PALANISAMY,TIRUPPUR vs. ITO, WARD-1(1), TIRUPPUR

ITA 3089/CHNY/2026Status: DisposedITAT Chennai06 October 2026AY 2015-169 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 148 of the Income Tax Act, 1961, on April 1, 2022, for Assessment Year 2015-16, is barred by limitation. The Court reasoned that under the erstwhile provisions of Section 149(1), the outer limit for issuing a notice under Section 148 for AY 2015-16 was six years from the end of the relevant assessment year, which expired on March 31, 2022. The notice was issued on April 1, 2022, after this period had expired. The Tribunal relied on the Supreme Court's decision in Union of India v. Rajeev Bansal, which clarified that the new extended limitation period cannot revive a reassessment that was already time-barred under the old regime. Furthermore, the Tribunal followed its Co-ordinate Bench's decision in Subramanian Prabhakaran v. Income Tax Officer, which held that for the notice to be valid, it must first pass the limitation test under the applicable provisions. Since the notice was already barred by virtue of the first proviso to Section 149(1), the question of excluding time spent on Section 148A proceedings did not arise. Consequently, the reassessment proceedings initiated pursuant to the invalid notice were quashed. The grounds relating to the merits of the addition were left undecided.

What were the facts?

The assessee, Palanisamy, an individual engaged in retail garment trading, filed a return of income for Assessment Year 2015-16 in response to a notice under Section 148 dated April 1, 2022. The Assessing Officer (AO) initiated reassessment proceedings under Section 147, treating cash deposits of Rs. 72,51,025/- in the assessee's bank account as unexplained money under Section 69A and taxing it under Section 115BBE. The assessee's explanation that regular books of account were not maintained and that cash deposits formed part of business receipts already offered under Section 44AD was not accepted. The Commissioner of Income Tax (Appeals) confirmed the AO's order. The assessee appealed to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the notice issued under Section 148 of the Income Tax Act, 1961, on April 1, 2022, for Assessment Year 2015-16 is barred by limitation in view of the first proviso to Section 149(1) of the Act, notwithstanding the proceedings undertaken under Section 148A of the Act? Assessee's Contentions: - The notice under Section 148 dated April 1, 2022, for AY 2015-16 is barred by limitation as the six-year period under the erstwhile Section 149(1) expired on March 31, 2022. The first proviso to Section 149(1) restricts the retrospective operation of the extended limitation period introduced by the Finance Act, 2021. - Relied on the Supreme Court judgment in Union of India v. Rajeev Bansal, which held that the new ten-year period cannot revive a reassessment already time-barred under the old six-year period. - Relied on the Tribunal's decision in Subramanian Prabhakaran v. Income Tax Officer, which held that a notice under Section 148 dated April 1, 2022, for AY 2015-16 was barred by limitation, and the time allowed for responding to a notice under Section 148A cannot be excluded if the notice itself is barred. - Submitted that if reassessment proceedings are quashed on this preliminary legal issue, grounds on merits need not be adjudicated. Revenue's Contentions: - Supported the lower authorities' orders. - Contended that proceedings under Section 148A were initiated, and the period allowed for response to the notice under Section 148A(b) and the period of proceedings under Section 148A should be excluded while computing the limitation period, as per the relevant provisos to Section 149(1). - Argued that after granting statutory exclusion, the notice issued under Section 148 on April 1, 2022, is not barred by limitation, and reassessment proceedings are valid.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148A,Section 149(1),Section 69A,Section 115BBE,Section 44AD,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: GAGAN GOYAL & SHRI MANU KUMAR GIRI

Hearing: 16.09.2026

PER MANU KUMAR GIRI, JM:

This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 16.03.2026 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for the assessment year 2015-16. 2. The assessee has raised the following grounds of appeal:

1.

The order of the Commissioner of Income Tax (Appeals), NFAC, Delhi dated 16.

The order continues below.

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