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Facts
The Revenue appealed against the CIT(A)'s order quashing the reopening proceedings under Section 147 of the Income Tax Act, 1961. The assessee had challenged the notice issued under Section 148 as being barred by limitation.
Held
The Tribunal held that the reassessment notice issued by the AO on 24/07/2022 was time-barred. This was based on the Supreme Court's rulings in the cases of Ashish Agarwal and Rajeev Bansal, which determined the surviving time limit for issuing such notices.
Key Issues
Whether the reassessment notice issued under Section 148 of the Income Tax Act, 1961 was barred by limitation as per the Supreme Court's pronouncements.
Sections Cited
147, 148, 148A, 149A
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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
Date of hearing 15.12.2025 Date of pronouncement 15.12.2025 ORDER
PER SATBEER SINGH GODARA, JM
1. This Revenue’s appeal for assessment year 2013-14, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1072638497(1), dated 28.01.2025 involving proceedings under section 147 of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’).
Case called twice. None appears at the assessee’s behest. It is accordingly decided ex-parte. 2. This Revenue’s appeal raises the following substantive grounds:
1. 1. On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,94,33,400/- by not appreciating the report of Investigation Wing dated 25.04.2017, in which they have stated that the assessee company was not carrying out any real business activities and were merely used to transfer accommodation entries to the beneficiaries.
2. On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 3,88,668/- by not appreciating the report of Investigation Wing dated 25.04.2017, in which they have stated that the assessee company was not carrying out any real business activities and were merely used to transfer accommodation entries to the beneficiaries.
3. The Revenue/appellant could hardly dispute that the CIT(A)/NFAC herein has quashed the impugned reopening itself without even dealing with the relevant factual matrix on merits; as under: “6. Decision: I have considered the facts of the case, written submission and case laws relied upon by the appellant as against the observations and findings of the AO in the assessment order. The submissions and contentions of the appellant are discussed and decided as under: I have carefully examined the assessment order and submissions of the appellant during the course of appellate proceedings. The appellant has raised various grounds challenging the assessment order dated 19.05.2023 and addition made by the AO for Rs. 94,43,000/- as per assessment order. In Ground no. 10, the appellant raised the objection that notice issued u/s 148 of the IT Act, 1961 on 24.07.2022 is barred by limitation. Facts of the case are as follows:
The AO issued notice u/s 148 (unamended) of the IT Act, 1961 on 08.06.2021without following the mandate provision of section 148A as introduced by FA, 2021.
The validity of notices u/s 148 issued between 01.04.2021 and 30.06.2021 became subject matter of writ petition before different High Courts.
The matter was finally decided by Hon’ble Supreme Court Civil Appeal No. 3005/2022 in the case of Union of India &ors. Vs. Ashish Agarwal and others whereby by order dated 04.05.2022 passed by Hon’ble Supreme Court of India in Civil Appeal No. 3005/2022 in the case of Union of India &ors Vs. Ashish Agarwal and others has pronounced the judgment that “The notices Section 148 issued to the respective assesses which were issued under un- amended Section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under Section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148A(b) of the Act.”
Again, the AO following the instruction of Hon’ble Supereme Court in the judgment of Ashish Agarwal (supra) and CBDT issued notice u/s 148A(b) of the Act dated 24.05.2022 along with information was issued alleging that the purchases of the appellant are bogus in nature against which the appellant submitted its reply on 07.06.2022. 5. The AO passed order u/s 148A(d) of the IT Act, 1961 on 24.07.2022 as well as issued notice u/s 148 (under the amended provision) of the IT Act, 1961 on 24.07.2022. In this ground of appeal, the appellant challenged the notice issued by the AO on 24.07.2022 u/s 148 (under the amended provision) of the IT Act, 1961 is barred by limitation. It contended that the date of original notice issued u/s 148 of the Act (under old regime) was 08.06.2021 and the appellant submitted the reply in response to information deemed to be supplied u/s 148A(b) of the IT Act, 1961 (post judgment of Ashish Agarwal (supra)) on 07.06.2022. Appellant further contended that according to recent judgement delivered by Hon’ble Apex Court judgment of Union of India Vs. Rajeev Bansal on 03.10.2024, surviving time available to the AO to issue notice u/s 148 of the Act (under new regime) would be difference of days between 08.06.2021 to 30.06.2021 i.e., 23 days. Appellant submitted that according the Apex court ruling in Union of India Vs. Rajeev Bansal (supra), the AO could issue notice only upto30th June 2022 i.e. by adding the survival period of 23 days to the date on which response submitted by the assessee (07.06.2022) and notice issued on 24.07.2022 is barred by limitation.
3 | P a g e The judgment of Apex Court in case of Union of India versus Rajeev Bansal – Civil Appeal No. 8629/2023 dated 03.10.2024 wherein the Hon’ble Apex Court held that the third proviso to Section 149 of the new regime provides that the period during which the proceedings under Section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under Section 148A(b) and the date of the decision of this Court in Ashish Agarwal (supra), the assessing officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show cause notices were deemed to have been stayed by order of this Court from the date of their issuance (somewhere from 1 April 2021 till 30 June 2021) till the date of decision in Ashish Agarwal (supra), that is, 4 May 2022. Further the Apex Court held that the court has allowed thirty days’ time to provide information to assessee from the date of decision of Ashish Agarwal (supra) and also directed to provide two weeks’ time to assessee to respond. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices. Further, the Hon’ble Apex Court held that the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021. The Hon’ble Apex Court concluded that the clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: 1. consider the reply of the assessee under Section 149A(c); 2. take a decision under Section 149A(d) based on the available material and the reply of the assessee; and 3. issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime. 4 | P a g e In Para 112 the Apex Court has also given example as under: “112. Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022.” I have gone through the facts of the present case and jugement of the Hon’ble Apex Court in case of Union of India versus Rajeev Bansal – Civil Appeal No. 8629/2023 dated 03.10.2024. The facts of the case are that notice under u/s 148(old regime) IT Act, 1961 was issued by the AO on 08.06.2021. According to the ruling given by the Apex Court, the survival time to issue notice u/s 148(new regime) of the IT Act, 1961would be number of days between 08.06.2021 to 30.06.2021 i.e. 23 days. Further the Apex Court has also held that when this period of survival time gets start. It held that this will start from either after 14 days to from supply of information or from the reply submitted by the assessee. Relevant portion of judgment of Apex Court in Union of India versus Rajeev Bansal – Civil Appeal No. 8629/2023 dated 03.10.2024 is extracted below: “108. The Income Tax Act read with TOLA extended the time limit for issuing reassessment notices under Section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction.163 Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the 5 | P a g e number of days between the date of issuance of the deemed notice and 30 June 2021.
If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under Section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income Tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction.
The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.
The clock started ticking for the Revenue only after it received the response of the assessees to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under Section 149A(c); (ii) take a decision under Section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime.
Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixtyone days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for 6 | P a g e issuance of a notice under Section 148 of the new regime will end on 18 August 2022.” Thus, in the present case the date of original notice issued u/s 148 of the Act (under old regime) is 08.06.2021 and of submission of reply in response to information provided by the Ld. AO after in judgment of Ashish Agarwal (supra) is 07.06.2022. Now as per Hon’ble Apex Court judgment of Union of India Vs. Rajeev Bansal surviving time available to the assessing office to issue notice u/s 148 of the Act (under new regime) would be difference of days between 08.06.2021 to 30.06.2021 i.e., 23 days. Hence, according the Apex court ruling the assessing officer could issue notice only upto 30th June, 2022 i.e., by adding the survival period of 23 days to the date on which response submitted by the assessee (07.06.2022). In the present case the AO issued notice u/s 148 (under new regime) on 24/07/2022 which is time barred. Thus, the assessment proceedings in the present case are liable to be quashed as it is time barred as per the judgment delivered by the Hon’ble Supreme Court. Hence, the ground no. 10 raised by the appellant allowed. The discussion on other grounds will only be an academic exercise as assessment proceedings in the present case have already been quashed in ground number 10. In view of the other grounds of appeal are not being adjudicated upon.”
4. That being the cases, in light of the fact that the Revenue has not raised any ground in its pleadings seeking to reverse the CIT(A)/NFAC foregoing detailed lower appellate discussion quashing the reopening itself, we find no merit in its instant appeal which is hereby rejected in very terms. All other remaining pleadings between the parties stand rendered academic.