora Vitrified LLP and other relevant documents but assessee has failed to file any reply to any of the notices issued to him. Therefore, based on the above observations and the material/information on record, the unexplained investment to the tune of Rs.29,00,000/-, chargeable to tax, has escaped assessment in the hands of the assessee and added back to the total income of the assessee u/s 69 of the Income Tax Act, 1961 for A.Y.2017- 18.

4.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer, therefore, the assessee is in further appeal before this Tribunal.

5.

Learned Counsel for the assessee, at the outset, submitted that assessee’s case does not fall under the survival period, decided by the Hon’ble Supreme Court in case of UOI vs. Rajeev Bansal, 167 taxmann.com 70 (SC)/469 ITR 46 (SC). The last date for issue of notice under section 148 of the Act, under new law, was on 20.06.2022, whereas actual notice under section 148 of the Act was issued on 28.06.2022. Hence, the notice issued by the assessing officer under section 148 of the Act is barred by limitation and therefore, assessment order passed by the assessing officer should be quashed.

6.

On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

7.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon and perused the fact of the case including the findings of the Ld. CIT(A) and other materials brought on record. Learned Counsel for the assessee submitted before me, a chart showing date of events, which is reproduced below:

From the above chart, I note that assessing officer has issued original notice u/s 148 of the Act on 11.06.2021, which is placed at Page no. 2 of the paper book. Thereafter, the assessing officer issued notice u/s 148A(b) of the Act dated 18.05.2022, which is placed at Page No. 3 of paper book. After that, the assessing officer issued final notice u/s 148 of the Act, on 28.06.2022, which is placed at Page No. 8 of the paper book. Therefore, I find that last date for issuing notice u/s 148 of the Act under new regime was up to 20.06.2022. However, actual notice issued by the assessing officer under new regime u/s 148 of the Act, is on 28.06.2022, therefore, the notice issued by the assessing officer u/s 148 of the Act, on 28.06.2022 is time barred. Therefore, assessment order framed by the assessing officer under section 147 of the Act should be quashed and for that reliance is placed on the judgment of Hon’ble Supreme Court in case of Rajeev Bansal 167 taxmann.com 70 (SC), wherein it was held as follows: “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.163 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 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. 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, 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.”

8.

I further note that the said technical issue is also covered by the judgement of the jurisdictional High Court of Gujarat in case of Ashitkumar Satishchandra Patel vs. ITO, (2025) 179 taxmann.com 188 (Guj.), wherein it was held as follows: “3. Brief facts of the case are that the respondent Assessing Officer issued notice dated 30.06.2021 under section 148 of the Act for the Assessment Year 2016-2017 during the extended time period as per Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 [(2020) 422 ITR (St.) 116] (For short “TOLA”).

4.

In view of the decision of Hon’ble Apex Court in case of Union of India and others v. Ashish Agarwal reported in (2022) 444 ITR 1 (SC), the aforesaid notice was to be treated as notice under section 148A(b) of the Act which has come into statute with effect from 01.04.2021. 5. The Hon’ble Apex Court in case of Union of India v. Rajeev Bansal reported in (2024) 469 ITR 46 (SC) has laid down the law to consider such notice as valid notice or invalid notice depending upon the surviving time left between the date of issuance of notice under section 148 of the Act read with section 3(1) of TOLA upto 30.06.2021 and the issuance of notice under section 148 pursuant to the directions issued by the Hon’ble Apex Court in case of Ashish Agarwal (supra). 6. This Court in case of Dhanraj Govindram Kella v. Income Tax Officer, Ward(2), Surendranagar (Judgment dated 08.07.2025 rendered in Special Civil Application No.6387 of 2023 and allied matters) has considered in detail the submissions made by both the sides and has held as under: “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 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):

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 Accordingly, ‘surviving impugned time’. 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. 70. Rule is made absolute to the aforesaid extent. No order as to costs.” 7. In the facts of the case, the respondent Assessing Officer has provided information pursuant to the directions issued by the Hon’ble Apex Court in case of Ashish Agarwal (supra) on 27.07.2022 and therefore, considering 15 days’ time to file reply by the assessee, the due date would be 18.08.2022. The petitioner filed reply on 11.08.2022. The order under section 148A(d) of the Act was passed on 29.08.2022 and notice under section 148 of the Act was issued on 30.08.2022. However, considering the period of limitation from the date of issuance of notice under section 148 read with TOLA upto 30.06.2021, the limitation for issuance of notice under section 148 of the Act applying the decision of Hon’ble Apex Court in case of Ashish Agarwal (supra) as well as Rajeev Bansal (supra), would be 25.08.2022. 8. Learned Senior Standing Counsel Ms. Maithili D. Mehta has verified the above dates and could not controvert the same. 9. In view of above, the impugned notice dated 30.08.2022 issued under section 148 of the Act would be invalid notice as the said notice is issued after 25.08.2022 as per the decision of Hon’ble Apex Court in case of Ashish Agarwal (supra). Therefore, the impugned notice having been issued beyond the ‘surviving time’ would be invalid notice as held by the Hon’ble Apex Court in case of Rajeev Bansal (supra) in the following paragraph no. 114 (g) and (h) of the judgment: “114. In view of the above discussion, we conclude that: xxx (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 [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , 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. 10. In view of foregoing reasons, impugned order dated 29.8.2022 and notice dated 30.08.2022 is hereby quashed and set aside and all consequential proceedings are also quashed and set aside.” 9. Therefore, respectfully following the binding judgment of Hon’ble Supreme Court in case of Rajeev Bansal (supra) and Hon’ble jurisdictional High Court of Gujarat in case of Ashitkumar Satishchandra Patel (supra), I quash the reassessment order under section 147, read with section 144 of the Act, being void ab-initio and allow the appeal of the assessee.

10.

As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

11.

In the result, the appeal filed by the assessee is allowed.

Order was pronounced in the open Court on 04/05/2026.

Sd/- [ Dr. Arjun Lal Saini ] लेखा सद�/Accountant Member

//True Copy// राजकोट /Rajkot िदनांक/ Date: 04/05/2026 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order

Assistant Registrar/Sr. PS/P.S. ITAT, Rajkot

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