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Facts
The assessee's case for Assessment Year 2015-16 was reopened under Section 147 due to an alleged unsecured loan of Rs.1.36 Cr from M/s Horizon Portfolio Ltd., which the AO later deemed non-genuine Long Term Capital Gain from share sales, adding the amount to income under Section 68. The First Appellate Authority quashed the reassessment order, holding the Section 148 notice issued on 26.07.2022 to be time-barred.
Held
The Tribunal upheld the First Appellate Authority's decision, relying on the Supreme Court's judgment in *Union of India vs. Rajeev Bansal*, which clarified that for Assessment Year 2015-16, Section 148 notices issued on or after April 1, 2021, must be dropped as the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) was not applicable for extending the limitation period. Since the notice in this case was issued on 26.07.2022, beyond the six-year limitation period, it was deemed void ab initio.
Key Issues
Whether the reassessment proceedings initiated under Section 147 by issuing a Section 148 notice on 26.07.2022 for Assessment Year 2015-16 were barred by limitation under Section 149, considering the applicability of TOLA and the pronouncements of the Supreme Court.
Sections Cited
147, 148, 148A(b), 148A(d), 143(3), 144B, 149, 10(38), 115BBE, 271(1)(c), 68, 3(1), 151
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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY
PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the Revenue against the order dated 31.05.2024 passed by the Learned Commissioner of Income Tax (Appeal), Lucknow-3 (ld. CIT(A)) for Assessment Year 2015-16.
2.0 The brief facts of the case are that the assessee e-filed his return of income for the year under consideration on 31.08.2015, declaring a total income of Rs.21,53,270/-. The case of the assessee was reopened under section 147 of the Income Tax Act, 1961 (hereinafter called “the Act’) citing the reason that the assessee had received unsecured loan of Rs.1,36,00,000/- from M/s Horizon Portfolio Ltd. In response to the notice issued by the Assessing Officer (AO) under section 148 of the Act, dated 26.07.2022, the assessee filed his return of income on 26.08.2022, declaring the same income as originally returned, i.e., Rs.21,53,270/-. The AO noticed from the material available on record that the assessee was allotted 30000 shares of M/s Cityon Systems (India) Ltd. @ Rs.10/- each and 90000 shares as bonus on 18.07.2013, i.e. during assessment year 2014-15. The AO also noticed that the assessee sold shares of M/s Cityon Systems (India) Ltd. through M/s Horizon Portfolio Ltd. and had received a sale consideration of Rs.1,39,59,988/- during the year under consideration and that the assessee had booked Long Term Capital Gain of Rs.1,38,50,934/-, out of which Rs.1,36,00,000/- was credited in his Bank account. The AO further noted that in the search operation carried out at the premises of Rich Udyog Group of Companies, which included M/s Cityon Systems (India) Ltd. and M/s Horizon Portfolio Ltd., on 28.04.2015 by the Investigation Wing, Kanpur, the jurisdictional AO of that group of companies noted that this group provided accommodation entries in the form of bogus unsecured loan/Long Term Capital gains/investment in lieu of commission @ 2.5% and that to provide bogus accommodation entries in the form of bogus Long Term Capital Gain, the beneficiaries were allotted shares of listed companies of Rich Group viz. M/s Rich Universe Network Ltd., M/s Cityon Systems (India) Ltd., and M/s Nikki Finance Ltd. at very low prices. The AO further observed that in order to provide bogus Long Term Capital Gain to beneficiaries, such shares of these listed companies were purchased by the companies of Rich Group, like M/s Horizon Portfolio Ltd. at a very high price and such purchases culminated into Long Term Capital Gains which were claimed as exempt under section 10(38) of the Act by the beneficiaries. The assessee was required to explain the credit entry of Rs.1,36,00,000/- in his Bank account and after considering the submissions made by the assessee, the AO, not being satisfied with the replies furnished by the assessee, held that the assessee had entered into a sham transaction and, accordingly, Rs.1,36,00,000/- received by the assessee on account of sale of shares of M/s Cityon Systems (India) Ltd. was added to the total income of the assessee. The AO completed the assessment under section 143(3) of the Act read with sections 147 and 144B of the Act, computing the income of the assessee as under:
Income as per return : Rs.21,53,270/- Income as computed u/s. 143(1)(a) of the Act : Rs.21,53,270/- Variation in respect of addition : Rs.1,36,00,000/- Total income : Rs.1,57,53,270/- 2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under section 271(1)(c) of the Act, separately.
2.2 Aggrieved, the Assessee preferred an appeal before the Ld. First Appellate Authority. The main issued raised before the Ld. First Appellate Authority was with respect to the validity of reassessment proceedings initiated by the AO under section 147 of the Act. The Ld. First Appellate Authority passed a detailed order and after placing reliance on various judicial precedents, he held that the notice issued by the AO under section 148 of the Act dated 26.07.2022 was barred by limitation as per the provisions of section 149 of the Act and was void ab initio and, accordingly, he quashed the assessment order passed by the AO under section 147 read with section 144B of the Act and allowed the appeal of the assessee.
2.3 Now, the Revenue has approached this Tribunal challenging the order of the Ld. First Appellate Authority, by raising the following grounds of appeal:
The Ld. CIT(A) erred by deleting the addition of Rs.1,36,00,000/- made pertaining to claim of Long Term Capital Gain as- 2. The assessing officer has the information which was duly provided to the appellant vide notice u/s 148A(b) of the I.T. Act, 1961. The appellant has failed to negate the information which suggest that the income chargeable to tax amounting to Rs.1,36,00,000/- has escaped the assessment.
The issue of limitation of 148 notice stands decided in favour of Revenue by Hon'ble Delhi High Court in the case of Salil Gulati Vs ACIT, Delhi (W.P12541/2022). 3.0 The Ld. Sr. D.R. submitted that the Department was in appeal before this Tribunal agitating the conclusion of the Ld. First Appellate Authority that the notice issued under section 148 of the Act, vide dated 26.07.2022 for the year under consideration, was barred by limitation in terms of section 149 of the Act and was held to be void ab initio. The Ld. Sr. D.R. submitted that in this case, the AO had information, which was duly provided to the assessee vide notice issued under section 148A(b) of the Act, regarding bogus Long Term Capital Gain to the tune of Rs.1,36,00,000/- and the assessee had failed to negate the information and, therefore, the reopening was very much valid in the eyes of law. The Ld. Sr. D.R. further submitted that the issue of limitation stood covered in favour of the Department by the judgment of the Hon'ble Delhi High Court in the case of Salil Gulati vs. ACIT in Writ Petition No.12541/2022, wherein the Hon'ble Delhi High Court had held that for assessment year 2013-14, the time period for issuing reassessment notice stood extended to 30.06.2021 and where the income alleged to have escaped assessment was above Rs.50 lakhs, the first proviso of section 149 of the Act (as amended by the Finance Act, 2021) was not attracted and the notice was held to have been issued within the limitation period. The Ld. Sr. D.R. submitted that this judgement of the Hon'ble Delhi High Court had followed the judgement of the Hon'ble Apex Court in the case of Union of India vs. Ashish Aggarwal reported in [2022] SCC Online SC 5431. The Ld. Sr. D.R. submitted that, therefore, the Ld. First Appellate Authority had grossly erred in law in holding the notice issued under section 148 of the Act in the captioned appeal to be void ab initio. It was submitted that the appeal before the Ld. First Appellate Authority required the Ld. First Appellate Authority to discuss on merits and the same should not have been dismissed without going into the merits of the case. It was prayed that the appeal of the Department be allowed.
4.0 Per contra, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that in the captioned appeal, notice issued under section 148 of the Act on 26.07.2022 was barred by limitation, as the Taxation and Other Laws (Relaxation Amendment of Certain Provisions) Act, 2020 (in short ‘TOLA’) was not applicable for the captioned assessment year, as the Revenue had itself granted concession as per paragraph 19 of the judgment of the Hon'ble Apex Court in the case of Union of India and Others vs. Rajeev Bansal reported in [2024] 167 taxmann.com 70 (SC), wherein the Department had conceded that for assessment year 2015-16, i.e., the year under appeal in this case, all notices issued on or after 1st April, 2021 will have to be dropped, as they will not fall in completion during the period prescribed under TOLA. The Ld. A.R. drew our attention to the relevant paragraph in the judgment of the Hon'ble Apex court in the case of Union of India and Others vs. Rajeev Bansal (supra) and submitted that in view of this judgment of the Hon'ble Apex Court, notice issued under section 148 of the Act in the case of the assessee, dated 26.07.2022 and the consequential assessment proceedings, had rightly been quashed by the Ld. First Appellate Authority. The Ld. A.R. submitted that the case of Union of India and Others vs. Rajeev Bansal (supra) was rendered subsequent to the judgment in the case of Salil Gulati vs. ACIT (supra) and Union of India vs. Ashish Aggarwal (supra) and is now the current law of the land. The Ld. A.R. prayed that the order of the Ld. First Appellate Authority be upheld and the appeal of the Department be dismissed.
5.0 We have heard the rival submissions and have also perused the material on record. The facts are not in dispute. It is seen that the first notice under section 148 of the Act was issued on 16.06.2021 for assessment year 2015-16, i.e. the year under appeal under the old regime, i.e., prior to the passing of the Finance Act, 2021. The AO, in view of the judgment of the Hon'ble Apex Court in the case of Union of India vs. Ashish Aggarwal (supra), issued notice under section 148A(b) of the Act on 25.05.2022 which was duly complied by the assessee. Thereafter, the AO passed order under section 148A(d) of the Act on 26.07.2022 and also issued notice under section 148 of the Act on the same date, i.e., on 26.07.2022. Thereafter, the AO, vide assessment order dated 29.05.2023, made an addition of Rs.1,36,00,000/- under section 68 of the Act as unexplained credit by holding the Long Term Capital Gain on sale of equity shares as non-genuine. However, on appeal, the Ld. First Appellate Authority, vide order dated 31.05.2024, deleted the addition by holding that the notice issued under section 148 of the Act dated 26.07.2022 was barred by limitation as per the first proviso to section 149 of the Act. The assessment order passed under section 147 of the Act was quashed by the Ld. First Appellate Authority.
5.1 It is seen that the Ld. First Appellate Authority, while quashing the notice under section 148 of the Act in the present appeal, has taken cognizance and followed the judgment of the Hon'ble Bombay High Court in the case of Hexaware Technologies Limited vs. ACIT in Writ Petition No.1778 of 2023, vide order dated 03.05.2024. The observations of the Hon'ble Bombay High Court also relevant in the present case and are being reproduced hereunder:
"Section 149 of the Act sets out, inter alia, the time limit for issuing notice under Section 148 of the Act. Apart from the period of limitation set out in the said Section, the first proviso lays down a further restriction on the issue of a notice under section 148 of the Act. The period of limitation as well as the said further restriction is framed/provided in respect of a notice under 148 of the Act, and not for a notice under section 148A of the Act. The notice dated 8th April 2021, which though originally issued as a notice under section 148 of the Act, (under the provisions of the Act prior to the amendments made by the Finance Act, 2021), has now been treated as a notice issued under section 148A(b) of the Act in accordance with the decision of the Hon'ble Apex Court in Ashish Agarwal (Supra). Once the notice dated 8th April 2021 has been treated as having been issued under Section 148A(b) of the Act, the said notice is no longer relevant for the purpose of determining the period of limitation prescribed under Section 149 or the restriction as per the first proviso below Section 149 of the Act. Therefore, for considering the restriction on issue of a notice under section 148 of the Act prescribed in the first proviso to Section 149 of the Act, the fresh/presently impugned notice dated 27th August 2022 issued under Section 148 of the Act is required to be considered. The said notice is admittedly beyond the erstwhile period of limitation of six years prescribed by the Act prior to its amendment by the Finance Act, 2021. For the Assessment Year 2015-2016, the erstwhile time limit of six years expired on 31st March 2022 and, the impugned notice under Section 148 of the Act has been issued on 27th August 2022 and, therefore, the impugned notice dated 27th August, 2022 is barred by the restriction of the first proviso to Section 149 of the Act.” 5.2 After having heard both the parties and after going through the impugned order, we are in complete agreement with the arguments advanced by the Ld. A.R. that the case of the assessee stands covered by the judgment of the Hon'ble Apex Court in Union of India and Others vs. Rajeev Bansal (supra). It will be relevant, at this juncture, to reproduce relevant extracts from paragraph 19 of this judgment for a ready reference:
“a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assessees and the Revenue during the time of COVID-19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income-tax Act; b. Section 149 of the new regime provides three crucial benefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re assessment for previous assessment years; c. The relaxations provided under section 3(1) of TOLA apply "notwithstanding anything contained in the specified Act." Section 3(1), therefore, overrides the time limits for issuing a notice under section 148 read with Section 149 of the Income-tax Act; d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; e. The Finance Act 2021 substituted the old regime for re- assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income-tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below:
Within six Years Assessment Within Expiry of Limitation read Expiry of Limitation read with Year 3Years with TOLA for (2) TOLA for (4) (4) (D (2) (3) (5) 2013-2014 31-3-2017 TOLA not applicable 31-3-2020 30-6-2021 2014-2015 31-3-2018 TOLA not applicable 31-3-2021 30-6-2021 2015-2016 31-3-2019 TOLA not applicable 31-3-2022 TOLA not applicable 2016-2017 31-3-2020 30-6-2021 31-3-2023 TOLA not applicable 30-6-2021 2017-2018 31-3-2021 31-3-2024 TOLA not applicable f. The Revenue concedes that for the assessment year 2015- 16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA.”
5.3 Therefore, in view of clauses (e) and (f) above, it is obvious in no uncertain terms that for assessment year 2015-16, all the notices issued on or after 1st April, 2021 will have to be dropped, as they will not fall in completion during the period prescribed under TOLA. This position was conceded by the Income Tax Department itself before the Hon'ble Apex Court and, therefore, it is binding as the law of the land.
5.4 It is also seen that following the judgment of the Hon'ble Apex Court in the case of Union of India and Others vs. Rajeev Bansal (supra), various Hon'ble High Courts have also passed judgments on similar lines, some of which are as under:
(1) Bhagwan Sahai Sharma v. Deputy Commissioner of Income-tax [2025] 174 taxmann.com 14 (HC Delhi). (2) Makemytrip India (P.) Ltd. v. Deputy Commissioner of Income-tax [2025] 173 taxmann.com 497 (HC Delhi). (3) IBIBO Group Private Limited v, Assistant Commissioner of Income Tax Circle 10-1, & ANR. [2024] W.P.(C) 17639/2022 (HC Delhi) . (4) Jay Jay Agro Industries. v. Income Tax Officer, Ward-1, Karnal & Another [2025] CWP-7405-2025 (O&M) (HC- Punjab and Haryana).
(5) The Income Tax Officer Ward 1(2) Jaipur v R.K. Build Creations Private Limited [2025]. 5.5 Therefore, respectfully following the above mentioned judicial precedents, we are of the considered view that in the present case, the impugned notice issued on 26.07.2022 under section 148 of the Act was issued admittedly and admittedly beyond the period of limitation as prescribed under section 149(1) of the Act, since TOLA was not applicable in respect of the said notice under section 148 of the Act as conceded by the Department in the case of Union of India and Others vs. Rajeev Bansal (supra). Accordingly, we hold that the impugned notice has rightly been set aside by the Ld. First Appellate Authority and we find no reason to interfere with the same. The grounds raised by the Department are, accordingly, dismissed.
6.0 In the final result, the appeal filed by the Department stands dismissed.
Order pronounced in the open Court on 31/10/2025.