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Facts
The assessee filed its original return and was assessed. Subsequently, reassessment proceedings were initiated under Section 147 based on information that the assessee claimed depreciation on an office premise allegedly not used for business and should have offered notional rental income. The Assessing Officer disallowed depreciation and added notional rental income.
Held
The Tribunal held that the notice issued under Section 148 was barred by limitation. Following the Supreme Court's decision in Union of India v. Rajeev Bansal, the Tribunal computed the surviving period of limitation, finding that the order under Section 148A(d) and the notice under Section 148 were issued beyond the permissible time limit.
Key Issues
Whether reassessment proceedings and the notice issued under Section 148 were barred by limitation, considering the time limits prescribed and extended by TOLA, and the pronouncements of the Supreme Court in Ashish Agarwal and Rajeev Bansal.
Sections Cited
147, 148, 143(3), 144B, 148A, 32, 24, 149, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI MAKARAND VASANT MAHADEOKAR
आदेश / ORDER
PER MAKARAND VASANT MAHADEOKAR, AM:
This appeal by the assessee is directed against the order dated 24.07.2025 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Apcotex Industries Limited Year 2013–14, arising out of the assessment order dated 27.05.2023 passed by the Assessing Officer (AO) under section 147 read with section 144B of the Act.
The brief facts of the case are that the assessee filed its original return of income for A.Y. 2013–14 on 29.09.2013, declaring total income of Rs. 11,35,45,570/-. The assessment was originally completed under section 143(3) determining total income of Rs. 13,40,45,570/-. Subsequently, a reassessment under section 143(3) read with section 147 was also completed on 29.12.2017 determining total income of Rs. 14,03,67,404/-. Thereafter, based on information available with the National E- Assessment Centre, the Assessing Officer initiated reassessment proceedings once again. According to the Assessing Officer, information was received to the effect that the assessee had purchased an office premises situated at Unit No. 3, 1st Floor, Centrium, C.S. No. 124/A, 15, LBS Marg, Kurla (West), Mumbai, on 28.09.2012 for a consideration of Rs. 5,49,04,095/-, and the said property was sold on 27.09.2017 (on 29.09.2017 as mentioned in order of AO). It was noticed that in subsequent assessment years, the assessee had let out the said property and offered rental income there-from under the head “Income from House Property”, while also reducing the property from the block of assets.
The Assessing Officer was of the view that for A.Y. 2013–14, the assessee had claimed depreciation on the said property amounting to Rs. 54,90,410/-, even though, according to him, Apcotex Industries Limited the property was not used for the purposes of business. Further, the Assessing Officer was of the opinion that the assessee ought to have offered notional rental income from the said property under the head “Income from House Property”, as the property was allegedly a deemed let-out property. On this basis, proceedings under section 148A were initiated, and after passing an order under section 148A(d) dated 28.07.2022, notice under section 148 was issued on 29.07.2022.
In response to the notice issued under section 148 of the Income-tax Act, 1961, the assessee filed its return of income on 18.08.2021, declaring income as originally returned. During the course of reassessment proceedings, notices under sections 143(2) and 142(1) were issued by the Assessing Officer. The Assessing Officer held that depreciation under section 32 is allowable only where the asset is used for the purposes of business during the relevant previous year. According to him, the assessee failed to establish that the property was used for business purposes in the year under consideration. He further held that allowing depreciation on the property, while also permitting deduction under section 24 in respect of income from house property, would result in a double deduction, which is not permissible under law. As no actual rental income was disclosed by the assessee for the year under consideration, the Assessing Officer proceeded to determine the annual letting value of the property by adopting a method based on Manual XVII of the Municipal Corporation of Greater Mumbai. By adopting 12 Apcotex Industries Limited percent of the cost of the property as a conservative estimate of annual rent and allowing standard deduction under section 24, the Assessing Officer computed notional income from house property at Rs. 41,50,749/-. Accordingly, depreciation of Rs. 54,90,410/- was disallowed and notional rental income of Rs. 41,50,749/- was added, resulting in a total addition of Rs. 96,41,159/-. The assessment was thus completed at a total income of Rs. 12,31,86,729/- vide order dated 27.05.2023 passed under section 147 read with section 144B of the Act.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). Before the CIT(A), the assessee challenged both the validity of reopening as well as the additions on merits. It was contended that the notice under section 148 was barred by limitation under section 149, that there was no failure on the part of the assessee to disclose fully and truly all material facts, and that the reopening was based on verification and roving enquiries. On merits, the assessee reiterated its submissions regarding allowability of depreciation and non-taxability of notional rent.
The CIT(A), after considering the submissions, upheld the validity of reopening. He held that the reassessment proceedings were initiated in accordance with the directions of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal and within the extended limitation provided under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. He further held that the Assessing Officer
On merits, the CIT(A) held that the assessee failed to produce any evidence to establish that the property was used for business purposes during the relevant year. He noted that the rent agreement produced by the assessee pertained to a later assessment year and that no contemporaneous evidence was furnished to support the claim of business use. The CIT(A) concurred with the Assessing Officer that the claim of depreciation and standard deduction under section 24 resulted in double deduction. He also upheld the method adopted by the Assessing Officer for determining notional rental income. Accordingly, the CIT(A) confirmed the total addition of Rs. 96,41,159/- and dismissed the appeal vide order dated 24.07.2025.
Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising following grounds of appeal:
1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in upholding the reopening of assessment without appreciating that notice dated 28.07.2022 issued u/s 148 was time barred, being not within time limit provided u/s 149 of the income tax act as held by Honourable Supreme Court in case of Rajeev Bansal, 301 Taxman 238.
2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in issuance of notice u/s 148 without bringing out failure on the part of assessee, to disclose fully and truly all material facts, specifically when already an assessment u/s 143(3) was made and first reopening was completed on 29.12.2017, and now by way of impugned 148 notice a second time reopening was resorted.
Apcotex Industries Limited 3. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in upholding the reopening of the assessment without appreciating that the reasons recorded itself were for purpose of verification and making roving inquiries which is not permissible under the provisions of section 148.
4. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) erred in upholding the addition of Rs. 54,90,410/- on account of depreciation claimed on the office premises use for the purpose of business.
5. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeal) further erred in upholding the addition of Rs. 41,50,749/- on account of income from deemed let-out of the above office premises.
6. The Appellant craves the leave to add, amend, alter and/or delete any of the above grounds of appeal
at/or before the time of hearing.
9. During the course of hearing before us, the learned Authorised Representative (AR) of the assessee submitted that the reassessment proceedings are barred by limitation and that the issue stands squarely covered by the judgment of the Hon’ble Supreme Court in the case of Rajeev Bansal. The learned AR invited our attention to the detailed timeline of events placed on record and explained that the statutory time limits, even after taking into consideration the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, stood exhausted prior to the passing of the impugned order under section 148A(d) and issuance of notice under section 148.
The learned AR explained the chronology of events as under: i. The last date for issuance of notice under section 148 for A.Y. 2013–14 under the old regime was 31.03.2020.
Apcotex Industries Limited ii. By virtue of the relaxations under TOLA, the extended last date for issuance of notice under section 148 was 30.06.2021. iii. Notice under section 148 under the old regime was issued on 28.06.2021, i.e. within the extended TOLA period. iv. The Hon’ble Supreme Court rendered its judgment in the case of Ashish Agarwal on 04.05.2022, pursuant to which the earlier notices were deemed to be show cause notices under section 148A(b). v. Notice under section 148A(b) providing information was issued on 27.05.2022. vi. The assessee submitted its reply to the notice under section 148A(b) on 13.06.2022. vii. As per the legal position explained by the Hon’ble Supreme Court in Rajeev Bansal, the consequential order under section 148A(d) and the notice under section 148 were required to be passed or issued within the prescribed time, which, according to the assessee, expired on 20.06.2022. However, in the present case, the actual order under section 148A(d) and the notice under section 148 were issued only on 28.07.2022.
On the basis of the above timeline, the learned AR submitted that the order under section 148A(d) as well as the notice issued under section 148 were beyond the permissible time limit and, therefore, the entire reassessment proceedings are void ab initio and liable to be quashed.
The learned AR placed reliance on the judgment of the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal reported in 167 taxmann.com 70 (SC), and drew our Apcotex Industries Limited attention to para 110, 111 and 112 of the said judgement. The learned AR also placed reliance on the judgment of the Hon’ble Gujarat High Court in the case of Krishna Naitik Patel, POA Holder of Ishwerbhai Keshavbhai Patel v. Assessment Unit, Income-tax Department, reported in 175 taxmann.com 814 (Gujarat), wherein, following the ratio laid down by the Hon’ble Supreme Court in Rajeev Bansal, it has been held that where the surviving time limit for issuance of notice under section 148 had expired prior to the passing of the order under section 148A(d) and issuance of notice under section 148, such notices are barred by limitation and the consequent reassessment proceedings are liable to be quashed. The learned AR submitted that the facts of the present case are identical and squarely covered by the aforesaid judgments.
The learned Departmental Representative relied on the orders of the lower authorities.
The issue of limitation raised by the assessee goes to the very root of the jurisdiction assumed by the Assessing Officer. In order to examine the said objection, it becomes necessary to compute the surviving period of limitation available to the Assessing Officer for issuance of notice under section 148 of the Act after the judgment of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal, in the light of the authoritative exposition of law subsequently laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal. We, therefore, proceed to examine the chronology of events and compute the surviving Apcotex Industries Limited time-limit step by step with reference to the relevant dates emerging from the record.
In order to test the assessee’s objection on limitation on the anvil of the ratio laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal (supra), we proceed to compute, in a sequential and arithmetical manner, the “surviving period” available with the Assessing Officer for issuance of notice under section 148 (new regime), after giving effect to the deeming fiction flowing from Ashish Agarwal and the statutory exclusions contemplated in section 149.
The starting point is the admitted position emerging from the record that the assessee filed its return on 18.08.2021 in response to notice under section 148 dated 28.06.2021.The CIT(A) has also recorded that, in compliance with Ashish Agarwal dated 04.05.2022 and CBDT Instruction No. 01/2022 dated 11.05.2022, the Assessing Officer issued the notice under section 148A(b) on 27.05.2022, the assessee filed its reply on 13.06.2022, the Assessing Officer passed the order under section 148A(d) on 28.07.2022, and thereafter issued notice under section 148 on 29.07.2022.
The Hon’ble Supreme Court, while explaining how to compute the “surviving/balance time-limit”, has, inter alia, held that the surviving period is to be computed by taking the period available between the date of issuance of the “deemed notice” (i.e. the old section 148 notice issued during 01.04.2021 to Apcotex Industries Limited 30.06.2021) and the outer date 30.06.2021 which represents the extended time-line under TOLA. This principle, in substance, flows from the Court’s formulation that the Assessing Officers were required to issue the notice under section 148 (new regime) “within the time-limit surviving under the Income Tax Act read with TOLA”, and that the “deemed stay” operates from the date of issuance of the deemed notice till supply of relevant information/material and the period of two weeks allowed to respond.
Applying the above to the present case, the “deemed notice” date is 28.06.2021 (the date of issuance of notice under section 148 under the old regime). The outer date, as recorded by the CIT(A) by tabulating the TOLA notifications, is 30.06.2021. Therefore, the raw surviving period, on a simple count, is the balance period from 28.06.2021 to 30.06.2021, which works out to two days (i.e. 29.06.2021 and 30.06.2021). However, the computation does not end there. Section 149 itself provides statutory exclusions and a statutory minimum extension. The proviso (as reproduced in the judgment) mandates that, for computing limitation, “the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A … shall be excluded”; and further provides that where, immediately after such exclusion, the period available for passing an order under section 148A(d) is less than seven days, “such remaining period shall be extended to seven days”.
Apcotex Industries Limited 19. In the present case, the record shows that the notice under section 148A(b) was issued on 27.05.2022 and the assessee filed its reply on 13.06.2022. Consistent with the framework recognised in Rajeev Bansal, the limitation clock, which is treated as having remained in abeyance during the “deemed stay” period (covering the interval up to supply of material and the response time), would start running for the Revenue only after receipt of the assessee’s reply. Once the clock starts, the Assessing Officer has to complete the remaining statutory steps, including passing an order under section 148A(d) and issuing notice under section 148 (new regime), within the surviving time.
Here, the raw surviving time is only two days, which is less than seven days. Consequently, by force of the above proviso to section 149, the remaining period stands statutorily extended to seven days. Since the assessee’s reply is dated 13.06.2022, the seven-day period begins to run from the next day, i.e. 14.06.2022, and expires at the end of the seventh day, i.e. 20.06.2022.
Thus, on this computation, the last permissible date (within the surviving period as statutorily extended to seven days) for passing the order under section 148A(d) and issuing notice under section 148 (new regime) would be 20.06.2022. Against this, the order under section 148A(d) was passed on 28.07.2022 and the notice under section 148 was issued on 29.07.2022, as recorded in the appellate order.
Apcotex Industries Limited 22. The above chronological analysis leaves no manner of doubt that the question of limitation in the present case is not res integra but stands conclusively governed by the binding ratio of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal (supra). The Hon’ble Supreme Court has authoritatively explained the legal consequences flowing from the deeming fiction created in Ashish Agarwal and has laid down a clear, workable mechanism for computing the surviving period of limitation available to the Assessing Officer for issuance of notice under section 148 of the Act.
The Hon’ble Supreme Court has, in unequivocal terms, held that the legal fiction created in Ashish Agarwal does not revive or enlarge limitation but merely stops the clock, and thereafter permits the Revenue to proceed further only within the time that was still surviving under the Income-tax Act read with TOLA. In this context, the Hon’ble Supreme Court has held as under: “The effect of the creation of the legal fiction in Ashish Agarwal was that it stopped the clock of limitation with effect from the date of issuance of section 148 notices under the old regime.”(para 110) 24. It has further been categorically held that: “The surviving or balance time-limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021.”(para 108) 25. The Hon’ble Supreme Court has also dealt with the exclusions that operate during such computation and has interpreted the third proviso to section 149 in the following terms:
Apcotex Industries Limited “The entire time allowed to the assessee to respond to the show cause notice has to be excluded for computing the period of limitation.”(para 107) 26. Further, while explaining when the limitation clock resumes, the Hon’ble Supreme Court has held:
The clock started ticking for the revenue only after it received the response of the assessees to the show cause notices. Once the clock started ticking, the Assessing Officer was required to complete these procedures within the surviving time-limit.
(para 111) 27. Finally, the Hon’ble Supreme Court has clearly laid down the jurisdictional consequence of non-compliance with the surviving time-limit in the following words:
“A reassessment notice issued beyond the surviving time-limit will be time-barred.” (para 113) 28. Tested on the above binding principles, the factual position in the present case is unambiguous. As already computed hereinabove, the raw surviving period available with the Assessing Officer after issuance of notice under section 148 (old regime) dated 28.06.2021 and the outer date of 30.06.2021 was only two days. After giving effect to the statutory exclusion of the time allowed to the assessee to respond to the notice under section 148A(b) and applying the proviso to section 149, the surviving period stood statutorily extended to seven days, expiring on 20.06.2022.
However, the Assessing Officer passed the order under section 148A(d) only on 28.07.2022 and issued the consequential notice under section 148 on 29.07.2022, both of which are clearly beyond the last permissible date of 20.06.2022 computed strictly Apcotex Industries Limited in accordance with the law laid down by the Hon’ble Supreme Court.
The contention of the Revenue, as reflected from the orders of the lower authorities, proceeds on an assumption that the Assessing Officer had an unrestricted period available after Ashish Agarwal. Such an assumption is directly contrary to the ratio of Rajeev Bansal, which expressly negates any concept of revival or fresh enlargement of limitation and confines the Revenue strictly to the surviving balance period. The defect in the present case, therefore, is not procedural but jurisdictional, going to the very root of the authority of the Assessing Officer to issue the impugned notice under section 148.
In view of the above discussion, we hold that the notice issued under section 148 dated 29.07.2022 is barred by limitation and without jurisdiction. Consequently, the reassessment proceedings culminating in the assessment order passed under section 147 read with section 144B are liable to be quashed. Since the reassessment itself fails on the foundational issue of limitation, the grounds raised
on merits do not survive for adjudication.
32. Before parting, we also take note of the judgment of the Hon’ble Gujarat High Court in the case of Krishna Naitik Patel, POA Holder of Ishwerbhai Keshavbhai Patel v. Assessment Unit, Income-tax Department, reported in 175 taxmann.com 814 (Gujarat), wherein, following and applying the ratio laid down by Apcotex Industries Limited the Hon’ble Supreme Court in Rajeev Bansal, it has been held that where the notice under section 148 of the new regime is issued beyond the surviving period of limitation available after giving effect to Ashish Agarwal and TOLA, such notice is barred by limitation and the reassessment proceedings are liable to be quashed as being without jurisdiction. The said decision fortifies the view taken by us hereinabove.
In the result, having regard to the foregoing discussion and respectfully following the binding ratio laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal (supra), we hold that the notice issued under section 148 of the Income-tax Act, 1961 dated 29.07.2022 is barred by limitation and, therefore, without jurisdiction. Consequently, the reassessment proceedings initiated pursuant thereto and the assessment order dated 27.05.2023 passed under section 147 read with section 144B of the Act are hereby quashed. As the reassessment itself is held to be invalid on the jurisdictional ground of limitation, the other grounds raised
by the assessee on merits are rendered academic and are left open.
34. The appeal filed by the assessee is allowed. Order pronounced in the open court on 08.01.2026.