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Facts
The assessee filed appeals against reassessment orders for AY 2013-14 and 2014-15. The notices under Section 148 were issued on 27/07/2022, which the assessee claimed were time-barred. The original notice was issued on 19/05/2021, and subsequent proceedings were conducted under the new regime.
Held
The Tribunal held that the notices issued under Section 148 on 27/07/2022 were beyond the limitation period as per the decisions in Ashish Agarwal and Rajeev Bansal. The reassessment proceedings and assessment orders for both assessment years were quashed.
Key Issues
Whether the notices issued under Section 148 for the assessment years 2013-14 and 2014-15 were barred by limitation as per the prevailing Supreme Court judgments.
Sections Cited
147, 148, 148A, 149, 151A, 69A, 144
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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYASHRI SANDEEP SINGH KARHAIL
Date of Hearing – 01/07/2025 Date of Order - 03/07/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M.
The assessee has filed the present appeals against the separate impugned orders of even date 24/01/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment years 2013-14 and 2014-15.
Since both appeals pertain to the same assessee, involving similar issues, these appeals were heard together as a matter of convenience and are ITAs No.1365 & 1366/Mum/2025 (A.Ys. 2013-14 & 2014-15) 2 being decided by way of this consolidated order. With the consent of the parties, the appeal for the assessment year 2013-14 is considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to the other appeal. In both the appeals, the assessee has raised similar grounds. The grounds raised
in the appeal for the assessment year 2013-14 are reproduced hereunder for the sake of brevity: – “Legal grounds:
1. The National Faceless Appeal Centre, Delhi (hereinafter referred to as 'NFAC') failed to appreciate that the notice dated 27.07.2022 issued under section 148 of the Act is barred by limitation as per the provisions of section 149 of the Act. Hence, the notice issued under section 148 of the Act is beyond jurisdiction as the same is time barred.
2. The notice dated 27.07.2022 under section 148 of the Act for the A. Y. 2013-14 has become time barred as per the directions laid down by the Hon'ble Supreme Court in UOl v. Rajeev Bansal [2024] 469 ITR 46 (SC) (03- 10-2024). Thus, the said notice issued under section 148 of the Act is time barred and therefore, void ab initio.
3. The NFAC is not justified in passing the impugned order dated 24.01.2025 setting aside the appeal of the Appellant without appreciating that the notice dated 27.07.2022 issued under section 148 of the Act has been issued by the Jurisdictional Assessing Officer and hence, the same is in violation of the Faceless Assessment Scheme as provided under section 151A of the Act. Thus, the notice issued under section 148 of the Act is unlawful, invalid, and bad in law.
4. The notice issued under section 148 of the Act is in contravention of the Faceless Assessment Scheme as well as the law laid down by the Hon'ble Bombay High Court in Hexaware Technologies Lid. v. ACIT (2024) 464 ITR 430 (Bombay) (03-05-2024). Hence, the notice issued under section 148 of the Act is bad in law. II. On merits:
5. Without prejudice to the above grounds raised, the NFAC is not justified in setting aside the matter to the Assessing Officer for de novo consideration without appreciating that the provisions of section 69A of the Act are not applicable. Hence, the addition amounting to Rs.1,51,97,105/- made by invoking the provisions of section 69A of the Act is unsustainable, unlawful, and therefore, bad in law.”
3. We, at the outset, noticed that grounds no.1 and 2, challenging the validity of the reopening of the assessment under section 147 of the Act, have ITAs No.1365 & 1366/Mum/2025 (A.Ys. 2013-14 & 2014-15) 3 raised a jurisdictional issue which goes to the root of the matter, and therefore, the same is considered at the outset. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the notice issued under section 148 of the Act on 27/07/2022 is barred by limitation as per the decision of the Hon’ble Supreme Court in Union of India v/s Rajeev Bansal, reported in (2024) 469 ITR 46 (SC).
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and did not file his return of income for the year under consideration. On the basis of the information that the assessee is a beneficiary of bogus long-term capital gains from the transaction in a penny stock scrip, notice under section 148 of the Act was issued on 19/05/2021.
Subsequently, in view of the decision of the Hon’ble Supreme Court in Union of India vs. Ashish Agarwal, reported in [2022] 444 ITR 1 (SC), the original notice issued under section 148 on 19/05/2021 was deemed to be issued under section 148A(b) of the Act. Vide show cause notice dated 23/05/2022, the information and material relied upon by the Revenue was provided to the assessee, and 15 days were granted to the assessee to respond to the notice in terms of the provisions of section 148A(b) of the Act.
However, the assessee did not respond to the aforesaid show cause notice dated 23/05/2022. Accordingly, the AO passed the order under section 148A(d) of the Act on 27/07/2022, declaring that it is a fit case for issuance of notice under section 148 of the Act. On the very same date, i.e., on 27/07/2022, notice under section 148 of the Act was issued by the ITAs No.1365 & 1366/Mum/2025 (A.Ys. 2013-14 & 2014-15) 4 Jurisdictional Assessing Officer. In response to the notice issued under section 148 of the Act, the assessee did not file his return of income. Accordingly, the assessment order was passed under section 147 r.w. section 144 of the Act, after making an addition of INR 1,51,97,105 under section 69A of the Act. The assessee in his appeal before the learned CIT(A), inter-alia, challenged the proceedings initiated under section 147 of the Act on the basis that the notice issued under section 148 of the Act is barred by limitation. However, the learned CIT(A), vide impugned order, without adjudicating the jurisdictional ground, set aside the assessment order and directed the AO to pass a speaking order. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned Departmental Representative (“learned DR”) vehemently relied upon the orders passed by the lower authorities.
We have considered the submissions of both sides and perused the material available on record. We find that the Hon’ble Supreme Court in paragraphs 106 and 107 of its decision in Rajeev Bansal (supra), observed as follows: –
“106. In Ashish Agarwal (supra), this Court directed the assessing officers to provide relevant information and materials relied upon by the Revenue to the assesses within thirty days from the date of the judgment. A show cause notice is effectively issued in terms of Section 148A(b) only if it is supplied along with the relevant information and material by the assessing officer. Due to the legal fiction, the assessing officers were deemed to have been inhibited from acting in pursuance of the Section 148A(b) notice till the relevant material was supplied to the assesses. Therefore, the show cause notices were deemed to have been stayed until the assessing officers provided the relevant information or material to the assesses in terms of the direction issued in Ashish Agarwal (supra). To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the ITAs No.1365 & 1366/Mum/2025 (A.Ys. 2013-14 & 2014-15) 5 supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices.
The third proviso to Section 149 allows the exclusion of time allowed for the assesses to respond to the show cause notice under section 149A(b) to compute the period of limitation. The third proviso excludes "the time or extended time allowed to the assessee." Resultantly, the entire time allowed to the assessee to respond to the show cause notice has to be excluded for computing the period of limitation. In Ashish Agarwal (supra), this Court provided two weeks to the assesses to reply to the show cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to Section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices.”
From the perusal of the aforesaid findings of the Hon’ble Supreme Court in Rajeev Bansal (supra), it is evident that the Hon’ble Supreme Court directed that while computing the time limit for issuance of notice under section 148, the time during which the show cause notice was stayed till the supply of relevant information or material by the AO and further period of two weeks allowed to the assessee to respond to the show cause notice should be excluded. We find that while examining the validity of notices issued from 01/04/2021 to 30/06/2021 under the old regime, the Hon’ble Supreme Court in Rajeev Bansal (supra), analysing the interplay of Ashish Agarwal (supra) with the TOLA, in paragraph 108 of its judgment observed 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. 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
ITAs No.1365 & 1366/Mum/2025 (A.Ys. 2013-14 & 2014-15) 6 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.”
Thus, the Hon’ble Supreme Court held that the surviving time under the Act read with the TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notice, including issuance of a reassessment notice under section 148 of the Act under the new regime. While explaining the methodology for computation of the surviving or balance time limit, the Hon’ble Supreme Court in paragraph 112 of Rajeev Bansal (supra) observed as follows: -
“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.”
Therefore, the surviving/balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30/06/2021. In the present case, in order to compute the surviving/balance time as per the decision of the Hon’ble Supreme Court in paragraph 108, it is relevant to note the following dates: -
S. No. Particulars Dates 1 First Notice issued u/s 148 19.05.2021 2 Extended Limitation as per the TOLA 30.06.2021 3 Surviving Time 43 Days 4 Notice u/s 148A(b) 23.05.2022
ITAs No.1365 & 1366/Mum/2025 (A.Ys. 2013-14 & 2014-15) 7 5 Time granted to assessee to reply 15 days 6 Total surviving time after 23.05.2022 58 days (43 days + 15 days), i.e. till 20.07.2022 6 Order u/s 148A(d) 27.07.2022 7 Second Notice u/s 148 27.07.2022
Therefore, computing the surviving/balance time limit, as per the decision of the Hon’ble Supreme Court in Rajeev Bansal (supra), we find that the Revenue had 58 days to issue notice under section 148 of the Act of the new regime in the present case, i.e. till 20/07/2022, after issuance of the show cause notice issued under section 148A(b) of the Act on 23/05/2025. However, undisputedly, in the present case, the notice under section 148 of the Act was issued on 27/07/2022, i.e., after the surviving/balance time period as per the decision of the Hon’ble Supreme Court in Rajeev Bansal (supra).
Therefore, in the light of the decision of the Hon’ble Supreme Court in Ashish Agarwal (supra) and Rajeev Bansal (supra), we are of the considered view that the notice issued under section 148 of the Act on 27/07/2022 is barred by the limitation period specified under section 149 of the Act. Accordingly, we are of the considered view that the notice issued under section 148 of the Act on 27/07/2022 for the assessment year 2013-14 is void ab initio and bad in law. Therefore, the same is quashed. Consequently, the entire reassessment proceedings and the assessment order passed under section 147 r.w. section 144 of the Act for the assessment year 2013-14 is also quashed.
ITAs No.1365 & 1366/Mum/2025 (A.Ys. 2013-14 & 2014-15) 8 14. Since the relief has been granted to the assessee on the aforenoted jurisdictional aspect, the other grounds raised by the assessee in the appeal for the assessment year 2013-14 are rendered academic, and therefore, are left open.
We find that even in the assessment year 2014-15, the notice under section 148 of the Act under the new regime was issued on 27/07/2022, which is beyond the surviving/balance time period as per the decision of the Hon’ble Supreme Court in Rajeev Bansal (supra). Accordingly, our findings/conclusions as rendered in assessee’s appeal for the assessment year 2013-14 shall apply mutatis mutandis to the appeal for the assessment year 2014-15. Accordingly, we are of the considered view that the notice issued under section 148 of the Act on 27/07/2022 for the assessment year 2014- 15 is void ab initio and bad in law. Therefore, the same is quashed. Consequently, the entire reassessment proceedings and the assessment order passed under section 147 r.w. section 144 of the Act for the assessment year 2014-15 is also quashed. Accordingly, the other grounds raised by the assessee in the appeal for the assessment year 2014-15 are rendered academic, and therefore, are left open.
In the result, both appeals by the assessee are allowed. Order pronounced in the open Court on 03/07/2025