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Facts
The Revenue filed an appeal and the assessee filed a cross-objection against an order passed by the NFAC, Delhi, concerning the quantum of assessment under Section 147/144 for AY 2017-18. The primary issue revolves around the validity of the reassessment notice issued under Section 148.
Held
The Tribunal held that the reassessment notice issued on 28/07/2022 was barred by limitation. The Tribunal reasoned that the surviving time limit for issuing the notice, as per Supreme Court judgments in Union of India vs. Ashish Agarwal and Union of India vs. Rajeev Bansal, had expired. Therefore, the notice was quashed, rendering the reassessment proceedings non-est.
Key Issues
Whether the reassessment notice issued under Section 148 was barred by limitation considering the timelines and judgments of the Hon'ble Supreme Court regarding the old and new regime of reassessment notices.
Sections Cited
147, 144, 148, 148A, 149(1)(a), 151A, 56(2)(vii)(b), 149(1)
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Income Tax Appellate Tribunal, ‘C’ BENCH
Before: SHRI AMIT SHUKLA & SMT. RENU JAUHRI
CO No.3/Mum/2025 Prasad Shetty आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue and Cross Objection by the assessee against order dated 30/09/2024 passed by NFAC, Delhi for the quantum of assessment passed u/s.147/144 for the A.Y.2017-18.
2. In the grounds of appeal the Revenue had raised following grounds:- 1.Whether in facts and circumstances of this case the Ld. CIT(A) has erred in allowing the appeal of the assessee without appreciating the fact that the assessee has not been able to prove the creditworthiness of the lenders.
2. Whether in facts and circumstances of this case the Ld. CIT(A) has erred in relying upon the judgment of Hon'ble Supreme Court of India in case of Lovely Exports, Supreme Court, 2008, 216 CTR 195 SC wherein the facts and circumstances have no resemblance with the instant case.
3. Whether in facts and circumstances of this case the Ld. CIT(A) has erred in allowing the appeal of the assessee by relying on the judgment of Lovely Exports (Supra.), whereas it is known that the above judgment has been challenged time and again and various judicial precedents such as Shankar Industries vs CIT (Cal) 114 ITR 689, Hari Chand Virender Paul vs CIT (P&H) 140 ITR 148 and CIT vs Biju Patnaik (SC) 160 ITR 674 have been ruled in favor of the revenue?.
4. In case of Mangilal Jain vs ITO (MAD) 315 ITR 105 and CIT us Precision Finance (P) Ltd. 208 ITR 465 the Hon'ble Courts have reiterated that "Assessee must prove identity of credits, capacity of creditor to advance money and genuineness of transaction." And as such the addition made by the AO was justified?
CO No.3/Mum/2025 Prasad Shetty 5. Whether in facts and circumstances of this case the Ld. CITA) has erred in allowing the submission of additional evidences under Rule 464 even though it was vehemently opposed by the AO based on circumstances of the case?
Where as in the cross objection assessee has raised following grounds:-
1. The assessment order dated 19-05-2023 passed under Section 147 read with Section 144B of the Income-Tax Act, 1961 is illegal, bad in law, and therefore unsustainable in law and fact.
2. The Learned AO committed a gross error of law and fact in reopening the assessment despite the fact that the same is barred by limitation as prescribed in Section 149(1)(a) of the Act.
3. On the facts and circumstances of the case and in law, the notice issued under Section 148 is bad in law as the same has been issued without DIN and is therefore in violation of Circular No. 19 of 2019 dated 14.08.2019 issued by CBDT. 4 On the facts and circumstances of the case and in law, the impugned notice issued under Section 148 is bad in law as the same has not been issued in accordance with Section 151A read with the e-Assessment of Income Escaping Assessment Scheme 2022.
5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the additions of Rs. 6,05,551 being the difference between the purchase price of the property and stamp duty value as income from other sources u/s 56(2)(vii) (b).
Since assessee has challenged the validity of reopening u/s.148 r.w.s. 149(1), therefore same is taken up first, Brief facts qua the issue of limitation are that, assessee has filed its return of income for A.Y.2017-18 on 30/03/2018 declaring total income at Rs.34,64,850/-. Later on, on the basis of information received by the ld. AO, that assessee has entered into transaction of purchase of immovable property wherein it was found that it was CO No.3/Mum/2025 Prasad Shetty not transacted as per fair market value, therefore, the difference between the stamp value and the actual transaction was sought to be reopened u/s.147 and notice u/s. 148 was issued to the assessee on 28/06/2021. However, in view of the judgment of the Hon’ble Supreme Court in the case of Union of India and others vs. Ashish Agarwal reported in (2022) 138 taxman.com 64 (SC) judgment dated 04/05/2022, the notice issued by the ld. AO u/s.148 was treated to deemed to have been issued u/s.148A and then the ld. AO issued another notice dated 24/05/2022 u/s.148A(b) which was a show-cause notice as per the requirement of the amended law and as per the Judgment of the Hon’ble Supreme Court in the case of UOI and others vs. Ashish Agarwal (supra). As per the said show-cause notice assessee was given two week’s time to submit his reply, i.e., on or before 07/06/2022 so that jurisdictional Assessing Officer can pass order u/s. 148A(d) if necessary. Since assessee did not file any reply within due date given, i.e., 07/06/2022. Thereafter, ld. AO passed order us/148A(d) of the Act on 28/07/2022 and notice u/s.148 under the new regime was issued on 28/07/2022.
Before us ld. Counsel submitted that now in view of the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (2024) 469 ITR 46 the AO had to pass the order u/s 148A(d) and issue notice u/s 148 within the surviving time once the time limit for filing of reply by the assessee is over. Here in this case, notice u/s.148 of the Act under the old regime was issued on 28/06/2021 and the time CO No.3/Mum/2025 Prasad Shetty limit for issuance of notice u/s.148 under the old regime was 30/06/2021 as held by the Hon’ble Supreme Court in the case of Ashish Agarwal (supra). Thereafter, the ld. AO had issued a notice in compliance of the decision of the Hon’ble Supreme Court in the case of Ashish Agawwal (Supra) supplying the information in his show-cause notice u/s. 148A(b) on 24/05/2022. The time granted under the said show-cause notice to file the reply was 07/06/2022. As per the judgment of the Hon’ble Supreme Court in the case of Rajeev Bansal date by which order u/s.148A(d) and notice u/s.148 of the Act was to be issued was up till 09/06/2022, whereas in this case the notice u/s.148 has been issued on 28/07/2022. He explained the proposition laid down by the Hon’ble Supreme Court in the case of Rajeev Bansal stating that limitation period has to be counted for issue of the notice u/s.148 by taking into account the surviving time. The surviving time has to be counted from the earlier notice issued u/s.148 dated 28/06/2021. Then in that case, the surviving time left was only two days, i.e., last date of issuance of notice under old regime upto 30/06/2021. Once under the new regime notice u/s.148A(b) was issued by the AO on 24/05/2022 and the time limit granted to file the reply granted was upto 07/06/2022, then as per the judgment of Rajeev Bansal the surviving time left to pass the order u/s.148A(d) and notice u/s.148 to be issued was two days, because the surviving time of 2 days has to be counted from 28- 06-2021 till on or before 30/06/2021. Thus AO had only two days left to issue notice u/s 148 after the expiry of time given to CO No.3/Mum/2025 Prasad Shetty assessee to file reply in response to notice u/s 148A(b) dated 24- 05-2022, which was upto 07-06-2022 and surviving time of 2 days was upto 09-06-2022 only. Thus, in view of the judgment of the Hon’ble Supreme Court in the case of Rajeev Bansal, the notice issued u/s.148 on 28-07-2022 is clearly barred by limitation.
The ld. DR on the other hand submitted that the ratio in principle laid down by the Hon’ble Supreme Court in the case of Ashish Agarwal (supra) and Rajeev Bansal (supra) will not apply here in this case, because Apex Court has held that time line prescribed in these judgments starts from two weeks for filing of reply by the assessee to the show-cause notice issued u/s.148A(b). Here this condition has not been complied with by the assessee as he has not filed the reply and therefore, the said ratio will not apply in the assessee’s case. According to him once the permissible period of two weeks as provided by the aforesaid judgment has not been complied with by the assessee, then only as per the provision of Section 148A to provide for a period of 30 days to be taken into account for passing the order u/s.148A(d) and issue notice u/s.148 is applicable and therefore, ld. AO had the time to issue notice till 30/07/2022 and accordingly, notice issued u/s.148 dated 28/07/2022 is within time.
We have heard both the parties and also perused the relevant facts and dates for adjudicating the issue of limitation. The Hon’ble Supreme Court in the case of Rajeev Bansal explaining the ratio laid down in similar judgment of Ashish Bansal wherein CO No.3/Mum/2025 Prasad Shetty the Hon’ble Supreme Court had exercised its discretionary jurisdiction under Article 142 of the Constitution of India while explaining the old law and new law u/s 148, has created a legal fiction and balancing act on the existing legal framework of procedure of re-assessment. Wherever the notice u/s.148 were issued under the old regime for which time limit was extended up to 30/06/2021, the Hon’ble Apex Court held that it would be deemed that re-assessment notice issued under the old regime shall be treated as show-cause notice issued u/s.148A(b) of the new regime. Further the Court directed the Revenue to provide all the relevant material / information to the assessee and thereafter, allowed the assessee to respond to the show-cause notice and raised its objection or availing any kind of defenses including available u/s.149. Thus, the Hon’ble Supreme Court balanced the equities between the Revenue and the assessee by giving effect to the legislative scheme of re-assessment as contained under the new regime. The Court thus supplemented the existing legal framework of the procedure of re-assessment under the Income Tax Act with the principles grounded in equitable standards. For the sake of ready reference para 108 & 109 of the judgment in the case of Rajeev Bansal is reproduced hereunder:- 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 CO No.3/Mum/2025 Prasad Shetty 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. East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109. [Lord Asquith, in his concurring opinion, observed: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."] 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 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.
If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction. See State of A P v. A P Pensioners Association [2005] 13 SCC 161. [This Court observed that the "legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing there from."
CO No.3/Mum/2025 Prasad Shetty 8. Thus, the Hon’ble Supreme Court had explained the concept of surviving or balance time limit which is to be calculated by computing number of days between dates of issuance of deemed notice and 30/06/2021. Thereafter, the Hon’ble Supreme Court has elaborated the effect of the legal fiction propounded in the case of UOI vs. Ashish Agarwal which has been explained in para 110 to 112 which is reproduced hereunder:- 110. The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.
The clock started ticking for the Revenue only after it received the response of the assessees to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as CO No.3/Mum/2025 Prasad Shetty prescribed under the Income-tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under section 148 of the new regime.
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.”
The sequitor of the aforesaid observation and the judgment of the Hon’ble Supreme Court are that- Firstly, exclusion of the period has been explained; a) the date of issuance notice u/s 148 under the old regime reckoned to be the date of issuance of the deemed notices u/s 148A(b); b) the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assessees is to be excluded from the computation of the period of limitation; c) further, period of two weeks granted to the assessee to reply to the show-cause notice is also to be excluded in terms of third proviso to Section 149; CO No.3/Mum/2025 Prasad Shetty Secondly, once the response of the assessee to the show- cause notice has been received, then “the clock starts ticking for the Revenue”, that is, after the receipt of reply, ld. AO has to; (a) consider the reply of the assessee u/s.148A(c); (b) take a decision u/s.148A(d) based on the available material and the reply of the assessee; and (c) issue a notice u/s.148 if it was a fit case for re- assessment. Once it is found to be a fit case for re-assessment, the limitation clock starts ticking and it is mandatory for the ld. AO to comply with these procedures within the surviving time limit which was available to the ld. AO to issue re-assessment notice u/s.148 of the new regime; and Lastly, the Hon’ble Supreme Court has given an example as how to calculate the surviving time. Calculation of surviving time has been laid down from the period when the first notice u/s.148 was issued under old regime till the last date of limitation for issuance of notice u/s.148 of the old regime; and that period has been reckoned as the surviving time period left for the ld. AO while issuing notice u/s.148 under the new regime. So whatever surviving time is left the AO has to issue notice within that surviving time.
If the surviving time like here in this case is only two days, because original notice u/s.148 under the old regime was issued on 28/06/2021 and the last date on which notice could have been issued under old regime was up till 30/06/2021; and CO No.3/Mum/2025 Prasad Shetty therefore, the surviving time left was only two days for issuing a notice under the new regime u/s.148 after completion of the procedure laid down u/s. 148A (b) to 148(d). This principle has been summarized in para 114G & H of the Judgment which for the sake of ready reference is reproduced hereunder:- “114. In view of the above discussion, we conclude that (a) ………………………………………………………………………… (b)………………………………………………………………………….. (c)………………………………………………………………………….. (d)………………………………………………………………………….. (e)………………………………………………………………………….. (f)………………………………………………………………………….. (g) The time during which the show-cause notices were deemed to be stayed is from the date of issuance of the deemed notice between April 1, 2021 and June 30, 2021 till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Agarwal, and the period of two weeks allowed to the assessees to respond to the show-cause notices; and (h) The Assessing Officers were required to issue the reassessment notice under section 148 of the new regime within the time limit surviving under the Income-tax Act read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. All notices issued beyond the surviving period are time barred and liable to be set aside;” Ergo, ld. AO was required to issue notice u/s.148 of the new regime within the time surviving under the Income Tax Act read CO No.3/Mum/2025 Prasad Shetty with TOLA and any notices issued beyond the surviving period was declared to be time barred by the Hon’ble Supreme Court.
Now here in this case, the chronology of date and issuance of notices for the purpose of calculation of limitation and surviving days as per the decision of the Hon’ble Supreme Court in the case of Rajeev Bansal can be illustrated in the following manner:- Sr. Particulars Date of Survi No. Notice ving days 1. Notice issued u/s. 148 of the Act under 28.06.2021 old regime.
Due date for issuance of notice under 30.06.2021 2 old regime 3. Notice issued by Ld. A.O. in compliance 24.05.2022 of the decision of Hon'ble Supreme Court in the case of UOI v. Ashish Agarwal [444 ITR ±1 supplying the information.
4. Time limit granted under above notice 07.06.2022 2 to file reply 5. Date by which order u/s i48A(d) and 09.06.2022 notice u/s 148 of the Act was required to be issued (para no of the decision) 6. Date of order u/s 148A(d) of the Act 28.07.2022 issued by Ld. A.O.
7. Date of notice u/s 148 of the Act issued 28.07.2022 by Ld. A.O.
CO No.3/Mum/2025 Prasad Shetty 12. Here in this case no reply was filed by the assessee in response to show-cause notice u/s. 148A(b) which was fixed by the ld. AO to be furnished on or before 07/06/2022. Once the time limit for reply to the show-cause notice had expired then the Hon’ble Supreme Court in para 111 (supra) have categorically held that ld. AO had to complete the procedure laid down u/s.148A(c), passed u/s.148(d) and issued notice u/s.148 within the surviving time limit which was originally available to the ld. AO. Here in this case the surviving time was only two days which is to be calculated from 28/06/2021 to 30/06/2021 and therefore, only two days shall be available to the ld.AO from the time granted to the assessee to give reply to the notice. Here in this case also the clock started ticking for the ld. AO on the expiry of permissible limit i.e. that is between 07-06-2022 to 09/06/2022. Thus, only 2 days were the surviving time available to the AO and he was required to pass order u/s. 148A (d) and issue notice u/s.148 on or before 09/06/2022. Accordingly, the impugned notice u/s.148 dated 28/07/2022 does not fit in the “surviving time limit” as laid down by the Hon’ble Supreme Court in the case of Rajeev Bansal. Accordingly, we hold that notice u/s.148 dated 28/07/2022 is barred by limitation, therefore, the entire notice is quashed. Consequently, the entire re-assessment proceedings as well as re-assessment order is non-est. Thus, on this ground, entire re-assessment order is quashed and consequently, the Revenue’s appeal is dismissed.
Since we have quashed the notice u/s 148 0n limitation ground, the issue raised on merits by the revenue has been CO No.3/Mum/2025 Prasad Shetty rendered infructous. Other grounds raised
by the assessee in its CO are also academic.
14. In the result, appeal of the Revenue is dismissed and cross objection of the assessee is allowed. Order pronounced on 28th April, 2025.