SMT. SARASAMMA,BANGALORE vs. ACIT, CIRCLE-4(3)(1), BANGALORE

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 04.09.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1080348698(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2010-11.

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ITA No.2199/Bang/2025 Smt. Sarasamma, Bengaluru Page 5 of 11 completed the Assessment on 27/07/2011 determining the total income at Rs.1,89,31,440/- as declared in ROI dated 14/07/2010.

3.1. On completion of the above Assessment, the Ld. AO had issued one more Notice dated 23/12/2016 u/s 148 of the Act for the AY 2010-11 and directed to file a Return of Income for AY 2010-11. The assessee had filed a detailed objections dated 27/08/2017 for the reassessment proceedings initiated by issue of a Notice u/s 148 of the Act dated 23/12/2016, contending that the reassessment proceedings initiated by Notice u/s 148 of the Act dated 23/12/2016 were based on the same set of facts and circumstances of the case & the same was issued by a mere change of opinion. The AO had provided a copy of the reasons recorded for issuance of notice u/s 148 of the Act in which it was stated that the assessee had sold the Agricultural Land on 20/08/2007 whereas the amount of Rs. 3 Crores was invested in the Capital Gains Account by closure of Capital Gain Account on 06/08/2010 the period of time elapsed between the Sale and Purchase beyond the time frame provided in section 54B of the Act, which is two years. The claim of the assessee is that after filing the objections dated 27/08/2017 against the validity of the notice issued u/s 148 of the Act dated 23/12/2016, the assessee was under the bonafide belief that the assessment proceedings was dropped based on the objections filed by the assessee & no further action is required.

3.2 Surprisingly, the AO in his re-assessment order passed u/s 143(3) r.w.s 147 of the Act dated 28/12/2017 has categorically stated that a separate notice u/s 148 of the Act was issued to the assessee on 23/02/2017 after recording reasons for opening of the assessment for the AY 2010-11. During the course of re- assessment proceedings, the AO observed that the assessee did not

ITA No.2199/Bang/2025 Smt. Sarasamma, Bengaluru Page 6 of 11 satisfy the primary conditions for claiming deduction u/s 54B of the Act, as reinvestment was made on 18/08/2010 which is three years after the date of sale of original asset. The section 54B of the Act states that the reinvestment should be made within 2 years from the date of sale of original asset. The date of sale of original asset was 20/08/2007. Thus, in the instant case the assessee had made the reinvestment after 2 years from the date of sale of the original asset & thus does not satisfy the conditions of deduction u/s 54B of the Act and accordingly added the said amount of Rs. 3 crores to the total income for the AY 2010-11 as per the proviso of section 54B of the Act.

ITA No.2199/Bang/2025 Smt. Sarasamma, Bengaluru Page 7 of 11 was under the Bonafide impression that the Department will not made any assessment on the basis of the aforesaid notice dated 23.12.2016 and therefore it was inferred that the Assessment Proceedings initiated by 148 Notice dated 23.12.2016 appeared to have been dropped on the basis of objection filed by the assessee .

6.1 He further submitted that the Ld. AO had not passed any Assessment Order on the basis of Notice issued u/s 148 of the Act dated 23.12.2016. However, the Ld. AO has passed the impugned Assessment Order dated 28.12.2017 in which it is stated that the impugned assessment was made upon an alleged Notice dated 23.2.2017 said to have been issued u/s 148 of the Act. The alleged 148 Notice dated 23.2.2017 mentioned in the impugned Assessment Order was not within the knowledge of the assessee since the said notice neither uploaded into the IT Portal nor served upon the assessee. Therefore, the impugned assessment order said to have been based upon Notice u/s 148 dated 23.2.2017 is void ab initio. Therefore, the ld. A.R. requested that the impugned order is liable to be quashed as the same was not based upon the valid notice u/s 148 of the Act.

ITA No.2199/Bang/2025 Smt. Sarasamma, Bengaluru Page 8 of 11 background of the case, the reasons for disallowance of deduction u/ s 54B of the Act. It is also to be appreciated that the A.O in the assessment order has clearly brought out the facts regarding the disposal of the objections raised by the assessee w.r.t the re- opening issue by passing the speaking order and also the para- wise comments conveyed to the assessee, thereby clearing the issues by redressing the issue w.r.t the issue of notices for re- opening. Since the A.O had already considered the objections raised and also since the reasons for the addition/dis-allowance made are clearly spelled out in the assessment order u/ s 143(3) r.w.s 147 dated 28/12/2017 for the A.Y 2010-11, the ld. D.R. requested that the additions made may be upheld and the assessee's contentions and appeal may be dismissed.

ITA No.2199/Bang/2025 Smt. Sarasamma, Bengaluru Page 9 of 11 23/12/2016, the assessee was under an honest and bonafide belief that the department had dropped the re-assessment proceedings which was initiated u/s. 148 of the Act dated 23/12/2016 based on the objection filed by the assessee.

8.1 Before us, the ld. D.R. submitted the comments of the AO on the allegation of the assessee that no notice u/s. 148 of the Act for the AY 2010-11 dated 23/02/2017 was either served on the assessee or uploaded in the Income Tax Portal. On going through the AO’s comments dated 20/03/2026, we take note of the fact that the AO has expressed his inability to furnish comments on the validity of the notices/ proceedings initiated for AY 2010-11 in the absence of relevant documents which were not readily available for furnishing the reply. In view of the above, we have no option but to accept the contention of the ld. A.R. of the assessee that notice u/s. 148 dated 23/02/2017 on the basis of which the assessment order 143(3) r.w.s. 147 of the Act passed is never serve on the assessee and it is also not uploaded on the Income Tax Portal. Our view also gets supports from the fact that the AO in paragraph 2 of the re- assessment order dated 28/12/2017 had categorically stated that in response to notice u/s. 148 of the Act dated 23/02/2017, the assessee has submitted his letter dated 21/01/2017. We could not understand how in response to notice which was issued in the month of February, the assessee can submit his reply in the month of January. Further, we are also of the considered opinion that the assessee’s honest & bonafide belief that the department had dropped the re-assessment proceedings which was initiated u/s. 148 of the Act dated 23/12/2016 appears to be genuine especially when the AO himself stated that a separate notice u/s 148 of the Act dated 23/02/2017 was issued based on which the re- assessment completed vide order dated 28/12/2017 u/s 143(3) r.w.s 147 of the Act. We are of the considered opinion that in the absence of statutory notice u/s. 148 of the Act dated 23/02/2017,

ITA No.2199/Bang/2025 Smt. Sarasamma, Bengaluru Page 10 of 11 the entire re-assessment proceeding is fatal & void-ab-initio. We are also of the considered opinion that service of notice u/s. 148 of the Act is a mandatory and jurisdictional pre-requisite. The AO obtain the jurisdiction to commence re-assessment proceedings only after the notice u/s.148 of the Act is served upon the assessee. If the AO has passed an order u/s. 147 without first serving the mandatory notice u/s. 148 of the Act, any additions made or taxes demanded will be legally unsustainable. Thus, section 148 of the Act is the jurisdictional provision that mandates issuance of a notice to the assessee before making such reassessment, and section 153 of the Act links the limitation period for completing reassessment to the date on which notice under section 148 of the Act is served. The very assumption of jurisdiction under section 147 is statutorily predicated on a valid notice u/s 148 of the Act and its proper service upon the assessee. In view of the above, in the absence of service of notice u/s. 148 of the Act dated 23/02/2017 based on which the re-assessment order u/s 143(3) r.w.s 147 of the Act dated 28/12/2017 was passed, we have no hesitation to annul the assessment order dated 28/12/2017 being void-ab-initio.

Order pronounced in the open court on 19th June, 2026

Sd/- Sd/- (Prashant Maharishi) (Keshav Dubey) Vice President Judicial Member

Bangalore, Dated 19th June, 2026. VG/SPS

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Copy to:

Asst. Registrar, ITAT, Bangalore.