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Facts
The assessee, a private limited company, filed its return of income for AY 2017-18. The assessment was reopened under Section 147 on the grounds of trading in penny stocks, leading to additions by the AO. The CIT(A) partly allowed the assessee's appeal.
Held
The Tribunal held that the reassessment notices issued under Section 148 were beyond the prescribed 'surviving time' as per Supreme Court judgments, making them invalid. Consequently, the reassessment orders were quashed.
Key Issues
Whether the reassessment notices issued under Section 148 were valid considering the period of limitation and the impact of TOLA and Supreme Court judgments on "surviving time"?
Sections Cited
147, 144B, 143(1), 115BBE, 69C, 68, 148, 148A, 149
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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri T.R. Senthil Kumar & Shri Makarand Vasant Mahadeokar
Shree Vishvamurte Income Tax Officer, Tradinvest Pvt. Ltd. Ward-4(1)(1), D 123, Ghantakaran Vs Ahmedabad Mahaveer Market, Sarangpur, Ahmedabad-380001 Gujarat PAN: AAACV6247M Shree Vishvamurte Income Tax Officer, Tradinvest Pvt. Ltd. Ward-4(1)(1), Vs D 123, Ghantakaran Ahmedabad Mahaveer Market, Sarangpur, Ahmedabad-380001 Gujarat PAN: AAACV6247M (Appellant) (Respondent) Assessee Represented: Shri Deepak R. Shah, A.R. Revenue Represented: Shri R P Rastogi, CIT-DR Date of hearing : 06-11-2025 Date of pronouncement : 27-11-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
These cross appeals are filed by the Assessee and Revenue as against appellate order dated 31-12-2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment order passed under section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18.
Brief facts of the case is that the assessee is a Private Limited Company engaged in shares and securities filed its Return of Income on 26-10-2017 for the Asst. year 2017-18 declaring total income of Rs.9,00,890/-. The return was processed u/s. 143(1) of the Act. Thereafter the assessment was reopened on the ground that the assessee has traded in scrips and transactions to the tune of Rs.3.85 crores which are penny stock. The assessing officer completed the reassessment making addition of Rs.115.22 crores and the computed the tax u/s.115BBE of the Act and demanded tax thereon.
Aggrieved against the reassessment order, assessee filed an appeal before Ld. CIT(A) who partly allowed the appeal and partly confirmed the addition made by the assessing officer.
Aggrieved against the appellate order, both the assessee and Revenue are in appeal before us raising the following Grounds of Appeal: Assessee’s Appeal:
1. That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in reopening assessment u/s 147 of the act.
2. That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in making addition of Rs. 14,22,48,852/- u/s 69C of the act.
3. That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in making addition of Rs. 1,08,76,043/- in the scrips of Yamini Investment, Stampede Capital, Virtual Capital, Syncom Formulation & Toyam Industries u/s 68 of the act. Revenue’s Appeal: The appellant has raised the following grounds of appeal:-
(a) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs 75,29,15,942/ made by AO on account of transaction in various Penny scripts u/s 68 of the Act without appreciating the detailed investigation reports and statements of key individuals involved in price rigging and accommodation entries.
(b) The Ld.CIT(A) failed to consider circumstantial evidence from the Investigation Wing which established that the assessee engaged in systematic tax evasion through accommodation entries.
(c) The Ld.CIT(A) has incorrectly granted relief on the grounds that no direct evidence links the assessee to price manipulation, without appreciating the decision of the Hon'ble Apex Court in the case of Sumati Dayal Vs CIT (1995) 214 ITR 801 (SC) wherein it has been held that human probabilities and surrounding circumstances must be considered.
(d) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 24,53,10,000/- made by AO on account of Bogus Loan received from Mahavir Gems Pvt Ltd & Jeevan Jyoti Vanijya Ltd, without appreciating that the assessee has not effectively discharged its onus of establishing creditworthiness of the lenders.
(e) The Ld.CIT(A) failed to appreciate that the AO had relied upon substantive evidences showing lack of creditworthiness of lenders.
(f) The Ld.CIT(A) failed to appreciate the decision of Apex Court in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC), wherein it is held that the burden of proving that transactions are genuine lies on the assessee, which was not effectively discharged.
(g) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.
The assessee also raised Additional Grounds of Appeal which is legal ground challenging the period of limitation and issuance of the notice u/s.148 of the Act as follows:
1. That the Ld AO erred in law and in the facts of the case in issuing notice u/s.148 on 30-08-2022 which is beyond period of limitation and hence the consequent assessment framed is bad in law which need to be quashed.
We have heard rival submissions at length and perused the materials available on record. The validity of issuance of 148 notice during the extended time period as per Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020 (hereinafter referred as TOLA). In view of the Apex Court judgment in the case of Union of India Vs. Ashish Agrawal reported in (2022) 444 ITR 1 (SC) wherein the notice issued was to be treated as notice u/s. 148A(b) of the Act which has come into the statute with effect from 01-04-2021. 6.1. The Hon’ble Supreme Court in the later judgment in the case of Union of India Vs. Rajeev Bansal reported in (2024) 469 ITR 46 laid down the law to consider such notice as valid notice or invalid notice depending upon the surviving time left date of issuance of the notice u/s. 148 of the Act r.w.s. 3(1) of TOLA up to 30-06-2021 and the issuance of notice u/s.148 pursuant to the direction issued by the Apex Court in the case of Ashish Agarwal.
6.1. The above Supreme Court Judgments were considered by the Jurisdictional High Court in the case of Dhanraj Govindram Kella Vs. ITO vide judgment dated 08-07-2025 in Civil Application No. 6387 of 2023 and held as follows:
"… 65. The alternative contention of the petitioner as to whether notices would be valid notice or invalid notice considering 'surviving time' between the date of the issuance of notices under TOLA and 30th June, 2021 or not is required to be considered and for that each matter has to be considered separately on the basis of the facts of case considering the date of issuance of notices under section 148 under TOLA by the Revenue and thereafter date of supplying information to the assessee and date of passing of order under section 148A(d) and date of issuance of notice under section 148 of the Act so as to consider whether issuance notice under section 148 of the Act is within 'surviving time' as per the direction of Hon'ble Apex Court in case of Rajeev Bansal (supra) or not.
So far as Assessment 2013-2014 and 2014-2015 concerned, the period of three years from end of the assessment year would be prior to 20.03.2020 and the period of six years would be over between 20.03.2020 Therefore, and 30.06.2021. Therefore, the notices issued under section 148 of the Act under old regime between 01.04.2021 and 30.06.2021 as per TOLA, will be a valid notice if the notice under section 148 of the Act under new regime is issued within the period of 'surviving time' as per the directions issued by Hon'ble Apex Court in case of Rajeev Bansal (supra). For the Assessment Years 2016-2017 and 2017-2018 are concerned, the notice issued under section 148 of the Act under old regime between 01.04.2021 and 30.06.2021 under TOLA would be considered to be issued within three years from the end of the relevant assessment year as three years would complete within the period of 20.03.2020 and 30.06.2021.
Therefore, in facts of these petitions, following data is required to be considered to find out 'surviving time' to decide as to whether the impugned notices under section 148 of the Act issued under the new regime as per the decision of Hon'ble Apex Court in case of Ashish Agarwal (supra) would be valid notice or not in of view of the decision of the Hon'ble Apex Court in case Rajeev Bansal (supra): Date of notice No of days of Date of SCA No. Asst. under section surviving time providing Years 148 under available till information TOLA 30-06-2021 u/s. 148A(b) 6387/2023 2013-2014 17.06.2021 13 26.05.2022 5688/2023 2014-2015 09.06.2021 21 23.05.2022 22260/2022 2016-2017 30.06.2021 1 23.05.2022 996/2023 2017-2018 30.06.2021 1 24.05.2022 Date of order Last date for Due date of under section issuance of SCA NO. filing reply Date of reply:- 148A(d) and notice under notice under section 148 as section 148:- per surviving time: 6387/2023 09.06.2022 04.06,2022 29.07.2022 22.06.2022 5688/2023 06.06.2022 - 27.07,2022 27.06.2022 22260/2022 07.06.2022 06.07.2022 30.07.2022 14.06.2022 996/2023 11.06.2022 10.06.2022 19.07.2022 18.06.2022
It is apparent from the above details that impugned notice under section 148 of the Act is issued beyond the period of 'surviving time' as per the direction of Hon'ble Apex Court in case Rajeev of Bansal (supra)and therefore, such notices would be invalid notices.
The impugned notices issued under section 148 of the Act are accordingly quashed and set aside being invalid having been issued beyond the 'surviving time'. Accordingly, impugned orders passed under section 148A(d) of the Act would also not survive and are accordingly, quashed and set aside. Subsequent proceedings, if any, undertaken by the respondent would not survive and are also quashed and set aside.
Rule is made absolute to the aforesaid extent. No order as to costs."
6.2. This judgment is followed by Jurisdictional High Court in the case of Rakesh Rameshchandra Patel Vs. ITO vide judgment dated 09-09-2025 in Civil Application No. 1591 of 2023 held as follows:
“….
In the facts of the case, the respondent Assessing Officer has provided information pursuant to the directions issued by the Hon'ble Apex Court in case of Ashish Agarwal (supra) on 01.06.2022 and therefore, considering 15 days' time to file reply by the assessee, the due date would be 15.06.2022. The petitioner filed reply on 20.06.2022. The order under section 148A(d) of the Act as well as notice under section 148 of the Act was issued on 30.08.2022. However, considering 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 of the Act applying the decision of Hon'ble Apex Court in case of Ashish Agarwal (supra) as well as Rajeev Bansal (supra), would be 28.08.2022.
8. Learned Senior Standing Counsel Ms. Maithili D. Mehta has verified the above dates and could not controvert the same.
9. In view of above, the impugned notice dated 30.08.2022 issued under section 148 of the Act would be invalid notice as the said notice is issued after 28.08.2022 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."
10. In view of foregoing reasons, impugned notice dated 30.08.2022 is hereby quashed and set aside and all consequential proceedings are also quashed and set aside.”
6.3. Following the above judicial precedents, for adjudication of the legal ground following dates are as follows:
Original notice u/s 148 issued on 29.06.2021 No. of surviving days 2 Date of providing information by notice u/s 148 A(b) 30.05.2022 Due date of furnishing reply by Appellant 20.06.2022 Actual date of reply 24.06.2022 Order u/s 148A (d) as also notice u/s 148 30.08.2022 Last date for issuing notice u/s 148 as per proviso to s. 149 27.06,2022
7. The Ld. A.R. pointing out the details of dates and events submitted above contended that the notice u/s.148 of the Act was issued beyond the limitation period/extended period, therefore such notice would be invalid in law and the assumption of jurisdiction to reassess the assessment fails. Therefore the entire reassessment proceedings are void and deserves to be quashed.
The Ld. CIT-DR appearing for the Revenue on the other hand submitted that the assessing officer issued a fresh notice u/s. 148A(b) notice dated 27-08-2022 due to inadvertent mistake in the reasons for reopening which was uploaded in the case of the assessee instead of original notice u/s. 148 of the Act dated 26-06- 2021. Therefore, the reopening of assessment is well within the provisions of the Act and requested to upheld the additions made by the Ld AO.
We have heard rival parties and perused the materials available on record. It is undisputed fact that the original notice was issued on 29-06-2021. The last date for issuing notice as per proviso to Section 149 is 27-06-2022, whereas the notices issued on 30-08-2022 which is after the expiry of the limitation prescribed u/s. 149 of the Act. Thus, the reopening notice itself is time barred, consequently the entire reassessment proceedings is invalid in law and is without jurisdiction. Therefore, the entire reassessment is liable to be quashed. Accordingly, we allow the appeal of the assessee on jurisdiction ground and quash the reassessment order and not adjudicating the other grounds raised on merits both by the assessee and the Revenue.
In the result, the appeal filed by the assessee in is hereby allowed. Since the main reassessment order itself is being quashed, the department appeal in is hereby dismissed.