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Facts
The assessee, an NRI, did not file an income tax return for AY 2015-16. The AO initiated reassessment proceedings under Section 147/148 of the Income Tax Act, 1961, issuing a notice on 06.04.2022. The assessee's contention was that this notice was time-barred.
Held
The Tribunal held that the notice issued under Section 148 on 06.04.2022 for AY 2015-16 was barred by limitation as per the first proviso to Section 149(1) of the Act. Consequently, the reassessment proceedings and the additions made were quashed.
Key Issues
Whether the reassessment notice issued under Section 148 for AY 2015-16 was barred by limitation, considering the provisions of Section 149(1) and its provisos.
Sections Cited
143(3), 144C(13), 147, 148, 148A(b), 148A(d), 149(1), 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI RAJ KUMAR CHAUHAN, JM
(Assessment Year: 2015-16) Elsie Hubald, ITO, International Tax, Ward- Flat No. 802, Building D, Raheja 2(2)(1), Residency, K Vaidya Marg, Kautilya Bhavan, Bandra, Vs. Dindoshi Malad East, Mumbai-400051. Mumbai-400097. PAN: AMRPH5353E Appellant) : Respondent) Appellant /Assessee by : Shri M. Subramanian, AR : Shri Krishna Kumar, Sr. DR Revenue / Respondent by : 19.06.2025 Date of Hearing Date of Pronouncement : 25.06.2025 O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the final order of assessment of the Income Tax Officer, International Circle-2(2)(1), Mumbai [In short 'AO'] passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act) dated 25.12.2024 for AY 2015-16. The assessee raised the following grounds of appeal:
“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.
Elsie Hubald 2. 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 of Rs.43,67,491/- u/s 69 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 of Rs.43,67,491/- and the learned A.O. erred in making addition of an amount of Rs.43,67,491/- as unexplained investment u/s69 of the act..”
The assessee is an individual and non-resident Indian. The assessee did not file the return of income for AY 2015-16. The AO noticed that the assessee has purchased a property during the year under consideration and has also deposited cash. Accordingly, the AO issued a notice under section 148A(b) of the Act on 22.03.2022. After considering the objections filed by the assessee, the AO passed an order under section 148A(d) of the Act on 06.04.2022 and on the same date issued a notice under section 148 of the Act. In response the assessee filed the return of income on 30.05.2022 declaring a total income of Rs. 3,75,958/-. After considering the various submissions made by the assessee, the AO made an addition of Rs. 43,67,491/- as unexplained investment under section 69 of the Act and also added a sum of Rs. 19,49,500/- as unexplained cash credits in the hands of the assessee. The assessee filed its objections before the DRP against the draft assessment order passed by the AO. The DRP deleted the addition made towards unexplained cash credit and sustained the addition made towards unexplained investment under section 69 of the Act. The assessee is in appeal before the Tribunal against the final order of assessment passed by the AO pursuant to the directions of the DRP.
The ld. AR raised a legal contention before us that notice under section 148 is barred by limitation since the notice is issued on 06.04.2022 which beyond six years. The ld. AR further submitted that if the said legal contention is held in favour Elsie Hubald 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.
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 the notice issued in assessee's case on 06.04.2022 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 [2024] 167 taxmann.com 70 (SC) has clearly held that notice for the year 2015-16 cannot be issued beyond the period of six years.
The ld. DR on the other hand vehemently argued that in assessee's case the AO issued notice under section 148A(b) on 22.03.2022 and after enquiry passed the order under section 148A(d) on 06.04.2022. 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 148A 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 AO would get time till 07.04.2022 for issuing notice under section 148. Since
We heard the parties and perused the material on record. In order to examine the whether in assessee's case the notice under section 148 is time barred or not, 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 the Act and the relevant provisions applicable for the year under consideration read as under – 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 section 148 or section 153A or section 153C 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 section 153A, is required to be issued in relation to a search initiated under section Elsie Hubald 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 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
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 - Time limit for notice. (1) No notice under section 148 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 147 shall apply as they apply for the purposes of that section.
(2) & (3) **** Elsie Hubald 8. 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 the 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 has been clearly explained by the Hon'ble Supreme Court in the case of Rajiv Bansal (supra). The relevant of observations of the Apex Court is extracted below –
The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 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. **** 48. 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. 49. 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 Section 148 of the new regime cannot be issued if the period Elsie Hubald 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 of ten 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. 50. to 52. *** 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.
From the perusal of the legislative intent of the first proviso to section 149(1) as laid down by the Hon'ble Supreme Court it is clear that Revenue can not issue notice under section 148 for assessment years prior to AY 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 time limit as per the first proviso is applicable. 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
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). 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) under 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. We in this regard notice that the coordinate bench in a recent decision has considered applicability of fifth and sixth proviso (third and fourth proviso as applicable to the present case) to section 149 in the case of Mohamedali Shabanali Badami Badami & Son vs ITO (ITA No. 913/MUM/2025 dated 16.06.2025) and held that – 7. Similar issue had come up before the Hon'ble Jurisdictional High Court of Bombay in the case of Hexaware Technologies Ltd. vs. ACIT in Writ Petition No.1778 of 2023, dated 03.05.2024, wherein Hon'ble Court while dealing with the provisos to section 149(1)(b) under the new regime for the Assessment Years covered by the erstwhile provisions of section 149(1) observed that the section has to be interpreted so as to give meaning to all the words and phrases used in the said section. It could not be interpreted in such a way so as to render any part or phrase in the said section otiose. According to the Hon'ble Court, terms “at that time” in the first proviso refers to the date on which notice u/s.148 is to be issued by the Assessing Officer. The term “at that time” has to refer to the term “at any time” used earlier in the said proviso. According to the Hon'ble Court the reference to “at any time” is to the date of the notice to be issued by the Assessment officer and therefore, the term “at that time” would also refer to the said date. Thus, on the said date, if a notice could not have been issued under the provision of section 149(1)(b) of the old regime for any Assessment Year beginning on or before 01.04.2021, the notice cannot be issued even under the new regime.
Elsie Hubald 7.1. Hon'ble Court took into consideration the stand of the Revenue to interpret the first proviso to section 149 of the Act to be applicable only for Assessment Years 2013-14 and 2014-15, i.e., for the Assessment Years where the period of limitation has already expired on 01.04.2021 which was held to be not correct because that would render the first proviso to section 149 under a new regime redundant and otiose. According to the Hon'ble Court, if such a stand of the Revenue is accepted then, it would amount to re-writing the proviso to section 149(1)(b). Hence such an interpretation as canvassed by the Revenue is clearly not permissible in law. Hon'ble Court thus, concluded that the first proviso to section 149(1)(b) is an exception to the period of limitation and provides for a restriction on the notices issued u/s.148 which are issued for Assessment Years up to 2021-22 beyond a certain date. It also took into account the extension of time as contained in fifth and sixth proviso to section 149(1)(b) while concluding on the period of limitation available for issuing the notice u/s.148. Hon'ble Court, thus concluded that if a notice is not issued within the time prescribed under the first proviso to section 149(1)(b) then, such period cannot be extended by fifth proviso and sixth proviso. 7.2. Relevant paragraph is extracted below: “30. With respect to applicability of the fifth proviso and the sixth proviso to Section 149(1)(b) of the Act for extension of limitation for issuing the notice under Section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed in Section 149(1) of the Act, i.e., three years or ten years, as the case may be. Fifth proviso or sixth proviso extend limitation for issuing notice under Section 149 of the Act, however, the first proviso is an exception to the period of limitation and provides for a restriction on the notices under Section 148 being issued for Assessment Years upto 2021-22 beyond a certain date. Therefore, the way the Section would operate, is first to decide whether a notice issued under Section 148 of the Act is within the period of limitation in terms of Section 149(1)(a) or (b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the extension of time as per the fifth and/or sixth proviso would be considered. Once, the notice is otherwise within the period of limitation, thereafter one has to see whether the said time limit is within the restriction provided in the first proviso or not. If the notice is beyond the restriction period, the notice is invalid. The fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per the first proviso. Hence, if a notice is not within the time prescribed under the first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth proviso and sixth proviso.
Elsie Hubald 8. In the present case, notice issued u/s.148 is dated 19.04.2022 which was issued pursuant to order passed u/s.148A(d) which is also of the even date, wherein it was held by the Assessing Officer that it is a fit case to issue notice u/s.148 of the Act. The moot case of the controversy arisen in this case is on account of show cause notice issued u/s.148A(b) which is dated 24.03.2022 and is prior to the date of 31.03.2022 when the limitation under the old regime expires. However, the notice u/s.148 is issued subsequent to this date, i.e., on 19.04.2022. Thus, the process of initiation of considering whether reopening is to be done or not was initiated within the limitation period available as per the old regime but it got concluded beyond the period of limitation. In this background from the perusal of provisions contained in section 149(1), we note that it states that no notice u/s.148 shall be issued for the relevant Assessment Year prescribing the conditions and time limit. It does not refer to show cause notice/s.148A(b). The first proviso to section 149(1)(b) also carves out an exception to the limitation in respect of notice u/s.148 and not under section 148A(b). Further, Hon'ble High Court of Bombay in the case of Hexaware Technologies Ltd. (supra) in para-30 has categorically held that if a notice u/s.148 is not with the time prescribed under the first proviso to section 149(1)(b) then, such period cannot be extended by fifth proviso and sixth proviso to the said section. 8.1. Admittedly, the undisputed fact in the present case is that impugned notice issued u/s.148 is dated 19.04.2022 which is after the limitation expired on 31.03.2022 within the meaning of first proviso to section 149(1)(b). In view of the above stated deliberations, on the factual matrix of the present case and the applicable law including the jurisprudence discussed above, we hold that notice for Assessment Year 2015-16 issued on 19.04.2022 u/s.148 of the new regime is barred by limitation and hence bad in law, liable to be quashed, resulting in impugned re-assessment proceedings as well as the impugned assessment order bad in law. Accordingly, ground nos. 1 and 2 raised by the assessee are allowed.
In view of these discussions and considering the provisions of the Act r.w. the ratio laid down by the Hon'ble Supreme Court and Jurisdictional High Court we hold that the notice issued under section 148 of the Act dated 06.04.2022 is barred by limitation. Accordingly the reassessment proceedings based on the invalid notice does not survive and the additions made therein are liable to be deleted.
Elsie Hubald 12. Since we have deleted the addition considering the legal issue of notice under section 148 of the Act being time barred, the other legal arguments and contentions on merits have become academic not warranting any adjudication.
In result, appeal filed by assessee is allowed.