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Facts
The appellant, a partnership firm engaged in manufacturing, filed its return for AY 2016-17. Information was received from CGST regarding clandestine sales. The case was reopened under Section 147 of the Income Tax Act, 1961, leading to an addition of Rs. 7,94,224/-. The appeal was dismissed by the CIT(A).
Held
The Tribunal held that the reassessment notice dated 29.07.2022 was barred by limitation. It was issued beyond the permissible period under the Income Tax Act, read with the relaxation granted under TOLA, 2020, and the interpretation of Supreme Court judgments.
Key Issues
Whether the reassessment notice issued under Section 148 was barred by limitation, considering the extended period and Supreme Court judgments on time limits for reassessment.
Sections Cited
147, 144B, 149(1)(b), 148, 151, 151A, 124, 69A, 234B, 143(1)(a), 143(2), 148A(d), 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI, AM. & Dr. DINESH MOHAN SINHA, JM
आदेश / O R D E R PER, Dr. DINESH MOHAN SINHA JM; Captioned appeals filed by the assesse firm, pertaining to Assessment Year 2016-17, is directed against order passed under section 250 of the Income Tax Act, 1961 by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income Tax (Appeals), dated 30/09/2025, which in turn arises out of an order dated 17/05/2023 passed by the Assessing Officer u/s 147 read with section 144B of the I.T. Act.
The Grounds of appeal
raised by the assessee are as follows: - 1.
1. Jurisdictional Defects (Limitation and Threshold Failure)
1. 1. 1. 1. 1. 1. 1. Invalid Assumption of Jurisdiction due to Retrospective Failure of Monetary Tinreshold (Section 149(1)(b)): The NFAC erred in sustaining the reassessment initiated under the extended period of limitation prescribed by Section 149(1)(b) despite the final assessed income falling below the mandatory threshold of Rupees fifty lakhs or more. -The AD relied on the entire alleged turnover of Rs. 1,17,14,220/- to invoke Section 149(1)(b). The NFAC itself conceded the settled legal position that only the profit embedded in such sales is taxable, not the entire turnover. Since the final addition sustained (Rs. 7,94,224/-) is conclusively below the Rs. 50 lakh thereshold required by Section 149(1)(b), the jurisdiction assumed by the AO ab initio was fundamentally flawed. Relying on the Supreme Court judgment encompassing Union of India v. Rajeev Bansal, any notice issued invoking the time limit under Section 149(1)(b) must be dropped if the escaped income is less than Rupees fifty lakhs.
2. Invalid Assumption of Jurisdiction due to Expiry of Surviving Time Limit (Section 149 read with TOLA): The subsequent notice under Section 148 dated 29.07.2022 is time-barred, as it was issued beyond the time limit surviving under the Income-tax Act read with the exterisions provided by TOLA, as interpreted by the Supreme Court in Rajeev Bansal. -The time limit for AY 2016-17 expired on 31.03.2020, extended by TOLA until 30 June 2021 The period available to the Revenue between the deemed SCN date (17.06.2021) and the TOLA expiry (30.06.2021) was 13 days Since the notice was issued on 29.07.2022, which is beyond the surviving 13 days available after excluding the period allowed to the assessee to file a reply (09.06.2022), the notice is time-barred and liable to be set aside. Page | Shiv Extrusion vs. ITO
Invalidity due to Improper Sanction for Original Notice (Section 151 Old Regime): The original notice under Section 148 dated 17.06.2021, issued beyond four years from the end of AY 2016-17 (expired 31.03.2020), was invalid as the approval was obtained only from the JCIT, Range-1, Jamnagar. For cases initiated beyond four years under the old regime, Section 151(1) mandated approval from the Principal/Chief Commissioner. Approval from the lower authority (ICIT) constitutes an incurable defect that vitiates the entire proceedings.
4. Invalidity due to Improper Sanction for Subsequent Notice (Section 151 New Regime): The subsequent notice u/s 148 dated 29.07.2022, issued on the explicit premise that the case fell under Section 149(1)(b) (more than three years elapsed), relied on the approval of the Pr. Commissioner of Income-tax (PCIT), Jamnagar. Section 151(ii) mandates that when more than three years have elapsed (as relied upon by the AO), approval must be obtained from the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General (the higher authority). Approval by the PCIT (the authority specified under Section 151(i)) for a Section 149(1)(b) case violates the statutory mandate of Section 151. II. Procedural and Substantive Defects 5. Invalidity due to Violation of Mandatory Faceless Assessment Procedure (Section 151A): The notice under Section 148 dated 29.07.2022 was issued by the Jurisdictional Assessing Officer (ITO Ward 2(10), Jamnagar) (Deep Shekhar). Section 151A and CBDT Notification No. 18/2022 dated 29.03.2022 explicitly brought the issuance of notice under section 148 within the mandatory scope of the Faceless Scheme (NaFAC). The issuance of the notice by the Jurisdictional AD after 29.03.2022 constitutes an action performed without jurisdiction, 6. Jurisdictional Error in Deciding Own Jurisdiction (Section 124): The AG erred in disposing of the Appellant's challenge to his jurisdiction (based on pecuniary limits and jurisdictional orders under Section 120) himself in the order u/s 148A(d) Section 124(2) (or 124(3)
Shiv Extrusion vs. ITO as cited by assessee) mandates that when the assessee questions the AD's jurisdiction, the AD must refer the matter to the Principal Commissioner. - The AO's failure to follow this prescribed statutory course renders the assessment null and void 7. Error in Sustaining Substantive Addition u/s 69A: The NFAC erred in confirming the addition of Rs. 7,94,224/-under Section 69A (unexplained money/investment), as the addition represents cash proceeds/profit from sales. The income, represented as cash proceeds from unaccounted sales, does not constitute an "Asset" as defined by the restrictive Explanation to Section 149(1)(b). The term "asset" includes immovable property, shares, securities, loans, advances, and deposits in a bank account, implying an exhaustive definition that excludes general cash.
8. Error in Charging Mandatory Interest u/s 2348: The NFAC erred in upholding the levy of mandatory interest under Section 2348 (Rs. 2,11,044/-). The net tax liability assessed (Rs. 3,27,451/-) was fully covered by the available Tax Deducted at Source (TDS) credit allowed (Rs. 3,41,378/- Hence, the charging of interest under Section 2348 is illegal, notwithstanding its consequential nature.
9. Leave to Add/Amend: The Appellant craves leave to add, amend, alter, or delete any of the above Grounds of Appeal at any time before or during the hearing of this appeal.
3. That the Ld. Council for the assessee submitted that assesse does not wish to praised ground no. 2, 3, 4, 5 & 6 has not paste
Facts of the Case The appellant is a partnership firm engaged in manufacturing of brass part and filed the return of income for A.Y. 2016-17 on 09.10.2016 declaring total income of Rs. 2.65.490/- The return was processed by Shiv Extrusion vs. ITO
CPC u/s 143(1)(a) on 05.12.2016 at Rs. 2,65,490/-. The information was shared by CGST department that, a search action has been carried out on 26/08/2015 at the premises of the assessee. During the course of search operation, incriminating documents indicating clandestine sale of goods were recovered. The statement of Shri Jitendrabhai Bediya. Partner of the firm was also recorded on 26/08/2015 wherein he interrail admitted the clandestine removal of finished goods amounting to Rs. 1,17,14,220/- and the same was not recorded in books.
The case of the assessee was reopened by issue of notice u/s 148 of the IT Act dated 29.07.2022 after following due procedure u/s 148A of the IT Act in compliance with the directions of the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agarwal & Others vide order dated 04.05.2022 (2022 SCC Online SC 543). In response, the assessee has filed the return of income on 17.08.2022 declaring total income of Rs. 2,65,490/-. Notice u/s 143(2) of the IT Act was issued on 22.11.2022. Upon perusal of the reply of the assessee, the AO has noted that, the grounds of objections raised by the assessee had been considered and found not acceptable at the time of passing order u/s 148A(d). Further, as per order u/s 148A(d) it was very clearly held that the assessee was in practice of out of books transaction with an intention to avoid due taxes/duties etc., The AO has noted that, the assessee generated out of books stock of Rs. 1,17,14,220/- for AU 2016-17.
In response, the assessee has filed the reply. On perusal of the reply of the assessee, the AO has noted that, the assessee admitted that Excise department carried out verification of physical inventory and found Shiv Extrusion vs. ITO there is shortage of 1572.500 kg stock of Brass rods. Assessee explained that shortage is due to sale of brass rods out of books and raised objections with regard to jurisdiction of the case and demanded to close the proceedings in the case of assessee in the light of decisions of Hon'ble Gujrat High Court and Allahabad High Court. However, the AO has rebutted the objections raised by the assessee with regard to jurisdiction during the VC. Further, the AO has noted that, the assessee had admitted that total initial Investment for stock was accounted in the books made at the initial stage and then unaccounted sales were done from such stock, thus income escapement is only to the extent of GP embedded in unaccounted sales income. In this regard the AO has held that the escapement will be 7,94,224/- as the same was not declared in ITR Accordingly, the AO has treated this Rs. 7,94,224/- as unexplained money u/s 69A of the Act and added to the total income of the assessee.
The AO completed the assessment u/s 147r.w.s. 144B of the IT Act on 17.05.2023 by assessing the total income at Rs.10,59,714/- after making the above discussed addition. Further, the AO has initiated penalty proceedings u/s 271(1)(c) of the IT Act separately.
That the assessee filed an appeal against the order of assessment before Ld. CIT(A), by order dated 30/09/2025 the appeal was dismissed.
That the assessee has challenged the legality and validity of the impugned order dated 30.09.2025 by moving of an appeal before this Tribunal.
(i) The Ld. AR Submitted paper book continuing 283 pages and also submitted the written arguments.
(ii) On the contrary the Ld. DR relied on the order of the lower authority. 7. We have heard the rival contention of both the parties and perused the material available on record. We note that the carefully considered the assessment order, the grounds of appeal, the written submissions of the appellant, and the material on record. We note that one of the ground was Validity of reassessment:
8. We shall adjudicate to the assessee’s Ground 1: Invalid Assumption of Jurisdiction due to Limitation (Section 149 read with TOLA): The reassessment notice dated 29.07.2022 is barred by limitation, as it was issued beyond the period permissible under the Income Tax Act read with the relaxation granted under TOLA, 2020, For AY 2016-17, the limitation under section 149(1)(a) expired on 31.03.2020, which stood extended only until 30.06.2021 by TOLA. The initial notice u/s. 148A(b) was issued on 17.06.2021, leaving a surviving balance of 13 days. As held by the Hon'ble Supreme Court in Union of India & Ors. v. Rajeev Bansal (Civil Appeal No. 8629 of 2024), only the remaining balance limitation period survives after Ashish Agarwal case.
9. The assessee filed reply on 09.06.2022, thereby restarting the balance period of 13 days. (till date of notice u/s. 148 of the act under TOLA) Accordingly, the notice under Section 148 ought to have been issued on or before 22.06.2022. The notice dated 29.07.2022, issued beyond the surviving limitation without jurisdiction, in view of the ratio in Rajeev Bansal, ITR (2024) 469 ITR 46 (SC)
The above issue is coverd in favor of assesee by the judgement of Guj. High Court in case of Dilipbhai Jayantibhai Patel Vs. Assessment Unit Income Tax Department & ANR. The order of the High Court runs as under:
“In the facts of the case, the to respondent Assessing Officer has provided information pursuant the directions issued by the Hon'ble Apex Court in case of Ashish Agarwal (supra) on 24.05.2022 and therefore, considering 15 days' time to file reply by the assessee, the due date would be 07.06.2022. The petitioner filed no reply. The order under section 148A(d) of the Act as well as notice under section 148 of the Act was issued on 28.07.2022. considering However, the period of limitation from the date of issuance of notice under section 148 read with TOLA upto 30.06.2021, the limitation for issuance of notice under section 148 the Act applying the decision of Hon'ble Apex Court in case of Ashish Agarwal (supra) as well as Rajeev Bansal (supra), would be 16.06.2022. of
Learned Senior Standing Counsel Mr. Karan Sanghani has verified the above dates and could not controvert the same.
In view of above, the impugned notice dated 28.07.2022 issued under section 148 of the Act would be invalid notice as the said notice is issued after 16.06.2022 as per the decision of Hon'ble Apex Court in case of Ashish Agarwal (supra). Therefore, the impugned notice having been issued beyond the 'surviving time' would be invalid notice as held by the Hon'ble Apex Court in case of Rajeev Bansal (supra) in the following paragraph no. 114 (g) and (h) of the judgment:
"114. In view of the above discussion, we conclude that: XXX
(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 [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] 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."
Considering above facts and circumstance and following the above said judgements, we are of the view that impugned notice dated 28.07.2022 is barred by limitation therefore, we quashed the notice and set aside the impugned order.”
Since we have decided ground no. 1 & 2 in favor of the assesse and the other grounds of appeal are not decided here with since it becomes with academic in nature.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 12/03/2026.