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Facts
The assessee trust filed a return of Nil income after claiming exemption u/s 12A. The assessment was completed at Nil. The case was reopened u/s 147 based on information of bogus donations. The notice u/s 148 was initially issued on 28.06.2021 and later treated as u/s 148A(b) notice. Subsequently, a fresh notice u/s 148 was issued on 31.08.2022.
Held
The Tribunal held that the notice issued u/s 148 on 31.08.2022 was beyond the prescribed limitation period, as per the Supreme Court's decision in Ashish Agarwal. Therefore, the notice and the consequent reassessment order were quashed.
Key Issues
Whether the notice issued u/s 148 of the Income Tax Act was within the prescribed limitation period, considering the various pronouncements of the Supreme Court and High Courts regarding the reassessment proceedings under the new regime.
Sections Cited
147, 144, 250, 148, 143(3), 12A, 148A, 249(4), 115BBE, 139(1), 149, 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
(ASSESSMENT YEAR: 2016-17) A P Goyal Charitable Trust, Income Tax Officer, B-125, Anand Vihar, Ward Exempt, 1(1), East Delhi-110092. Vs. Delhi. PAN:AABTA8575B (Appellant) (Respondent) Assessee by Shri Nitin Kanwar, Rajiv Kumar and Shivam Jain, Advocates Department by Shri Praduma Kumar Singh, Sr. DR Date of hearing 03.09.2025 Date of pronouncement 10.09.2025 O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the order of National Faceless Appeal Centre, Delhi in Appeal No. NFAC/2015-16/10286893 dated 27.01.2025 u/s 250 of the Income Tax Act, 1961 for Assessment Year 2016- 17 arising out of the order passed u/s 147 read with Section 144 of the Act dated 30.05.2023.
Brief facts of the case are that assessee is a trust and filed its return of income on 01.08.2016 declaring Nil income after claiming exemption u/s 12A of eh Act. The assessment was originally completed u/s 143(3) at Nil. The case of the assessee was reopened u/s 147 of the Act on the basis of information received from DCIT, Central Circle, Mumbai that assessee has received bogus donation from M./s Anandilal & Ganesh Podar Society of Rs.50,00,000/- lacs and based on such information, notice u/s 148 was issued on 28.06.2021. Thereafter, in compliance to the order of Hon’ble Supreme Court in the case of Union of India and Anors. Vs. Ashish Agarwal dated 04.05.2022 in Civil Appeal No.3005/2020, the said notice was treated as notice u/s 148A(b) of the Act and after considering the submissions of the assessee, the order u/s 2 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO 148AD was passed on 31.08.2022 and notice u/s 148 was issued on same day. Thereafter, the assessment was completed u/s 147 r.w.s. 144 r.w.s.144B of the Act on 30.3.2023 by making addition of Rs.50,00,000/- as unexplained credit u/s 68 and provisions of section 115BBE of the Act also invoked. Further addition of Rs. 7,500/- was also made as Income from Other Sources.
Against this order, an appeal was filed before the Ld. CIT(A) who vide impugned order dt. 27.01.2025 dismissed the appeal of the assessee by not admitting the same in terms of section 249(4) of the Act.
Before us, the Ld. AR of the assessee submits that primarily case of the assessee is fully covered by the judgment of Hon’ble Supreme Court in the case of Union of India & Anors vs. Rajiv Bansal in Civil Appeal No.8629/2024 wherein it is held if the notice is issued u/s 148 under new regime i.e. post amendment u/s 147 of the Act. lime limit should be strictly adhered. As per Ld. AR, notice u/s 148 of the Act was firstly issued on 28.06.2021 and thus, their remained three days period from the date of expiry of limitation i.e. 30.06.2021. As per Hon’ble Supreme court decision in the case of Ashish Agarwal (supra), the notice issued u/s 148 on 28.6.2021 was treated as notice u/s 148A(b) of the Act and the assessee had filed it reply on 07.07.2022 and therefore, as per the directions given by hon’ble Supreme court in the case of Rajeev Bansal (supra) in para 112 of the order, three days period was available with the AO to issue notice u/s 148 after passing the order u/s 148A(d) of the Act which stood expired on 10.07.2022. However, in the instant case, the notice u/s 148 was issued on 31.08.2022. It is thus submitted by ld. AR that that the notice so issued u/s 148 on 31.8.2022 is beyond the prescribed time and thus barred by limitations and is bad in law and therefore, it is requested to quash the entire reassessment proceedings based on such invalid notice.
On the other hand, the Ld. CIT-DR submits the case of the assessee was dismissed by the Ld. CIT(A) by not admitting the appeal of the assessee u/s 249(4) of the Act, as no advance tax was paid by the assessee. He, therefore, submits that the appeal of the assessee should not be admitted for adjudication. Regarding the limitation issue as has been raised by the ld. AR
3 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO of the assessee during the course of hearing, ld. CIT DR submits that as per the provisions of section 148A(d) of the Act, the AO has time period of one month from the end of the month in which the reply is received from the assessee, and therefore, since in the present case, the assessee filed its reply on 24/06/2022, the order passed under section 148A(d) and notice issued under section 148 of the Act on 28/07/2022 is within the limitation period. He therefore requested that this plea of the assessee deserves to be dismissed.
Heard both the parties and perused the materials available on record. In the instant case, it is seen that the assessee has filed return of income on 01.08.2016 u/s 139(1) of the Act wherein the Nil income was declared after claiming exemption u/s 12A of the Act. It is further seen that in response to notice u/s 148 of the Act no return was filed by the assessee. The Ld. CIT(A) observed that the assessee has failed to file the return of income though its income exceeds the minimum amount not chargeable to tax and, therefore, the assessee is liable to pay advance tax and appeal was not admitted in terms of Section 249(4) (b) of the Act. The assessee before us in ground appeal No.17 challenged the action of ld. CIT(A) in not admitting the appeal of the assesse.
So far as the non-maintainability of assessee’s appeal on account of non-payment of advance tax we find that ld. CIT(A) invoked the provisions of section 249(4) of the Act which reads as under: “(4) No appeal under this Chapter shall be admitted unless at the time of filing of the appeal, (a) where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or (b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him: Provided that, in a case falling under clause (b) and on an application made by the appellant in this behalf, the Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause.”
Admittedly, as per section 249(4)(b) of the Act, in a case where no return of income has been filed by the assessee, then the appeal shall be maintainable before the CIT(Appeals) only if he had paid an amount equal to the amount of advance tax which was payable by him. At the same time, the legislature had carved out an exception to the applicability of the aforesaid
4 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO statutory requirement by way of a “proviso” to Section 249(4) of the Act, as per which, on an application made by the appellant, the CIT(Appeals) may, for any good and sufficient reason to be recorded in writing exempt him from the operation of the aforesaid statutory provision. The statutory requirement contemplated in Clause (b) of sub-section (4) of Section 249 of the Act would stand triggered only where any obligation was cast upon the assessee to pay “advance tax”. As is evident from the facts and grounds of appeal filed by assessee along with the appeal memo, that assessee is not having total income exceeding the maximum amount not chargeable to tax as it is entitled for exemption u/s 12A of the Act and its assessment was completed u/s 143(3) by accepting the returned income i.e. NIL income. Thereafter on the allegation of escapement of income of Rs. 50.00 lacs case of the assessee was reopened by issue of notice u/s 148 of the Act. It is thus clear that the assessee was not having any taxable income for the year under consideration, therefore it was not under any obligation to compute and pay any advance tax.
9. In view of the above facts, in our considered opinion the appeal of the assessee should not be rejected by invoking the provisions of section 249(4) of the Act. Accordingly, we admit the appeal of the assessee.
10. The appeal of the assessee was not admitted by the Ld. CIT(A) and legal grounds taken with respect to the legality of notice u/s 148 on the ground of limitations are not decided by the Ld. CIT(A), however, this issue is legal in nature and requires no fresh investigation therefore, we can proceed to decide the grounds of appeal
Nos. 1&2 of the assessee at this stage.
11. As observed above, the notice us/ 148 was issued on 31.08.2022 after considering the submission of the assessee filed on 27.06.2022 and the surviving period was of only 3 days which expired on 30.6.2022. The hon’ble Supreme court in the case of Rajeeb Bansal (supra) has made following observations in case the earlier notice issued u/s 148 is treated as notice u/s 148A(b) of the Act. The relevant observations are as under: 105. A direction issued by this Court in the exercise of its jurisdiction under Article 142 is an order of a court. The third proviso to Section 149 of the new regime provides that the period during which the proceedings 5 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO 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.
In Ashish Agarwal (supra), this Court directed the assessing officers to provide relevant information and materials relied upon by the Revenue to the assesses within thirty days from the date of the judgment. A show cause notice is effectively issued in terms of Section 148A(b) only if it is supplied along with the relevant information and material by the assessing officer. Due to the legal fiction, the assessing officers were deemed to have been inhibited from acting in pursuance of the Section 148A(b) notice till the relevant material was supplied to the assesses. Therefore, the show cause notices were deemed to have been stayed until the assessing officers provided the relevant information or material to the assesses in terms of the direction issued in Ashish Agarwal (supra). To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices.
The third proviso to Section 149 allows the exclusion of time allowed for the assesses to respond to the show cause notice under Section 149A(b) to compute the period of limitation. The third proviso excludes “the time or extended time allowed to the assessee.” Resultantly, the entire time allowed to the assessee to respond to the show cause notice has to be excluded for computing the period of limitation. In Ashish Agarwal (supra), this Court provided two weeks to the assesses to reply to the show cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to Section 149. 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. b. Interplay of Ashish Agarwal with TOLA 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 6 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO 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. 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 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 assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under Section 149A(c); (ii) take a decision under Section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was 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, 7 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022.
In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under Section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under Section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under Section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under Section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under Section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income Tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time barred. G. Conclusions 114. In view of the above discussion, we conclude that: a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions; b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021; c. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148; d. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval; e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 8 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval; f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021; g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 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), and the period of two weeks allowed to the assesses to respond to the show cause notices; and h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside; 12. In the case of Communist Party of India (Marxist) vs. CIT Exmpt. reported in [2025] 174 taxmann.com 925 (Delhi), the Hon'ble Delhi High court held as under: "8. The AO issued a notice dated 29.07.2022 under Section 148 of the Act accompanied with the order dated 29.07.2022 passed under Section 148A(d) of the Act. It is the petitioner's case that the said notice is barred by limitation.
It is material to note that the original notice under Section 148 of the Act [deemed to be a show cause notice under Section 148A(b) of the Act in terms of the decision in the case of Union of India & Ors. v. Ashish Agarwal (supra)] was issued on 28.06.2021, that is, two days prior to the expiry of the limitation period as extended by virtue of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [TOLA]. Thus, the AO had two days to issue the notice under Section 148 of the Act after receiving the reply dated 08.06.2022 filed by the petitioner. Since the said period was less than seven days, the AO had, by virtue of the fourth proviso to Section 149(1) of the Act, seven days to pass an order under Section 148A(d) of the Act (which was necessarily required to accompany a notice under Section 148 of the Act). The said period expired on 16.06.2022. Therefore, the order passed under Section 148A(d) of the Act was beyond the period of limitation.
The impugned notice is also liable to be set aside on the ground that it was issued without the approval of the authority specified under Section 151 of the Act. Since the impugned notice was issued beyond the period of three years from the end of the relevant assessment year, thus, in terms of Section 151(ii) of the Act, the same was required to be approved by the Principal Chief Commissioner or Principal Director General or where there is no such authority, by Chief Commissioner or 9 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO Director General. The determination of the specified authority for grant of approval under Section 151 of the Act depends on whether the notice under Section 148 of the Act has been issued after the expiry of three years from the end of the relevant assessment year or within the said period."
As regards the other contention of the learned DR that notice issued under section 148 of the Act on 28/07/2022 is within the limitation period, this issue is also considered and decided by the Hon'ble Delhi High Court in Ram Balram Buildhome (P.) Ltd. v/s Income-tax Officer, reported in [2025] 171 taxmann.com 99 (Delhi), wherein the hon’ble court has made following observation: 69. As noted above, by virtue of TOLA, the AO had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings, which began on 01.06.2021, to issue a notice under Section 148 of the Act. The said notice was required to be accompanied by an order under Section 148A(d) of the Act. Thus, the AO was required to pass an order under Section 148A(d) of the Act within the said twenty-nine days notwithstanding the time stipulated under Section 148A(d) of the Act. This period expired on 12.07.2022.
Since the period of limitation, as provided under Section 149(1) of the Act, had expired prior to issuance of the impugned notice on 30.07.2022. The said is squarely beyond the period of limitation.
It is contended on behalf of the Revenue that the AO is required to pass an order under Section 148A(d) of the Act by the end of the month following the month on which the reply to the notice under Section 148A(b) of the Act was received. Thus, the order under Section 148A(d) of the Act as well as the notice under Section 148 of the Act (both dated 30.07.2022) are within the prescribed period. This contention is without merit as it does not take into account that proceedings under Section 148A of the Act necessarily required to be completed within the period available for issuing notice under Section 148 of the Act, as prescribed under Section 149 of the Act. Thus, the time available to the AO to pass an order under Section 148A(d) of the Act was necessarily truncated and the same was required to be passed on or before 12.07.2022. The fourth proviso to Section 149 of the Act did not come into play as the time period available for the AO to pass an order under Section 148A(d) of the Act was in excess of the seven days.
In view of the above, we find merit in Mr.Sehgal's contention that the impugned notice dated 30.07.2022 has been issued beyond the period of limitation.
The petition is accordingly allowed and the impugned order dated 30.07.2022 passed under Section 148A(d) of the Act; the impugned notice dated 30.07.2022 issued under Section 148 of the Act; and the assessment order dated 30.05.2023 framed under Section 147 of the 10 IT No.2038/Del/2025 AP Goyal Charitable Turst vs. ITO Act pursuant to the notice dated 30.07.2022 for AY 2013-14, are set aside. Pending application is also disposed of."
In view of the findings of the Hon'ble Delhi High Court in the decision cited supra, we do not find any merits in the argument of ld. CIT DR. In the instant case notice u/s 148 of the Act has been issued beyond the period of limitation as prescribed by the Hon'ble Supreme Court in the case of Rajeev Bansal (supra). As per the "fourth proviso" to Section 148A of the Act, where the surviving period/time, if available, with the A.O for passing an order under clause (d) of 148A of the Act is less than 7 days, in those cases, the period of limitation so available would stand extended to 7 days. In the instant case, the notice u/s 148 of the Act was issued on 31.08.2022 and the surviving period or even the extended surviving period as per fourth proviso expired on 04.07.2022 thus the notice issued u/s 148 on 31.8.2022 is barred by limitations and thus is quashed and consequent reassessment order passed u/s 147 r.w.s.144 r.w.s.144B is also quashed. Grounds of appeal No. 1, 2 and 17 of the assessee are allowed.