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Facts
The assessee's appeals were filed against the orders of the NFAC for AY 2016-17 and 2017-18, concerning assessment orders under Section 147 r.w.s. 144B. The core issue revolves around the validity of the notice issued under Section 148 and the subsequent reassessment.
Held
The Tribunal held that the notice issued under Section 148 of the Act was time-barred as it was issued beyond the 'surviving time' permitted by law, as interpreted by the Supreme Court in Union of India vs. Ashish Agarwal and Rajeev Bansal. Consequently, the reassessment orders were quashed.
Key Issues
Whether the notice issued under Section 148 of the Income Tax Act was time-barred due to being issued beyond the 'surviving time' limit.
Sections Cited
147, 144B, 148, 133(6), 68, 234B, 148A, 149(1), 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, SURAT
Before: S/SHRI SANJAY GARG & BIJAYANANDA PRUSETH
Per Sanjay Garg, Judicial Member :
1. These two appeals are filed by the assessee against the separate orders of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”), both dated 03.03.2025, for the Assessment Years (A.Y.) 2016-17 & 2017-18 in relation to assessment orders passed under Section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
2. 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.
& 480/SRT/2025 Page 2 of 11 for A.Y. 2016-17
3. 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).
4. 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.
5. In this appeal, the assessee has raised the following grounds:
1. That on the facts and in the circumstances of the case as well as in law, the Id. CIT (A), NFAC, DELHI [CIT (A)] has erred in upholding the validity of the & 480/SRT/2025 Page 3 of 11 order passed u/s 148A (d) and notice issued u/s 148 of the I. T. Act, 1961 (the Act), which is invalid, time barred, bad in law and beyond the law and without sanction of appropriate authority u/s 151 and thereby erred in upholding the validity of the consequent assessment order passed u/s 147 r.w.s. 144B of the Act, which are invalid and bad in law ab initio. Appellant prays for quashing the same.
2. Without prejudice to above grounds of appeal
, that on the facts and in the circumstances of the case as well as in law, the Id. CIT (A) has erred in upholding the addition of Rs. 25,00,031/- u/s 68 of the Act by assuming the duly explained amount of advance received from Eclat Construction Pvt. Ltd. as unexplained cash credit. The reasons mentioned for making this addition are factually wrong and contrary to the settled law and the addition made is wrong and unjustified on facts as well as in law. Appellant prays for deleting the same.
3. Without prejudice to other grounds of appeal, that the interest charged by Id. A.O. u/s 234B of the Act is also wrong and unjustified. Appellant prays for deleting the same.
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 & 480/SRT/2025 Page 4 of 11 and the fresh notice u/s 148 of the Act issued on 28.06.2021, were barred by limitation.
7. 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 & 480/SRT/2025 Page 6 of 11 and information relied upon by the Revenue within thirty days from the date of the judgment. The effect of this direction was summarized by the Apex Court in the case of Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC) as under:
…..To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices. [Emphasis supplied.]
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 clock started ticking for the Revenue only after it received the response of the assesses 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 prescribed under the Income Tax Act read with TOLA, was & 480/SRT/2025 Page 7 of 11 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.
In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under Section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under Section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under Section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under Section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under Section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income Tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time-barred. [Emphasis supplied.]
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 & 480/SRT/2025 Page 8 of 11 Assessing Officer was required to pass the order a u/s 148A(d) of the Act and also to issue notice u/s 148 of the Act in this case within a period of seven days from the date of receipt of reply of the assessee. As the assessee had filed its reply on 06.06.2022, the time limit available to the Assessing Officer to issue the notice u/s 148 of the Act was till 08.07.2022 only. As the notice in the present case was issued on 25.07.2022, the same is found to be beyond the limitation period.
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):
SCA NO AY Date of notice under No of days of Date of providing section 148 under surviving time information under TOLA available till section 148A(b) 30.06.2021 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 SCA NO Due date of Date of reply:- Date of order Last date for issuance of notice filing reply under section under section 148 as per 148A(d) and surviving time:- notice under section 148:- 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 68. 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 of Rajeev 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.
The Hon’ble Court held that since the notices under section 148 were issued beyond period of 'surviving time' as per direction of Supreme Court in Union of India v. Rajeev Bansal (supra), such notices were invalid.
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 (supra). Accordingly, the proceeding initiated u/s 148 of the Act is quashed being time-barred. As a consequence, the impugned assessment order dated 25.04.2023 does not survive and the same is quashed and set aside. The legal ground taken by the assessee is allowed.
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.
Issue of Original Notice u/s 148 with Approval of JCIT 28/06/2021
No of days of surviving time available till 30.06.2021 3 days
Notice u/s 148A(b) providing information as per Supreme 25/05/2022 Court judgement in Ashish Agarwal
Further information provided u/s 148A(b) 17/06/2022
2 Weeks' time given in above notice u/s 148A(b) 01/07/2022
6. Reply filed by the appellant against notice u/s 148A(b) 06/06/2022
Last date for issuance of notice under section 148 as per 04/07/2022 "surviving time" as per Judgement of Hon'ble Supreme Court (i.e. in case of RAJEEV BANSAL (Para No. 112) 01/07/2022 + 3 days) 08. Order u/s 148A(d) and Notice u/s 148 issued with Approval 25/07/2022 of PCIT & 480/SRT/2025 Page 11 of 11 18. In this year also, the notice under Section 148 of the Act was issued beyond the surviving period. Hence, the finding and the decision in for the A.Y. 2016-17 will apply mutatis mutandis to A.Y. 2017-18 as well. Accordingly, the legal ground taken by the assessee is allowed and the appeal of the assessee is allowed.
In the final result, both the appeals of the assessee stand allowed. Order pronounced on 23rd December, 2025.