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Facts
The assessee firm engaged in running a hotel filed its return for AY 2016-17 declaring NIL income. Following survey proceedings and a reference for construction cost estimation, the Assessing Officer (AO) made an addition of Rs. 71.27 lacs for unexplained investment in the hotel's construction. The assessee appealed this order.
Held
The Tribunal held that the notice under Section 148, dated 18.04.2023, was issued beyond the time limit prescribed by Section 149(1)(b) of the Act as it existed before the Finance Act, 2021. Therefore, the assumption of jurisdiction by the AO was invalid.
Key Issues
The key issue was whether the notice issued under Section 148 for AY 2016-17 was barred by limitation, considering the provisions of Section 149(1)(b) and its provisos as amended by the Finance Act, 2021.
Sections Cited
147, 148, 144, 149, 148A, 142A, 133A, 69, 115BBE, 234A, 234B, 151A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI RAVISH SOOD, HONBLE & SHRI OMKARESHWAR CHIDARA, HONBLE
आदेश /O R D E R
PER RAVISH SOOD, JM:
The present appeal filed by the assessee firm is directed against the order passed by the Commissioner of Income Tax (Appeals), Visakhapatnam-3, dated 24.10.2025, which in turn arises from the order passed by the Assessing Officer
I.T.A.No.741/VIZ/2025 Hotel Selection Grand (for short “A.O”) under section 147 r.w.s. 144 of the Income-Tax Act, 1961 (for short, “the Act”), dated 06.01.2025 for the Assessment Year 2016-17. The assessee firm has assailed the impugned order on the following grounds of appeal before us:
“1. The notice under section 148 issued on 18.04.20232 for the assessment year 2065-17 is barred by limitation as per the first proviso to section 149(1)(b) (new section inserted by the Finance Act, 2021, w.e.f 01.04.2021} being beyond six years from the end of the assessment year as per the provisions section 149(1)(b) existing upto 31.03.2021.
2. The notice issued under section 148 dated 18.04.2023 is invalid as it has given only 30 days-time from the date of service of the notice for filing response thereto as against the period of three months from the end of the month in which the notice is issued as mandated by the provisions of section 148 with effect from 01.04.2023.(Additional Grounds of Appeal
before CIT(A)
3. The notice issued under section 148 dated 18.04.2023 is invalid as it has been issued by the Income-tax Officer, Ward-1, Tadepalligudem (JAO) which is against the mandate of the e assessment of income escaping assessment scheme notified on 29.03.2022 by Central Government under section 151A of the Income-tax Act, 1961. (Additional Grounds of Appeal before CIT(A).
4. The Notice U/s 148 is invalid: i) Notice U/s 148 is based on estimation made by the Departmental Valuation Officer but not on the basis of any information in the possession of the Assessing Officer which reveal that income chargeable to tax has escaped assessment as mandated by section 149(1)(b). ii) The Notice U/s 148 is based on D.V.O. report which is on a invalid reference made by the Assessing Officer having not been made during the course of any proceedings pending as on date of reference i.e.,11-07-2019.
5. The show cause notice under section 148A(b) dated 24.03.2023 with the prior approval of PCCIT, AP & Telangana, is invalid as the same has not given the minimum Seven (7) clear days for compliance, consequently the entire reassessment proceedings are invalid and void ab initio.
Page. No 2 I.T.A.No.741/VIZ/2025 Hotel Selection Grand 6. The reopening of assessment is invalid as the copy of the approval of the specified authority is not furnished to the assessee till date though the same is mandated by the CDT guidelines for issue of notices under section 148.
7. The reopening of assessment is invalid as the same is based on an estimation report by DVO and the reference to the DVO was made without any pending proceedings and also without rejecting books of account by the Assessing Officer.
8. The DVO report is barred by limitation as per the provisions of section 142A.
9. The addition of Rs.71,27,000/- is against the facts of the case as the Appellant has no income and the appellant has not commenced any business during the year as the said fact was recorded in the sworn statement that the firm commenced business after 16-08-2016 i.e. during the financial year relevant to the Assessment Year 2017-18.
10. The Assessing Officer failed to accept the fact that the investment was made by the partners and the addition ought to have made in the hands of the partners only and not in the hands of the Appellant firm as the entire investment was made by the partners.
11. The Assessing Officer made the addition invoking the provisions of Sec.69A based on the estimation of the D.V.O. which is not correct and applying the provisions of Sec. 115BBE.
12. The period for which interest is charged under section 234A /B/are not justified.
13. All the above grounds of appeal
are mutually exclusive and without prejudice to one another.
14. The appellant craves leave to add to; alter; amend; modify or delete all or any of the above grounds of appeal.”
2. Succinctly stated, the assessee firm which is engaged in the business of running a hotel under the name and style of M/s. Hotel Selection Grand had filed its return of income for the A.Y. 2016-17 on 22.03.2017, declaring an income of Rs. NIL.
Page. No 3
I.T.A.No.741/VIZ/2025 Hotel Selection Grand 3. Survey proceedings under section 133A of the Act were conducted in the case of assessee firm on 22.03.2018 to verify the investment made towards construction of its hotel building. Consequent to the survey operation, the AO in order to estimate the cost of construction of the hotel building made a reference under section 142A of the Act to the valuation cell on 11.07.2019.
Thereafter, the Department Valuation Officer (for short, “DVO”) vide his report dated 12.01.2023 estimated the cost of construction of the hotel building at Rs.593.54 lacs spread over three years viz., (i) F.Y. 2014-15: Rs. 372.50 lakhs; (ii) F.Y. 2015-16: Rs.198.36 Lakhs; and (iii) F.Y. 2016-17: Rs.22.67 lakhs.
The A.O during the course of the assessment proceedings observed that as against the cost of construction of the hotel building that was valued by the DVO at Rs.198.36 lakhs for the year under consideration, i.e, period relevant to A.Y. 2016-17, the assessee firm had disclosed the same in its books of accounts at Rs.98,87,969/-. The A.O taking into cognizance of the aforesaid variance in the investment disclosed by the assessee firm towards cost of construction of the hotel building for the year under consideration worked out the suppressed investment towards the construction of hotel building to the extent relatable to the subject year at Rs.99.36 lacs (Rs.198.36 lacs – Rs.99 lacs).
6. Thereafter, the A.O based on his observation that the income of the assessee firm chargeable to tax to the extent of Rs.99.36 lacs (supra) had escaped
Page. No 4
I.T.A.No.741/VIZ/2025 Hotel Selection Grand assessment, thus taking into cognizance of the fact that the said escapement of income was more than Rs.50 lacs within the meaning of section 149(1)(b) of the Act, issued notice under section 148 of the Act dated, 18.04.2023, wherein the assessee firm was called upon to file its return of income in compliance thereto.
7. As the assessee firm failed to comply with the notice issued by the A.O under section 148 of the Act, 18.04.2023, and failed to file its return of income for the subject year, therefore, the A.O issued notice under section 142(1) of the Act, dated 14.02.2024, which, however, was not acted upon by the assessee-firm. Also, another notice under section 142(1) of the Act, dated 29.10.2024 calling for the requisite details was issued, pursuant whereto, the assessee firm filed its reply on 13.11.2024.
8. Thereafter, the assessee firm filed its return of income in compliance to the notice issued under section 148 of the Act, dated 18.04.2023, and also furnished the requisite details as were called for by the A.O. However, the A.O observed that as the assessee firm had failed to produce its books of accounts, construction account, bills and vouchers for purchase of material and labor charges, etc., therefore, the cost of construction of the hotel building that was disclosed by the assessee firm in its books of accounts could not be verified.
9. Thereafter, the A.O vide his order passed under section 147 r.w.s. 144 of the Act, dated 06.01.2025, based on his exhaustive observations made an addition
Page. No 5
I.T.A.No.741/VIZ/2025 Hotel Selection Grand towards unexplained investment made by the assessee firm towards construction of the hotel building under section 69 of the Act of Rs. 71.27 lacs [Rs.198.36 lacs (cost of construction estimated by the DVO) – Rs.127.09 lacs (investment incurred by the assessee firm during the year under consideration)].
10. Aggrieved, the assessee-firm assailed the assessment order before the CIT(A), but without success.
11. The assessee firm, aggrieved with the order of the CIT(A) has carried the matter in appeal before us.
We have heard the Learned Authorized Representatives of both the parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
Shri I. Kama Sastry, CA, Learned Authorized Representative (for short, “Ld. AR”) for the assessee-firm, at the threshold of hearing of the appeal, submitted that the AO had grossly erred in law and the facts of the case in assuming jurisdiction for framing the impugned assessment vide his order passed under section 147 r.w.s. 144 of the Act, dated 06.01.2025. Elaborating on his contention, the Ld. AR submitted that as the AO as per the “first proviso” to section 149(1) of the Act (post amended) as was applicable at the time of issuing
Page. No 6
I.T.A.No.741/VIZ/2025 Hotel Selection Grand the notice under section 148 of the Act, dated 18.04.2023, was divested of his jurisdiction to issue any such notice seeking to reopen the case of the assessee firm for the subject year AY 2016-17 beyond 31/03/2023, i.e., beyond the time limit specified under the clause (b) of sub-section (1) of section 149 of the Act as was available on the statute before commencement of the Finance Act, 2021, therefore, the initiation of the impugned proceedings and the consequential framing of the assessment by him based on the said notice cannot be sustained and is liable to be struck down on account of invalid assumption of jurisdiction. The Ld. AR to buttress his contention had drawn our attention to section 149(1) of the Act - “first proviso” (as was made available on the statute by the Finance Act, 2021, w.e.f. 01/04/2021).
Carrying his contention further, the Ld. AR submitted that though the “fifth” and “sixth” provisos of the post amended section 149 of the Act provide for excluding certain periods while computing the period of limitation, viz., (i) the time or extended time allowed to the assessee, as per show cause notice (SCN) issued under clause (b) of section 148A of the Act or the period during which the proceedings under section 148A is stayed by an order or injunction of any Court (as per “fifth proviso”); and (ii) that where immediately after the exclusion (period referred to in “fifth proviso”) of the period of limitation available to the AO for passing an order under clause (d) of section 148A of the Act does not exceed seven days, such remaining period shall be extended to seven days and Page. No 7
I.T.A.No.741/VIZ/2025 Hotel Selection Grand the period of limitation under sub-section (1) of section 149 shall be deemed to be extended accordingly (as per “sixth proviso”), but both the aforementioned provisos, i.e., “fifth proviso” and “sixth proviso” qualify the substantive amended section 149 of the Act and do not relate to the un-amended section 149 of the Act, which in turn is taken care of exclusively by the “first proviso” to section 149(1) of the Act. Accordingly, the Ld. AR based on his aforesaid contentions submitted that the time spent from the issuance of notice under section 148A(b) of the Act upto the passing of the order under section 148A(d) of the Act in terms of “fifth proviso” and “sixth proviso” cannot be excluded for reckoning the limitation period for issuance of notice under section 148 of the Act. Elaborating further on his contention, the Ld. AR submitted that as the notice under section 148 of the Act, dated 18.04.2023 for the AY 2016-17 had been issued beyond the time limit specified under the provisions of clause (b) of sub-section (1) of section 149 of the Act as was available on the statute before the commencement of the Finance Act, 2021, which expired as on 31/03/2023 (six years from the end of the assessment year, i.e., AY 2016-17), therefore, the same cannot be sustained and is liable to be quashed. The Ld. AR to buttress his contention had relied upon the judgment of the Hon’ble High Court of Karnataka in the case of Independent & Public Spirited Media Foundation & Ors. v. ACIT (2025) 9 NYPCTR 1555 (Kar) and the Judgement of the Hon’ble Supreme Court in the case of Union of India & Ors v. Rajeev Bansal (2024) 8 NYPCTR 1291 (SC). The Ld.AR submitted that the Hon’ble High Court of Karnataka in the case of Independent & Public Spirited
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I.T.A.No.741/VIZ/2025 Hotel Selection Grand Media Foundation & Ors. V. ACIT (supra), had by relying on the judgement of the Hon’ble Supreme Court in Union of India & Ors v. Rajeev Bansal (supra) quashed the notice issued under section 148 of the Act, dated 10.04.2023 for A.Y. 2016-17 by holding the same as barred by limitation as per the mandate of “1st Proviso” to section 149(1)(b) of the Act. Also, the Ld.AR had taken us through the order of the Hon’ble Apex Court in the case of Union of India & Ors v. Rajeev Bansal (supra).
15. Per contra, Shri K. Prasad, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) relied upon the orders of the authorities below. The Ld. Sr. DR has placed on our record the “Written Submissions” dated 06.02.2025 of the DCIT, Central Circle -2, Rajamahendravaram.
We have heard the Learned Authorized Representatives of both parties and given thoughtful consideration qua the issue in hand before us, i.e., sustainability of the impugned order of assessment passed by the AO under section 147 r.w.s 144 of the Act, dated 06/01/2025, which in turn is based on the notice issued under section 148 of the Act, dated 18/04/2023, for the AY 2016-17.
Admittedly, it is a matter of fact borne from record that the impugned notice under section 148 of the Act, dated 18.04.2023 has been issued beyond the time limit specified under the provisions of clause (b) of sub-section (1) of section Page. No 9
I.T.A.No.741/VIZ/2025 Hotel Selection Grand 149 of the Act as they stood immediately before the commencement of the Finance Act, 2021. We say so, for the reason that as per the pre-amended section 149(1)(b) of the Act a notice under section 148 of the Act for the AY 2016-17 could have been issued by the AO latest by 31.03.2023.
Considering the aforesaid factual position, we find substance in the Ld. AR’s contention that as a notice under section 148 of the Act, dated 18.04.2023 had been issued beyond the time period specified under the provisions of clause (b) of sub-section (1) of section 149 of the Act, as was available on the statute prior to the commencement of the Finance Act, 2021, therefore, the same could not have been issued as per the clear mandate of the “first proviso” to section 149 of the Act as had been made available on the statute by the Finance Act, 2021. Also, we concur with the Ld. AR that the period sought to be excluded for the purpose of computing the period of limitation as contemplated in the “fifth proviso” of section 149(1) of the Act (post amended) and also the extension of time limit to seven days in a case where after the exclusion of the time limit contemplated in the “fifth proviso” to seven days (as per the “sixth proviso”) of section 149(1) of the Act cannot be read into for the purpose of computing the period of limitation for issuance of notice under section 148 of the Act as contemplated in the “first proviso” of post amended section 149(1) of the Act. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Telangana in the case of Cyberabad Citizens Health Services Private Limited
Page. No 10
I.T.A.No.741/VIZ/2025 Hotel Selection Grand vs. DCIT (supra), wherein based on exhaustive deliberations, it was observed, as under:-
“6. According to the learned Senior Counsel for the petitioner, notice under Section 148 of the Act is barred by limitation. As per the first proviso to the amended Section 149 of the Act, the impugned notice is beyond the period of six years from the Assessment Year 2017-18. The reopening of assessment proceedings have also been challenged on the ground that during pendency of the proceedings under Section 154 of the Act on the same issue, it cannot be made. The attention of this Court has been drawn to the notice dated 20.01.2022 issued for rectification of mistake and the order under Section l48A(d) of the Act passed on 22.04.2024. Reliance has been placed on the following decisions rendered by the Apex Court in Union of India v. Rajiv Bansal; High Court of Delhi in Sheetal international (P) Ltd v. Chief Commissioner of Income-tax, Central-2z; High Court of Karnataka at Bengaluru in Tarish Investment and Trading Company (P) Ltd., v. Union of India3; High Court of Rajasthan in Shree Cement Ltd., v. Assistant Commissioner of Income Tax; High Court of Bombay in Godrej Industries Ltd., v. The Assistant Commissioner of Income Tax, Circle 14(1X2), Mumbai, and by a coordinate Bench of this Court in M/s. Sri Sai Dhurga Balaji Health and Educational Welfare Society v. the Income Tax Officer6. All these decisions relate to the Assessment Year 2017-18 except the case of Godrej Industries Ltd., (supra) which relates to the Assessment Year 2014-15.
On the second issue, reliance has been placed on the decision of the Apex Court in the case of S.M. Overseas (P) Ltd., v. Commissioner of Income-tax. Learned Senior Counsel for the petitioner has distinguished the decision rendered by the High Court of Patna in Chandra Shekhar v. Principal Commissioner of Income-tax as it relates to the Assessment Year 2020-21 where the application of the first proviso to the amended Section 149 of the Act introduced with effect from 01.04.2021 cannot be applied. Based on the said submissions, the learned Senior Counsel for the petitioner has prayed that the impugned notice under Section 148 of the Act may be quashed and the order passed under Section 148A(d) of the Act may also be set aside.
On behalf of the Revenue, learned Senior Counsel for the Department has taken us to the chronology of dates and events as referred to hereinabove and thereby drawn the attention of this Court to the notice under Section 148A(b) of the Act dated 26.03.2024. It is submitted that the instant notice was issued prior to the expiry of six years period for reopening the assessment proceedings under the un-amended Section 149 of the Act for the Assessment Year 2017-18. The order under Section 148A(d) of the Act was passed on 22.04.2024. Further, the petitioner took time to file its reply on the date fixed as 10.04.2024. It is submitted that therefore, the benefit of the fifth and sixth provisos to amended Section 149 of the Act
Page. No 11 I.T.A.No.741/VIZ/2025 Hotel Selection Grand come into play. Therefore, the impugned notice under Section 148 of the Act dated 22.04.2024 is not barred by limitation.
9. Upon consideration of the rival submissions and the materials referred to hereinabove placed on record, we are of the considered view that the impugned notice under Section 148 of the Act dated 22.04.2024 relating to the Assessment Year 2017-18 is barred by limitation as per the first proviso to Section 149 of the Act brought into effect from 01.04.2021. The relevant part of amended Section 149 and the first, fifth and sixth provisos are extracted in the footnote”.
This, we say so for the following reasons: In the case of Rajeev Bansal (supra), the position of law stands clear as regards the operation of amended Section 149(1) of the Act. The relevant paragraphs 49 and 53 thereof are extracted hereunder: “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 (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- (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, Which has escaped assessment amounts to or in likely to amount to fifty lakh rupees or more: 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 1” day of April, 2021, if a notice under section 148 or section 153A or section 153C 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 or section 153A or section Page. No 12 I.T.A.No.741/VIZ/2025 Hotel Selection Grand 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 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 does not exceed 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. 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 assessees.” “53 The position of law which can be derived based on the above discussion may be summarized thus: (10) 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 clapsed 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.”
The first proviso) to the amended Section 149 of the Act prescribes that no notice under Section 148 of the Act shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021, if a notice under Section148 of the Act 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 Section 149 of the Act or as they stood
Page. No 13 I.T.A.No.741/VIZ/2025 Hotel Selection Grand immediately before the commencement of the Finance Act, 2021. For the purposes of appreciating the first proviso, the un-amended Section 149 of the Act is also extracted in the foot note10 Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year, (a) if four years have clapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the mome chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. I if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. Explanation In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1 day of April, 2012.
12. Apparently, the fifth and sixth provisos of the amended Section 149 of the Act extracted hereinabove provide for excluding certain periods while computing the period of limitation as per the amended Section. It prescribes the time or extended time allowed to the assessee as per the show cause notice under clause (b) of Section 148 of the Act or the period during which the proceeding under Section 148A of the Act is stayed shall be excluded. The sixth proviso to the amended Section 149 of the Act also deals with exclusion of the period referred to in the fifth proviso i.e., the period of Page. No 14 I.T.A.No.741/VIZ/2025 Hotel Selection Grand limitation available to the Assessing Officer for passing an order under clause (d) of Section 148A of the Act if it does not exceed seven days. In that event, 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, both the fifth and sixth provisos in the first place do not amount to clarification of the first proviso. These two provisos qualify the substantive amended Section 149 of the Act and do not relate to the un- amended Section 149 of the Act for which the first proviso takes care of. The contention of the learned counsel for the Revenue that the time spent from the issuance of notice under Section 148A(b) of the Act up to the passing of the order under Section 148A(d) of the Act in terms of the fifth and sixth provisos stands excluded for reckoning the limitation period for issuance of notice under Section 148 of the Act is not worth acceptance. Section 148A of the Act lays down the procedure for issuance of notice under Section 148 of the Act whereas Section 149 of the Act prescribes strict time limit within which notice under Section 148 of the Act can be issued in the prescribed circumstances. The Revenue is therefore obliged to adhere to the timeline prescribed under Section 149 of the Act for issuance of such notice and undertake the procedure before issuance of notice under Section 148A of the Act.
13. In this regard, it is apposite to refer to opinion of the Delhi High Court. Paragraphs 15 and 16 of Godrej Industries Ltd., (supra) are extracted hereunder: “15. The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued under Section 148 of the Act, which in the present case is 31 July 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under Section 148 of the Act for AY 2014-15 could be issued on or after 1” April 2021 based on the first proviso to Section 149 of the Act. Therefore, the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under Section 148 of the Act could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices. The fifth proviso can only apply where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached.
16. The sixth proviso to Section 149 of the Act has no impact as it only provides a situation where after exclusion of the time period referred to in the fifth proviso, the time available with the Assessing Officer for passing an order under Section 148A(d) of the Act is less than 7 days, then the remaining time frame shall be extended to 7 days and limitation also stands extended by 7 days.”
14. Paragraph 12 of Shree Cement Ltd., (supra) is also extracted hereunder. “12. In this case, as it pertains to Assessment Year 2017-18, six years period would have expired on 31” March 2024. Whereas
Page. No 15
I.T.A.No.741/VIZ/2025 Hotel Selection Grand notice under Section 148 of the Act itself came to be issued on 1” May 2024. Mr. Siddharth Bapna, counsel for Revenue, made an attempt to argue that fifth and sixth provisos to Section 149(1)(b) of the Act would save the period of limitation for issuing notice under Section 148 of the Act. We are afraid we do not agree with him. Same argument was raised in Hexaware Technologies Ltd. (supra) and was rejected. The Court held, with respect to applicability of fifth and sixth provisos to Section 149(1)(b) of the Act for extension of limitation for issuing notice under Section 148 of the Act, fifth and sixth provisos are only applicable with respect to the period of limitation prescribed under Section 149(1) of the Act ie, three years or ten years, as the case may be. The Court also held that fifth and sixth provisos extend limitation for issuing notice under Section 149 of the Act, however, first proviso is an exception to the period of limitation and provides for a restriction on the notices under Section 148 of the Act being issued for assessment years up to 2021-22 (in this case, it is Assessment Year 2017-18) beyond a certain date. Therefore, the way the section would operate, is to fira decide whether a notice issued under Section 148 of the Vet is within the period of limitation under Section 149(1)(2) or (b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the extension of time as prescribed in fifth and/or sixth proviso would be considered. The Court further held once. The notice is otherwise within the period of limitation, thereafter one has to see whether the said limit is within the prescribed restriction provided in first proviso or not. If the notice is beyond the restriction period, the notice is invalid, and the fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per first proviso. Hence, if a notice is not within the time prescribed under first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth or sixth proviso. In Hexaware Technologies Ltd. (supra), the Court had relied upon another judgment of Bombay High Court in Godrej Industries Ltd. V. Assistant Commissioner of Income-tax [2024] 160 taxmann.com 13 (Bombay)/(2024) 338 CTR (Bom) 25, which was also authored by one of us (the Chief Justice), where paragraph No.15 reads as under: “15. The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued under Section 148 of the Act, which in the present case is 31” July 2022, by which time the Finance Act, 2021 is already on the statute and in terms thereof, no notice under Section 148 of the Act for AY 2014-15 could be issued on or after 1 April 2021 based on the first proviso to Section 149 of the Act. Therefore, the fifth proviso cannot apply in a case where the first proviso applies because, if a notice under Section 148 of the Act could not be issued beyond the time period provided in the first proviso, then the fifth proviso could not save such notices. The fifth proviso can only apply
Page. No 16 I.T.A.No.741/VIZ/2025 Hotel Selection Grand where one has to determine whether the time limit of three years and ten years in Section 149(1) of the Act are breached.”
The reliance placed by the Revenue on the decision rendered by Patna High Court in the case of Chandra Shekhar (supra) is distinguishable as it relates to the Assessment Year 2020-21 in respect of which the notice under Section 148A(b) of the Act was issued on 28.03.2024. The petitioner therein had assailed the notice on the ground that the Assessing Officer had no jurisdiction to undertake the assessment for the Assessment Year 2020-21 after 31.03.2024 with reference to the second notice issued on 22.04.2024 as it was beyond the time limit stipulated under Section 149(1)(a) of the Act. In the aforesaid facts, the learned Court held that the combined reading of the fifth and sixth provisos meant that the first notice dated 28.03.2024 was issued well within the time limit stipulated. Therefore, the Assessment Officer has jurisdiction.
16. In view of the above discussion, the initiation of reopening of assessment by the impugned notice dated 22.04.2024 is barred by limitation being beyond the period of six (6) years reckoned from the relevant Assessment Year 2017-18 as per the un-amended Section 149 of the Act read with the first proviso thereof brought into effect from 01.04.2021.”
Also, we find that a similar view has been taken by the Hon’ble High Court of Karnataka in the case of Independent & Public Spirited Media Foundation & Ors. Vs. ACIT in W.P.No.8848 of 2023, dated 11.09.2025. As observed by us hereinabove, the Hon’ble High Court in its aforesaid order had after drawing support from the judgment of the Hon’ble Supreme Court in Union of India & Ors v. Rajeev Bansal (2024) 340 CTR 865 (SC), quashed the notice under section 148 of the Act, dated 10.04.2023 for the A.Y. 2016-17 by treating the same as barred by limitation as per the “first proviso” to section 149(1)(b) of the Act. For the sake of clarity, we deem it apposite to cull out the observations of the Hon’ble High Court, as under:-
“53. The position of law which can be derived based on the above discussion may be summarized thus: (i)s. 149(1) of the new regime is not Page. No 17 I.T.A.No.741/VIZ/2025 Hotel Selection Grand prospective. It also applies to past assessment years; (i) The time limit of four years is now reduced to three years for all situations. The Revenue can issue notices under s. 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 s. 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 s. 149(I)(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 unders. 149(I)(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 31st June, 2021.
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) substituted ss. 147 to 151 of the IT Act w.e.f. 1st April, 2021; (ii) ss. 147 to 151 of the old law ceased to operate from 1st April, 2021; (iii) after 1st April, 2021, any reference to the IT Act means the IT Act as amended by the Finance Act 2021; (iv) the time limits prescribed for issuing reassessment notices under s. 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) Ltd vs. Chief CIT (2024) 168 taxmann.com 308 (Del), it is held as under : "1. Issue notice.
Learned counsel appearing accepts notice. for the respondents 3. The petitioner has filed the present petition, inter alia, impugning an order dt. 1st May, 2024 (hereafter the impugned order) issued under s. 148A(d) of the IT Act, 1961 (hereafter the Act) for the asst. year 2017-18 as well as the notice dt. 1st May, 2024 issued unders. 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 s. 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 vs. ITO (2024) 340 CTR (Del) 946 : (2024) 242 DTR (Del) 241 : (2024) 466 ITR 758 (Del) : (2024) 300 Taxman 516 (Del) : (2024)
Page. No 18 I.T.A.No.741/VIZ/2025 Hotel Selection Grand 165 taxmann.com 675 (Del) : Neutral Citation : 2024:DHC:5411- DB.
It is also relevant to note that the Supreme Court in a recent decision of Union of India vs. Rajeev Bansal (supra) has observed as under : "46. The ingredients of the proviso could be broken down for analysis as follows : (i) no notice under s. 148 of the new regime can be issued at any time for an assessment year beginning on or before 1st 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 s. 148 of the new regime for asst. yr. 2021-22 and before only if the time limit for issuance of such notice continued to exist under s. 149(l)(b) of the old regime. ….
The first proviso to s. 149(1 )(b) requires the determination of whether the time limit prescribed under s. 149(l)(b) of the old regime continues to exist for the asst. yr. 2021-22 and before. Resultantly, a notice under s. 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 s. 149(I)(b) of the new regime applies prospectively. For example, for the asst. yr. 2012-13, the ten year period would have expired on 31st March, 2023, while the six year period expired on 31st March, 2019. Without the proviso to s. 149(I)(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 s. 149()(b) to protect the interests of the assesses."
7. In view of the above, the present petition is allowed. The impugned order dt. 1st May, 2024 as well as the notice issued under s. 148 in respect of the asst. yr.2017-18 are set aside.
8. Pending applications also stand disposed of."
6. In the light of the issues standing covered on all its fours, the petition deserves to succeed and the action impugned and the orders impugned to be obliterated as admittedly the notice issued is beyond the period of limitation.
Page. No 19 I.T.A.No.741/VIZ/2025 Hotel Selection Grand 7. For the aforesaid reasons, the following : ORDER (i) Petition is allowed. (ii) The impugned order dt. 7th May, 2024 bearing ITBA/AST/F/148A/2024-25/1064704419(1) passed by the 2nd respondent under s. 148A(d) of the IT Act, 1961 for asst. yr. 2017-18 (Annex. A-I), stands quashed. (iii) The impugned notice dt. 7th May, 2024 bearing ITBA/AST/S/148_I/2024-25/1064704431(I) issued by the 2nd respondent under s. 148 of the IT Act, 1961 for asst. yr. 2017-18 (Annex. A-2), stands quashed. (iv) The petitioner shall be entitled to all consequential benefits that would flow from the quashment of the order.
8. In the light of the issues standing answered, I deem it appropriate to follow suit and grant the relief that is granted in the aforesaid order.
For the aforesaid reasons, the following : ORDER (i) Petition is allowed. (ii) The impugned order under s. 148A(d) of the IT Act, 1961 dt. 10th April, 2023 bearing DIN ITBA/AST/F/148A/2023-24/2051990641(1) passed by the First respondent for the asst. yr. 2016-17 (Annex. A-1), stands quashed. (iii) The impugned notice under s. 148 of the IT Act, 1961 dt. 10th April, 2023 bearing DINITBA/AST/S/148_1/2023-24/1051990774(1) issued by the first respondent for the asst. yr. 2016-17 (Annex. A2), stands quashed. (iv) The petitioner shall be entitled to all consequential benefits that would flow from the quashment of the order. (v) Except the issue which has led to quashment of the impugned orders, any other issue is left open to be urged and considered by the petitioner and the respondent.”
We thus, in terms of our aforesaid deliberations find substance in the Ld. AR’s contention that as the notice issued by the AO under section 148 of the Act, dated 18.04.2023 is barred by limitation as per the mandate of the “first proviso”
Page. No 20
I.T.A.No.741/VIZ/2025 Hotel Selection Grand to section 149 of the Act as had been made available in the statute by the Finance Act, 2021, therefore, the same cannot be sustained and thus, the consequential assessment order passed by the AO on the basis of the same vide his order under section 147 r.w.s 144 of the Act, dated 06.01.2025 has to meet the same fate and is liable to be quashed.
We thus, in terms of our aforesaid deliberations, quash the assessment order passed by the AO under section 147 r.w.s 144 of the Act, dated 06.01.2025 for want of a valid assumption of jurisdiction.
As we have quashed the assessment order passed by the AO under section 147 r.w.s 144 of the Act, dated 06.01.2025, therefore, we refrain from adverting to and adjudicating the other contentions based on which the impugned order of assessment has been assailed by the assessee firm before us, which, thus, are left open.
In the result, appeal filed by the assessee firm is allowed in terms of our aforesaid observations.
Order pronounced in the open court on 18th February, 2026.