KANCHAN DEVI AGARWAL,SURAT vs. ITO, WARD 1(2)(1), SURAT

As the facts involved in these two cases are identical, both the matters were heard together and are being disposed of vide this common order for the sake of convenience. We will first take up the appeal of the assessee for the A.Y. 2016-17.

The brief facts of the case are that the assessee had filed her return of income for the A.Y. 2016-17 on 03.08.2016 declaring income of Rs.4,99,060/-. Subsequently, the case of the assessee was reopened by the AO by issuing a notice under section 148 of the Act with the specific reason to verify the genuineness of unsecured loan credit of Rs.25,00,031/- received by the assessee from M/s.ECLAT Construction P.Ltd., a paper/shell company managed and run by Banka Group of companies in the form of accommodation entry, which was explained by the assessee to be an amount of Rs.25.00 lakhs taken from the M/s.ECLAT Construction Pvt. Ltd. as advance for the purpose of purchase of equity shares of M/s.Dhanurdhar Processer P.Ltd. The said ECLAT Construction P.Ltd. confirmed the same in response to the notice under section 133(6) of the Act. However, the ld.AO did not get satisfied with the explanation of the assessee and completed the assessment by making an addition of Rs.25.00 lakhs under section 68 of the Act. Aggrieved by the said order of the AO, the assessee went in appeal before the ld.CIT(A).

Before the ld.CIT(A) the assessee challenged the assessment on two counts (i) validity of reopening of the assessment by issuance of notice under section 148 in view of the decision of the Union of India Vs. Aashish Agawal, and (ii) merit of the impugned addition. The ld.CIT(A), however, upheld the finding of the AO and confirmed his order on both the counts. Hence, the assessee has come in further appeal before the Tribunal.

In this appeal, the assessee has raised the following grounds:

At the outset, Shri Ramesh Malpani, ld.AR of the assessee submitted the notice u/s 148 of the Act issued by the Assessing Officer was time barred. The Ld. AR submitted that the initial notice u/s 148 of the Act was issued on 28.06.2021, which was within the extended time limit as per Taxation and Other Laws Ordnance, 2020 (TOLA). As per the decision of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal (2023) (1 SSC 617), all the notices issued u/s 148 of the Act during the period from 01.04.2021 to 30.06.2021, were deemed to be notice issued u/s 148A(b) of the Act, as amended by the Finance Act 2021. Further, directions were issued to supply the materials within 30 days and grant further 15 days’ time to the assessee to reply to such notice before passing the order u/s 148A(d) of the Act. The Ld. AR explained that in the present case, the assessee was supplied materials on 21.06.2022 in terms of Section 148A(b) of the Act to which the assessee had submitted reply on 06.06.2022. Thereafter, the order u/s 148A(d) of the Act was passed by the Assessing Officer on 25.07.2022. According to the assessee, this order u/s 148A(d) of the Act

The Ld. AR explained that as per the decision of Hon’ble Supreme Court in the case of Union of India vs. Rajeev Bansal (2024) 167 taxmann.com 70 (SC), the order u/s 148A(d) of the Act was required to be passed and notice u/s 148 of the Act under the new regime was required to be issued within the time limit surviving under the Income Tax Act read with TOLA. He explained that since the original notice u/s 148 of the Act was issued on 28.06.2021, the Assessing Officer had only 3 days surviving limit under the Income Tax Act read with TOLA. Therefore, new notice u/s 148 of the Act was required to be issued within the extended period of 7 days, from the date of response of the assessee to the notice u/s 148A(b) of the Act. The Ld. AR submitted that as the notice u/s 148 of the Act was issued in this case beyond the time limit surviving under the Income Tax Act read with TOLA, the same was barred by limitation.

Per contra, Shri Ajay Uke, Ld. Sr. DR relied upon the orders of the lower authorities. He submitted that as per provision of section 148A(d) of the Act, the AO was required to pass the order under that section within a period of one month from the end of the month in which the reply of the assessee to the show cause notice u/s 148A(b) of the Act, was received. The Ld. Sr. DR explained that the order u/s 148A(d) passed in this case was within the time limit as prescribed under the Act and the notice u/s 148 of the Act was also issued within the time period. Therefore, there was no infirmity with the notice of the AO.

We have carefully considered the rival submissions. It will be relevant to tabulate the chronology of the events in the present case, which is as under: -

The contention of the assessee is that the Assessing Officer was required to pass order under Section 148A(d) of the Act and also issue notice under Section 148 of the Act within the surviving period of three days (which was extended to seven days) of filing its reply on 06.06.2022. Thus, the Assessing Officer had time limit till 14.06.2022 only to take these actions. However, the order under Section 148A(d) of the Act and the notice under Section 148 of the Act was issued on 25.07.2022 i.e. beyond the period of seven days from its reply on 06.06.2022 and thus the notice was barred by limitation.

The Hon’ble Supreme Court, in the case of Ashish Agarwal (supra), had directed that all the notices u/s 148 of the Act issued under the old provision shall be treated as show cause notice issued u/s 148A(b) of the Act of the new provisions. Further, the Hon’ble Court had directed the assessing officers to supply the assesses with the relevant material

The Hon’ble Court had held that only 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 such deemed notice, including issuance of notice u/s 148 of the new regime. The surviving or balance time limit was required to be calculated by computing the number of days between the date of issuance of deemed notice and 30th June, 2021. The reasoning and the relevant part of the judgement of the Court is as under: 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 Hon’ble Supreme Court had thus categorically held that 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 TOLA and that all notices issued beyond the surviving period were time barred and liable to be set aside. This time- line was also demonstrated in para 112 of the order with an illustration. In the present case, the original notice u/s 148 of the Act was issued on 28.06.2021 which was treated as deemed notice u/s 148A(b) of the Act. Since this notice was issued on 28.06.2021, the surviving time period available to the Assessing Officer to complete the further proceedings, including the issue of notice u/s 148 of the Act, was three days only, which was extended to seven days. Accordingly, the

Identical issue was decided by the Hon’ble Gujarat High Court in the case of Dhanraj Govindram Kella [2025] 177 taxmann.com 194 (Gujarat). The findings given by the Hon’ble Court on this issue are reproduced below: 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 of 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. 66. So far as Assessment Years 2013-2014 and 2014-2015 are concerned, the period of three years from the end of the assessment year would be over prior to 20.03.2020 and the period of six years would be over between 20.03.2020 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. 67. 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 view of the decision of the Hon'ble Apex Court in case of Rajeev Bansal (supra):

In view of the facts discussed above and the judgement of the Hon’ble Supreme Court as well as the jurisdictional High Court, the impugned notice dated 25.07.2022 issued u/s 148 of the Act is held to be invalid as the same was issued beyond the surviving period as per the decision of Hon’ble Supreme Court in the case of Rajiv Bansal

Since the legal ground taken by the assessee has been allowed, and the assessment order has been consequently quashed and set aside, other grounds on merits taken by the assessee has become infructuous. Accordingly, the appeal of the assessee is allowed.

The facts involved in this appeal are identical to A.Y. 2016-17. The chronology of the events pertaining to A.Y. 2017-18 is as under: - SL. PARTICULARS DATE / DAYS No.

In the final result, both the appeals of the assessee stand allowed. Order pronounced on 23rd December, 2025.