Loading judgment…
Facts
The assessee, a non-resident Indian, did not file a return of income for AY 2015-16. The AO initiated reassessment proceedings by issuing a notice under Section 148A(b) on 31.03.2022, followed by an order under Section 148A(d) on 12.04.2022 and a notice under Section 148 on 18.04.2022. The assessee filed a return declaring NIL income. The AO proposed an addition of Rs. 34,03,093/- under Section 56(2)(vii)(b).
Held
The Tribunal held that the notice issued under Section 148 on 18.04.2022 was barred by limitation as it was issued beyond the period of six years from the end of the assessment year 2015-16. Consequently, the reassessment proceedings and the additions made were held to be invalid.
Key Issues
Whether the notice issued under Section 148 for AY 2015-16 was barred by limitation under Section 149(1) of the Income Tax Act, 1961.
Sections Cited
147, 148, 148A, 149(1), 151, 56(2)(vii)(b)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of final assessment order dated 11/12/2024 passed by Income Tax Officer, International Circle-3(1)(2), Mumbai for assessment year 2015-16 on following grounds of appeal :
A.Y. 2015-16 Oveen Naveen Lewis “1. On the facts and in the circumstances of the case and in law, the proceedings-initiated u/s 147 by issuance of notice u/s 148 of the act is invalid and bad in law.
On the facts and in the circumstances of the case and in law, the order passed u/s. 147r.w.s. 144C (13) of the IT Act is invalid and bad in law.
3. On the facts and in the circumstances of the case and in law, the learned DRP erred in rejecting the objections raised against the proposed addition u/s 56(2)(vii) (b) in respect of Mumbai property and the learned A.O. erred in making addition of an amount of Rs. 14,53,093/- u/s 56(2) (vii) (b) of the act.
4. On the facts and in the circumstances of the case and in law, the learned DRP erred in rejecting the objections raised against the proposed addition u/s 56(2)(vii) (b) in respect of Udupi District property and the learned A.O. erred in making addition of an amount of Rs. 19,50,000/- u/s 56(2) (vii) (b) of the act.
5. The appellant craves leave to add, alter, amend and/or delete any or all of the grounds of appeal.” Brief facts of the case are as under:
2. The assessee is an individual and non-resident Indian. The assessee did not file return of income for AY 2015-16. The Ld.AO noticed that, the assessee purchased a property during the year under consideration and has also deposited cash. Accordingly, the Ld.AO issued notice under section 148A(b) of the Act on 31/03/2022. The Ld.AO passed an order under section 148A(d) of the Act on 12/04/2022 and on 18/04/2022 issued notice under section 148 of the Act. In response the assessee filed the return of income on 06/02/2023 declaring total income of Nil. After considering the various submissions made by the assessee, the Ld.AO proposed addition of Rs. 34,03,093/- by invoicing provisions of Sec. 56(2)(vii)(b) of the Act. The draft assessment was passed on 18/03/2024.
A.Y. 2015-16 Oveen Naveen Lewis 2.1 The assessee filed its objections before the DRP against the draft assessment order passed by the Ld.AO. The DRP upheld addition made by the Ld.AO on receipt of draft assessment order the Ld.AO passed impugned order on 11/12/2024. Aggrieved by the final assessment order assessee is in appeal before this Tribunal.
In Ground No. 1-2 :- The Ld.AR raised legal contention before us that notice under section 148 is barred by limitation, since the notice is issued on 18/04/2022 is beyond six years. The Ld.AR further submitted that, if the said legal contention is held in favour of the assessee, the grounds raised
on merits would become academic. Accordingly for the purpose of adjudication we will first consider the issue of whether the notice under section 148 dated 18/04/2022 is barred by limitation as per the first proviso to section 149(1) of the Act. 3.1 The main contention of the Ld.AR 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 notice issued in assessee's case on 18/04/2022 is time barred and invalid. The Ld.AR further submitted that, the assessee's case is covered under the first proviso to section 149(1) and that the that the Hon'ble Supreme Court in the case of UOI vs Rajiv Bansal reported in [2024] 167 taxmann.com70 clearly held that notice for the year 2015-16 cannot be issued beyond the period of six years. 3.2 The Ld.DR on the other hand vehemently argued that in assessee's case the Ld.AO issued notice under section 148A(b) on A.Y. 2015
16. Oveen Naveen Lewis 31/03/2022 and after enquiry passed the order under section 148A(d) on 12/04/2022. The Ld.DR further argued 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 148 A is stayed by an order or injunction of any Court shall be excluded. The Ld.DR also submitted 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 Ld.DR submitted that in assessee's case the extended time would apply whereby the Ld.AO would get time for issuing notice under section 148. Since the notice issued on 18/04/2022 the Ld.DR submitted that, the same is not barred by period of limitation. He supported this contention by relying on the decision of coordinate Bench of this Tribunal in case of Albert Joseph Rozario in vide order dated 22/07/2025. 3.3 The Ld.DR submitted as under :
We have perused the submissions advance by both sides in the light of record placed before us.
In order to examine whether the notice under section 148 is time barred in present facts, we need to first look at the relevant provisions of the Act and the legal position as per judicial precedence. Section 149(1) of the Act contain the provisions with regard to the time limit for issue of notice under section 148 of 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 section148 or section 153A or section153 C 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 section153A, 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 A.Y. 2015-16 Oveen Naveen Lewis limitation under this sub-section shall be deemed to be extended accordingly. 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 4.1 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-Timelimitfornotice. (1) No notice under section148 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 147shall apply as they apply for the purposes of that section. (2)&(3)**** 4.2 The time limit for issue of notice under section 148 of the Act was revised with effect from 01.04.2021 and the legislature 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 extended time of ten years, where the notices were not issued within a period of six years for AYs prior to 2020-21. The said legislative intent is clearly explained by the Hon'ble Supreme Court in the case of Rajiv Bansal(supra). The
The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section148 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. **** (emphasised supplied)
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 have 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.
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 Section148 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 often 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.
to52.*** A.Y. 2015-16 Oveen Naveen Lewis 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 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.
4.3 From the perusal of the legislative intent of the first proviso to section 149(1) as laid down by the Hon'ble Supreme Court in case of Rajiv Bansal (supra) it is clear that Revenue cannot issue notice under section 148 under new regime for assessment years prior to A.Y 2021-22 if six years from the end of the relevant assessment year has expired on the date of issue of such notice. In the light of the above legal position we will now examine the facts in assessee's case. The year under consideration here is AY 2015-16 and therefore the 4.5 time limit as per the first proviso is applicable. 4.4 The argument of the Ld.DR is that the time allowed to the assessee to respond to the notice issued under section 148A(b) should be excluded as per the third proviso to section 149(1). The Ld.DR relied on the decision of coordinate Bench in case of Albert Joseph Rozario v/s. ITO in for assessment year 2018-19 dated 22/07/2025 to support his A.Y. 2015-16 Oveen Naveen Lewis argument. But the point to be noted in the present facts are that there is no surviving period available, as the six years expired on 31/03/2021, and the revenue do not have any day to issue notice under sec. 148 of the new regime. We are of the considered view, for the purpose applying the exclusion period, the notice should first survive the test of being issued either under section 149(1)(a) or 149(1)(b) of the new regime. In the given case the notice under section 148 of the Act for AY 2015- 16 does not survive the test by virtue of the first proviso and therefore the question of applying the third proviso for calculating the time limit does not arise. 4.5 Therefore the time limit as per the old regime, for issue of notice for AY 2015-16 under section 148 of the Act, six years from the end of the relevant assessment year. i.e. 31.03.2022. Accordingly the notice dated 18.04.2022 issued to assessee is beyond the time limit and not valid.
In view of the above discussions and considering the provisions of the Act r.w. the ratio laid down by the Hon’ble Supreme Court in case of Rajeev Bansal v/s. UOI, we hold that the notice dated 18/04/2022 issued under section 148 of new regime is barred by limitation. As a consequence reassessment proceedings based on the invalid notice does not survive and the additions made therein are liable to be deleted. Accordingly the Ground No. 1-2 raised by the assessee stands allowed. 5.1 Since we have allowed the legal issue raised herein above grounds on merits become academic at this stage. In the result the appeal filed by the assessee is allowed.