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Facts
The assessee, a non-resident, did not file a return of income for AY 2015-16. The case was reopened under section 147, and a notice under section 148 was issued on 29/04/2022. The assessee contested the validity of this notice, primarily on the grounds of limitation.
Held
The Tribunal held that the notice issued under section 148 on April 29, 2022, for AY 2015-16 was invalid and barred by time. The six-year limitation period under the old regime expired on March 31, 2022, and the first proviso to the substituted Section 149(1) acts as a statutory bar.
Key Issues
Whether the notice issued under Section 148 of the Income Tax Act, 1961, on April 29, 2022, for AY 2015-16, was within the prescribed time limits as per Section 149 of the Act?
Sections Cited
147, 144, 148, 148A, 149, 69, 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
1. This appeal at the instance of the assessee is directed against the order of Income Tax Officer, Ward-Intl. Taxation 1(1),Bengaluru dated 12/12/2024 vide DIN and Order No: ITBA/AST/S/147/2024- 25/1071150608(1) passed u/s. 147 r.w.s 144 of the Income Tax Act, 1961 (in short “the Act”) for the AY 2015-16.
2. The assessee has raised the following grounds of appeal: -
The appellant objects to the order of the Ld. AO u/s. 147 in pursuance of the directions of the Dispute Resolution Panel order on the grounds that:
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 2 of 23 Grounds Raised
Tax Effect in INR
1. The order of the Ld. AO u/s. 147 of the Income Tax Act, 1961 in pursuance of the directions of the Dispute Resolution panel in so General Ground far as it is prejudicial to the interest of the Appellant is opposed to facts and law.
2. The order of the Ld. AO and the order of the Ld DRP under whose directions the impugned assessment order is passed is invalid and bad in law inasmuch as the reassessment 2,90,654/- proceedings were initiated by an Income Tax (excluding Authority who had no jurisdiction over the interest) Appellant.
3. Without prejudice to ground no 2 and assuming without admitting that the proceedings were validly initiated, the order of Same as above the Ld. AO and the order of the Ld DRP under whose directions the impugned assessment order is passed is invalid and bad in law inasmuch as the notice u/s. 148 was issued on 29/04/2022 which is beyond the time limit stipulated u/s. 149 of the Income Tax Act,1961.
4. Without prejudice to the order grounds raised, the Ld AO erred in assessing a sum of Rs.8.31 Lakhs u/s. 69 of the Income Tax Act, 1961 and in doing so, he failed to duly consider Same as above and appreciate the following: - a. The said amount was received by the appellant as gift from the mother-in-law, who IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 3 of 23 had sufficient source of the same. b. The appellant submitted sufficient documentary evidence during the assessment proceedings, including but not limited to the bank statements of the mother-in-law, clearly substantiating the source and nature of the said amount and the Appellant cannot be expected to justify the source of the source from where he received the funds.
5. Without prejudice to the grounds above and assuming without admitting that the amount received from the mother-in-law of the Appellant ought to have been taxed u/s. 69, the Ld AO erred in treating an amount to the extent of Rs.3,31,000/- received via cheque dated 01/04/2015 as income for the assessment year 2015-16, despite the transaction clearly pertaining to assessment year Same as above 2016-17 and in doing as he failed to appreciate the evidence submitted, including the cheque no 141844 dated 01/04/2015 and bank statement, which clearly established that the transaction does not pertain to the year under assessment. 6.The action of the Ld AO in making the addition of Rs.1,09,627/- u/s. 69C and the action of Ld DRP in upholding the same are untenable inasmuch as the Same as above same was spent through the credit card which itself acts as the source for the same and the Appellant later settled the credit card liability from proven sources.
The Appellant prays for the leave to add, delete, modify or introduce fresh grounds of appeal at any time before the appeal is disposed off.
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 4 of 23 For these and such other grounds that may be adduced or removed in time to time, it is requested that the Hon’ble ITAT may be pleased to examine the case in the light of justice and grant the relief sought for.
The brief facts of the case are that the assessee is a non- resident and employed outside India. Since the assessee having no taxable income in India for the AY 2015-16, he did not file any return of income u/s. 139 of the Act. The case of the assessee was reopened u/s. 147 of the Act after following due procedure as envisaged u/s. 148A of the Act and accordingly a notice u/s. 148 of the Act was issued on 29/04/2022. The AO observed that no ROI was filed in response to notice u/s. 148 of the Act; however, the assessee claimed that he had filed his return on 25/03/2024 and the copy of the return of income (ITR-V) and the computation of income was also produced before the ld. D.R.P. The AO thereafter issued notice u/s. 142(1) of the Act along with the Show Cause notice dated 19/01/2024 to which the assessee made part compliances. In the instant case specific information was disseminated through the insight portal in accordance with the Risk Management Strategy (RMS) formulated by the CBDT. As per the information available, the assessee had undertaken the below mentioned transactions during the period under reference-
Information Information Source Amount (Rs. Code description TDS-194IA(P) Payment of Arun 69,00,000 consideration for purchase of immovable properties AIR-002 Paid SBI cards 3,28,337 Rs.2,00,000 or and more against payment credit card services bills limited
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 5 of 23 3.1 During the course of assessment proceedings, the assessee was given sufficient opportunities to explain the sources of investments made in the year under reference. The assessee in his reply contended that during the FY 2014-15, the assessee invested in the house property vide sale deed dated 01/04/2015 with Mrs. Rajeshwari M.S. for a total consideration of Rs.69,00,000/- the address of schedule property is No.4699, 2nd Stage Vijaynagara, Devaraja Mohalla, Mysore-570017. The payment for the property was made during the March 2015 and April 2015 and the investment in house property was his first investment in the house property in India. In order to make this investment, the assessee taken a housing loan from HDFC Bank to the extent of Rs.55,00,000/-. The statement of HDFC Loan account was also submitted before the AO and as well as DRP. Further, with regard to balance of funding to the extent of Rs.14,00,000/- for the property, the assessee explained as below-
1. Rs.5,00,000/- was paid through vide DD no.444791 dt. 06/03/2015, the said DD was purchased by Mrs. Kalavathi K, Mother-in-law of the assessee from her bank account.
2. Payment to the extent of Rs.5,00,000/- was done by the assessee himself from his bank in Singapore. The transfer was done from assessee Singapore Bank account viz DBS Bank Ltd- Singapore.
3. Rs.3,31,000/- was paid vide cheque no. 141844 dt. 01/04/2015 drawn Indian Overseas Bank. The said cheque was also given by Mrs. Kalavathi K, Mother-in- law of the assessee. The cheque was cleared on 06/04/2015.
4. The balance of Rs.69,000/- was deposited as TDS by Mrs. Kalavathi K from her Central Bank of India
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 6 of 23 account on 30/03/2015. The confirmation from Central Bank of India was also produced. The source for the funds in Central Bank of India was from gold loan taken- account A/c. No. 344549861.
3.2 During the assessment proceedings, the AO also sought explanation on expenditure related to credit card to the extent of Rs.2,18,710/- made during that period. The assessee in his reply submitted that the credit card payments to the extent of 1,72,746/- are made from his State Bank of India account i.e. a/c No.20022300330 during 2014-15. Further, the assessee submitted that the source for making these credit card bills were from his earnings outside India i.e. from Singapore. From the bank statements, it can be seen that the total transfer from DBS Bank limited, Singapore to State Bank of India was about 3,46,133/- for the FY 2014-15 which was used for making credit card payments and thus the assessee claimed that he had sufficient source of income to pay the credit card bills.
3.3 The AO however accepted the source of Rs.55,00,000/- which was loan from HDFC Bank and also accepted Rs.5,69,000/- invested out of savings from earning in Singapore as per the direction of ld. DRP, however did not accept the claim of payments amounting to Rs.8,31,000/- as gift from Mother-in-law Mrs. Kalavathi K. The AO finally held that the assessee failed to prove genuineness and creditworthiness of the Mother-in-law of the assessee as there was not enough evidence to prove that the cash deposits were out of the agricultural income.
3.4 Now with regard to unexplained expenditure u/s. 69C of the Act, the AO in the absence of return of income of the assessee for the period under consideration and considering the opinion of the IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 7 of 23 DRP panel that credit card expenditure of Rs.2,18,710/- was made out of amount transfer from assessee’s foreign bank account, restricted the addition under this head to Rs.1,09,627/- (3,28,337 – 2,18,710). The AO completed the assessment proceedings on a total assessed income of Rs.9,40,627/- while passing order u/s. 147 r.w.s 144 of the Act dated 12/12/2024.
4. Aggrieved by the aforesaid order of the AO passed u/s 147 r.w.s. 144 of the Act dated 12/12/2024, the assessee has filed the present appeal before this Tribunal. Before us the assessee has also filed a paper book comprising 154 pages containing therein the written submissions, notice u/s. 148(b), order u/s. 148(d), notice u/s. 148, sale deed dated 01/04/2015, affidavit of Mrs. Kalavathi K dated 19/03/2025, copy of Indian Overseas bank Statements of Mrs. Kalavathi K for the period of 01/04/2014 to 30/04/2015, cash transaction summary, copy of RTC as well as the case laws relied upon by the assessee.
Before us the ld. AR of the assessee at the outset by raising the legal ground vehemently submitted that the notice issued u/s. 148 of the Act on 29/04/2022 for the AY 2015-16 is barred by limitation as per the 1st proviso to section 149(1) of the Act and accordingly subsequent proceedings including the re-assessment order passed on 12/12/2024 are non-est and void-ab-initio.
6. The ld. CIT DR on the other hand vehemently supported the order of the AO and submitted that in terms of 5th and 6th provisos to section 149(1) of the Act, the order u/s 148A(d) of the Act as well as the notice issued u/s. 148 of the Act both dated 29/04/2022 were well within the prescribed timeline. Further, the ld. DR submitted that the AO had initiated the proceedings by issuing the notice under clause (b) of section 148A of the Act on 26/03/2022
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 8 of 23 which was well before 31/03/2022 and hence the subsequent order passed u/s 148A(d) of the Act and the notice issued u/s 148 of the Act are well within the time.
We have heard the rival submission and perused the material available on record. Undisputedly, the present case relates to AY 2015-16. It is also an undisputed fact that the notice u/s. 148A(b) of the Act was issued on 26/03/2022 and accordingly the order u/s. 148A(d) of the Act was passed on 29/04/2022. Thereafter, the notice u/s. 148 of the Act was issued for the AY 2015-16 on the same day i.e. on 29/04/2022. It is also an undisputed fact that the last date for issuing the notice u/s 148 of the Act under erstwhile section 149(1)(b) of the for the AY 2015-16 was 31/03/2022 (6 years from the end of the assessment year). Now, it is apposite here to note down the chronological date of event for a better appreciation of fact which are detailed below-
Particulars Date Paper Book Ref. Last date for issuing notice u/s. 31/03/2022 NA 148 under erstwhile section 149(1)(b) for AY 2015-16 (6 years from end of AY)
Issuance of Show cause notice 26/03/2022 15 u/s. 148A(b) Due Date/time provided to 05/04/2022 15 respond to the show cause notice issued u/s. 148A(b) as cited in the Notice u/s. 148A(b)
Approval by Specified 27/04/2022 17,19 Authority- PCCIT Karnataka & Goa as cited in the order u/s. 148A(d) & 148 notice
Date of Order u/s. 148A(d) 29/04/2022 17
Issuance of Notice u/s. 148 29/04/2022 19
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 9 of 23 Thus, the core issue revolves around whether the issuance of the notice under section 148 of the Act on April 29, 2022, for AY 2015- 16, falls within the permissible time limits or not?
7.1 Before proceeding further, it is apposite here to mention the relevant provisions of the Act as it stood then which are as follows- Time limit for notice.
(1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause(b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:
Provided further that the provisions of this sub-section shall not apply in case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:
Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause(b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:
Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 10 of 23 Explanation.- For the purposes of clause (b) of this sub-section, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.
7.2 On going through the above provisions, we take note of the fact that for the AY 2015-16, the old 6 years time limit expired on March 31, 2022. Therefore, the notices issued between 01/04/2021 and 31/03/2022, for escaped income of Rs. 50 lakhs or more, could be valid if section 148A procedures were followed and the notice was not time-barred under the old law as of 31/03/2021. However, the notices issued after 31/03/2022, would generally be invalid as they would have become time-barred under the old law, failing the test of the first proviso to section 149(1) of the Act. Thus, the validity of the notice issued u/s 148 of the Act on April 29, 2022, for AY 2015-16, is primarily governed by the first proviso to the substituted Section 149(1) of the Act. This proviso stipulates that no notice under Section 148 shall be issued for an assessment year beginning on or before April 1, 2021, if such notice could not have been issued under the time limits of the old regime (pre-Finance Act, 2021). It is an undisputed fact that for AY 2015- 16, the last date for issuing a notice under the old regime was March 31, 2022. Since the notice was issued on April 29, 2022, it was issued after this cut-off date, rendering it time-barred under the old law. Consequently, the first proviso to the amended Section 149(1) acts as a bar, making the notice invalid, irrespective of the procedural compliance with Section 148A of the Act. We are also of the opinion that the exclusion of time under the 3rd & 4th provisos to Section 149(1) of the Act for Section 148A proceedings does not revive a notice that was already time-barred under the old regime as per the first proviso. We are of the considered opinion that the extended time limits of the new regime do not apply at all if the old limitation period had already expired as on 31/03/2022 & therefore the exclusions under the 3rd & 4thprovisos to Section 149(1) of the IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 11 of 23 Act does not arise at all. Thus, under the unamended Section 149(1)(b) of the Act, a notice under Section 148 of the Act could generally be issued within six years from the end of the relevant assessment year, provided the income escaping assessment amounted to or was likely to amount to one lakh rupees or more. Therefore, the last date for issuing a notice for AY 2015-16 under the old regime was March 31, 2022. Thus, the first proviso to amended section 149(1) acts as a statutory bar, preventing the issuance of a notice under Section 148 for an assessment year like AY 2015-16 (which began on or before April 1, 2021) if such notice could not have been issued under the time limits of the old law. In the present case as the notice in question was issued on April 29, 2022, which is after March 31, 2022 and therefore the condition precedent for issuing a notice for AY 2015-16 under the new regime, as laid down by the first proviso to Section 149(1), is not met. The notice, having been issued after the expiry of the time limit under the old law, is therefore invalid.
7.3 The Hon’ble Supreme Court in the case of Union of India and others vs. Rajeev Bansal reported in (2024) 469 ITR 46 meticulously analyzed the first proviso to Section 149(1)(b) of the new regime. The relevant paragraphs are reproduced below- “45. The first proviso to Section 149(1)(b) provides thus: "149. (1) No notice under section 148 shall be issued for the relevant assessment year, - (a) If three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) If three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in possession of books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April 2021, if such notice could not have been issued at that time on account of being immediately beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:"
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 12 of 23 [Emphasis supplied] 46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of" 149(1)(b) of the old regime. Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime.
In CTO v. Biswanath Jhunjhunwalla 1996 taxmann.com 1141 (SC)/[1996] 5 SCC 626 the Bengal Sales Tax Rules 1941 empowered the Commissioner to revise any assessment within four years from the date of assessment. Subsequently, the State Government issued a notification following the law to extend the time limit from four years to six years from the date of assessment. The extension of the time limit was challenged by the respondents on the ground that the assessments which had attained finality because of the expiry of the period of four years could not be reassessed. This Court observed that it was the clear intention of the notification to permit the Commissioner to revise any assessment made or order passed, provided the assessment had not been made before six years. It was held that if the legislative intention is clear and the language is unambiguous, full effect must be given to the legislative intention by reading the notification as applying not only to the incomplete assessments but also to assessments that had reached finality because of lapse of the earlier prescribed period. The principle that emanates from Biswanath Jhunjhunwalla (supra) is that the courts should give full effect to the legislative intention of granting reassessment powers to assessing officers unless the legislature, by express provision, states otherwise.
Notices have to be judged according to the law existing on the date the notice is issued. Section 149 of the old regime primarily provided two time limits: (i) four years for all situations and (ii) beyond four years and within six years if the income chargeable to tax which escaped assessment amounted to Rupees one lakh or more. After 1 April 2021, the time limits prescribed under the new regime came into force. The ordinary time limit of four years was reduced to three years. Therefore, in all situations, reassessment notices could be issued under the new regime if not more than three years have elapsed from the end of the relevant assessment year. For example, for assessment year 2018-2019, the four year period would have expired on 31 March 2023 under the old regime. However, if the notice is issued after 1 April 2021, the three year time limit prescribed under the new regime will be applicable. The three year time limit will expire on 31 March 2022.
The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.
Another important change under section 149(1)(b) of the new regime is the increase in the monetary threshold from Rupees one lakh to Rupees fifty lakhs. The old regime
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 13 of 23 prescribed a time limit of six years from the end of the relevant assessment year if the income chargeable to tax which escaped assessment was more than Rupees one lakh. In comparison, the new regime increases the time limit to ten years if the escaped assessment amounts to more than Rupees fifty lakhs. This change could be summarized thus:
Regime Time limit Income chargeable to tax which has escaped assessment Old regime Four years but not more Rupees one lakh or more than six years New regime Three years but not more Rupees fifty lakhs or more than ten years
Given Section 149(1)(b) of the new regime, reassessment notices could be issued after three years only if the income chargeable to tax which escaped assessment is more than Rupees fifty lakhs. The proviso to Section 149(1)(b) limits the retrospectivity of that provision with respect to the time limits specified under section 149(1)(b) of the old regime.
In Ashish Agarwal (supra), this Court held that the benefit of the new regime must be provided for the reassessment conducted for the past periods. The increase of the monetary threshold from Rupees one lakh to Rupees fifty lakh is beneficial for the assesses. Mr Venkataraman has also conceded on behalf of the Revenue that all notices issued under the new regime by invoking the six year time limit prescribed under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs.
The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to Section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than Rupees fifty lakhs. ii. TOLA can extend the time limit till 31 June 2021 54. The proviso to Section 149(1)(b) of the new regime uses the expression "beyond the time limit specified under the provisions of clause (b) of sub section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021." Thus, the proviso specifically refers to the time limits specified under section 149(1)(b) of the old regime……….”
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 14 of 23 7.4 Thus, the Apex Court held that "no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; if it is barred at the time when the notice is sought to be issued because of the 'time limits specified under the provisions of' 149(1)(b) of the old regime" (Para 46). This means that for AY 2015-16, a notice under the new Section 148 could only be issued if it was not time-barred under the old regime's Section 149(1)(b) of the Act. Further, the Apex Court held that for the AY 2015-16, the six-year limitation period under the unamended Section 149(1)(b) expired on March 31, 2022 (six years from the end of the relevant assessment year, i.e., March 31, 2016). The Supreme Court explicitly stated that "a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice" (Para 49).
7.5 Now coming to the contention of the Revenue that the AO had initiated the proceedings by issuing the notice under clause (b) of section 148A of the Act well before 31/03/2022 i.e. on 26/03/2022 and hence the subsequent order passed u/s 148A(d) of the Act and the notice issued u/s 148 of the Act both dated 29/04/2022 are well within the time. In this regard we are of the considered opinion that section 149 of the Act stipulates the time limit to issue the notice u/s 148 of the Act & not the issuing of the notice u/s 148A(b) of the Act. This time limit has nothing to do with the issuance of show cause notice u/s 148A(b) of the Act & passing of the order u/s 148A(d) of the Act unlike in section 151 of the Act which categorically prescribed the specified authority for sanction for issue of notice for the purposes of both section 148 as well as section 148A of the Act. We are of the opinion that provisions of section 148A proceedings are completely different with that of the 148 proceedings. After the amendment in Finance Act, 2021, the IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 15 of 23 proceedings u/s 148 of the Act can only be commenced after completion of 148A proceedings, however subject to certain exceptions. Before issue of the notice u/s 148 of the Act, the AO shall conduct an enquiry, provide an opportunity of being heard to the assessee by serving SCN and after considering the reply furnished if any, decide, on the basis of material available on record including the reply of the assessee whether or not it is a fit case to issue notice u/s 148 of the Act by passing an Order. Thus the section 148A of the Act is a complete code in itself. In the present case, the contention of the assessee is that the notice issued u/s 148 of the Act dated 29/04/2022 is barred by limitation as per the 1st proviso to amended section 149(1) of the Act. Further section 149 of the Act stipulates the time limit for issue of the notice u/s 148 of the Act & therefore the contention of the Revenue that the proceedings initiated by the issuance of show cause notice u/s 148A(b) of the Act within the stipulated time period prior to the issue of notice u/s 148 is not at all tenable. The procedural compliance with Section 148A, while necessary, cannot validate a notice issued u/s 148 of the Act that is fundamentally flawed due to being issued beyond the statutory period of limitation.
7.6 Now coming to another contention of the Revenue that the notice under section 148A(b) of the Act was issued on 26/03/2022 by which assessee was asked to give response/ objection to the same within 05/04/2022. In response to the same, assessee filed his objection. On a plain reading of 5th proviso to Section 149, the time period of 10 days allowed to assessee to give response/ objection needs to be excluded. Further as per 6th proviso a period of 7 days also need to be excluded. The assessing officer has passed the order u/s. 148A(d) on 29/04/2022 and issued the notice u/s. 148 on 29/04/2022, which very well falls within the limitation period. In this regard we are of the considered
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 16 of 23 opinion that undisputedly the erstwhile third proviso to amended section 149(1) of the Act allows for the exclusion of the time taken for Section 148A proceedings. However, this exclusion is for computing the period of limitation as per section 149 of the Act. It does not override the first proviso to Section 149(1) of the Act, which acts as a threshold condition for the applicability of the new regime to old assessment years. If a notice was already time-barred under the old law, the exclusion of time under the 3rd or 4th provisos cannot revive it. The exclusion cannot override the fundamental bar imposed by the first proviso to Section 149(1) of the Act. As stated earlier the first proviso to amended section 149(1) acts as a statutory bar, preventing the issuance of a notice under Section 148 of the Act for the assessment year like AY 2015-16 (which began on or before April 1, 2021) if such notice could not have been issued under the time limits of the old law. We are of the considered opinion that first proviso to section 149(1) of the Act is a restriction & act as a gate keeper and the erstwhile 3rd & 4th Provisos (which allow for exclusion of time for certain events) cannot override this fundamental restriction. This means that even if there were delays due to assessee’s response or court stays, these exclusions cannot revive a notice that is already time-barred by the first proviso. In Assistant Commissioner of Income-tax v. Godrej Industries Ltd. [2024] 160 taxmann.com 13 (Bombay), for AY 2014-15, the High Court held that the validity of a notice must be judged on the law existing on the date of issuance of the Section 148 notice. It emphasized that "the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under section 148 could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices" (Para 15). This means that if the notice is already time-barred under the old regime as per the first proviso, the exclusion of time for Section 148A proceedings under the 3rd proviso or 4th provisos cannot revive it. Further, the IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 17 of 23 Hon’ble Gujarat High Court in the case of Assistant Commissioner of Income-tax v. Devika Fibres (P.) Ltd. [2023] 153 taxmann.com 18 (Gujarat) clearly stated that "the notice which could not have been issued in the old regime period due to becoming time barred as per then operating provision, would also not be permissible to be issued post 01-4-2021" (Para 5.4.6). Thus, the embargo of the six-year limitation under the old regime continues in the new regime for assessment years prior to 2021-22.
It is apposite here to mention that under the similar facts & circumstance & for the similar AY 2015-16, the Hon’ble Jurisdictional High Court of Karnataka in the case of Mohammed Yaseen v. Income Tax officer reported in [2025] 175 taxmann.com 280 (Karnataka) has held as under- “5. As rightly contended by the learned counsel for the petitioner, the material on record discloses that the impugned proceedings is relating to the Assessment Year 2015-16 in respect of the petitioner; however, it is an undisputed fact that the respondents issued impugned notice at Annexure-A2 under Section 148 of the I.T.Act on 01.04.2022, beyond the period of limitation and the same has already been held not to be permissible by the Apex Court in Rajeev Bansal's case (supra), which reads as under:-
"19(e). The Finance Act, ([2021]) 431 ITR (St.) 52) substituted the old regime for reassessment with a new regime. The first proviso to Section 149 does not expressly bar the application of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 3 of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 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 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to assessment years 2013-14, 2014-15, 2015-16, 2016-17, and 2017-18 will be within the period of limitation as explained in the tabulation below:
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 18 of 23 Assessment Within 3 Expiry of limitation Within six Expiry of limitation year (1) years (2) read with TOLA for years (4) read with TOLA for (3) (4) (5) 2013-2014 31-3- TOLA not 31-3-2020 30-6-2021 2017 applicable 2014-2015 31-3- TOLA not 31-3-2021 30-6-2021 2018 applicable 2015-2016 31-3- TOLA not 31-3-2022 TOLA not applicable 2019 applicable 2016-2017 31-3- 30-06-2021 31-3-2023 TOLA not applicable 2020 2017-2018 31-3- 30-06-2021 31-3-2024 TOLA not applicable 2021
19(f). The Revenue concedes that for the assessment year 2015-16, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020; 49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under Section 149(1)(b) of the old regime continues to exist for the assessment year 2021-22 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten-years prescribed under Section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-13, the ten-year period would have expired on March 31, 2023, while the six-year period expired on March 31, 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-13 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.
6. Subsequently, in Nehal Ashit's case (supra) also, the Apex Court reiterated the very same position and dismissed the appeal filed by the Revenue on the ground that the notice issued after 01.04.2022 was barred by limitation and the impugned proceedings are not permissible beyond period of limitation. In the instant case, it is an undisputed fact that the impugned proceedings is relating to the Assessment Year 2015-16, while the impugned notice under Section 148 of the Act dated 01.04.2022 was issued beyond/after 01.04.2021 which is impermissible in law and barred by limitation and consequently, the impugned orders/notices etc., deserve to be quashed.
7. In the result, I pass the following:- 'ORDER
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 19 of 23 (i) Petition is hereby allowed. (ii) The impugned orders/Notices at Annexures-A1, A2, B, C1, D1 and E1 dated 01.04.2022, 01.04.2022, 15.03.2022, 09.03.2022, 27.08.2024 and 27.08.2024 respectively and subsequent orders/notices issued by the 1st respondent are hereby quashed.”
8.1. Further, the Hon’ble High Court of Karnataka in the case of Tarish Investment and Trading Company (P) Ltd v. Union of India reported in [2025] 179 taxmann.com 198 (Karnataka) has under the similar facts & circumstances but for the AY 2017-18 also taken a similar view. The relevant paragraph of the said judgment is reproduced below- “2. The petitioner in the subject petition calls in question an order passed by the 2nd respondent under Section 148A(d) of the Income Tax Act and consequent notices so issued to the petitioner under section 148 of the Income Tax Act, 1961. The notice reads as follows: "Notice under section 148 of the Income-tax Act, 1961 Sir/Madam/M/s.
I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961 (here in alter referred to as "the Act") for Assessment Year 2017-18 • information in accordance with the risk management strategy formulated in this regard suggesting that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Order under sub-section (d) of section vide 148A of the Act has been passed in such case DIN ITBA/AST/F/148A/2024-25/1064704419(1) dated 07/05/2024 and annexed herewith for reference, 2. I, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for the Assessment Year 2017-18 and I, hereby, require you to furnish, within a period of three months from the end of month in which this notice is issued, a return in the prescribed form for the Assessment Year 201718. Note:- Please note that any return of income, required to be furnished by you under this section and furnished beyond the period allowed shall not be deemed to be a return under section 139 of the Act. (Proviso 3 to Section 148)
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 20 of 23 NITHAN RAJ T.N. CIRCLE 7(1)(1), BANGALORE"
3. The notice itself indicates that it is issued for the Assessment Year 2017-18 and is admittedly issued on 7.5.2024. Learned counsel appearing for the petitioner submits that the notice is barred by limitation, as the limitation prescribed under Section 148 is for a period of six years from the date of end of the Financial Year of the Assessment Year. Admittedly, Financial Year of Assessment Year, 2017-18 comes to an end on 31.03.2018 and the limitation would cap at 31.03.2024.
Learned counsel for the petitioner would submit that the issue in the lis stands covered by the three Judge Bench of the Apex Court in the case of UOI v. Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC), in which the Apex Court at Paras 49, 53 and 60 has held as follows: "49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under Section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on March 31, 2023, while the six year period expired on March 31, 2019. Without the proviso to section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012- 2013 if the escaped assessment amounted to rupees fifty lakhs or more. The proviso limits the retrospective operation of section 149(1)(b) to protect the interests of the assesses. 53. The position of law which can be derived based on the above discussion may be summarized thus: (i) Section 149(1) of the new regime is not prospective. It also applies to past assessment years; (ii) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under Section 148 of the new regime only if three years or less have elapsed from the end of the relevant assessment year; (iii) the proviso to Section 149(1)(b) of the new regime stipulates that the Revenue can issue reassessment notices for past assessment years only if the time limit survives according to section 149(1)(b) of the old regime, that is, six years from the end of the relevant assessment year; and (iv) all notices issued invoking the time limit under section 149(1)(b) of the old regime will have to be dropped if the income chargeable to tax which has escaped assessment is less than rupees fifty lakhs. ii. Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 can extend the time limit till June 31, 2021 60. The above principles can be applied as follows to the factual situation in the present appeals: (i) The Finance Act, 2021 ([2021] 432 ITR (St.) 52)
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 21 of 23 substituted Sections 147 to 151 of the Income Tax Act with effect from April 1, 2021; (ii) sections 147 to 151 of the old law ceased to operate from April 1, 2021; (iii) after April 1, 2021, any reference to the Income Tax Act means the Income Tax Act as amended by the Finance Act 2021; (iv) the time limits prescribed for issuing reassessment notices under section 149 operate retrospectively for three years for all situations and six years in case the escaped assessment amounts to or is likely to amount to more than rupees fifty lakhs." (Emphasis supplied) 5. The High Court of Delhi in two of the judgments has followed the said judgment of the Apex Court in Rajeev Bansal supra. In Sheetal International (P.) lLtd. v. Chief CIT [2024] 168 taxmann.com 308 (Delhi), it is held as under: "1. Issue notice.
Learned counsel appearing for the respondents accepts notice.
3. The petitioner has filed the present petition, inter alia, impugning an order dated 01.05.2024 (hereafter the impugned order) issued under Section 148A(d) of the Income Tax Act, 1961 (hereafter the Act) for the assessment year (AY) 2017-18 as well as the notice dated 01.05.2024 issued under Section 148 of the Act.
4. The petitioner contends that the said notice was issued beyond the period of limitation as prescribed in first proviso to Section 149(1) of the Act.
5. The learned counsel appearing for the petitioner submits that the issue stands covered by the decision of this Court in Manju Somani v. Income Tax Officer [2024] 165 taxmann.com 675/300 Taxman 516/466 ITR 758 (Delhi): Neutral Citation: 2024:DHC:5411-DB.
It is also relevant to note that the Supreme Court in a recent decision of Union of India v. Rajeev Bansal: 2024 SCC OnLine SC 2693/[2024] 167 taxmann.com 70 (SC) (SC) has observed as under: "46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of" 149(1)(b) of the old regime. Thus, a notice could be issued under Section 148 of the new regime for assessment year 20212022 and before only if the time limit for issuance of such notice continued to exist under Section 149(1)(b) of the old regime. **** ** 49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under Section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 22 of 23 issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under Section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 20122013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses."
7. In view of the above, the present petition is allowed. The impugned order dated 01.05.2024 as well as the notice issued under Section 148 in respect of the AY 2017-18 are set aside.”
8.2 In view of the above discussions & respectfully following the decisions of the Hon’ble Apex Court as well as Jurisdictional High Court, we are of the considered opinion that the notice issued under Section 148 of the Income Tax Act, 1961, on April 29, 2022, for Assessment Year 2015-16, is invalid & barred by time. The first proviso to the substituted Section 149(1) acts as a statutory bar, as the six-year limitation period under the old regime for AY 2015-16 expired on March 31, 2022. The procedural compliance with Section 148A or the exclusion of time under the 3rd or 4th erstwhile provisos cannot override this fundamental jurisdictional defect of limitation. Since we have held the notice dated 29/04/2022 issued under section 148 of the Act to be barred by limitation & therefore the consequent order passed u/s 147 r.w.s 144 of the Act dated 12/12/2024 deserve to be quashed. Further, since we have adjudicated the sole legal ground in favour of the assessee, the other grounds raised by the assessee becomes academic.
IT(IT)A No.193/Bang/2025 Arun Duraiswamy, Mysore Page 23 of 23 9. In the result the appeal filed by the assessee is allowed.