The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment proceeding for Assessment Year 2014-15 after holding that the notice issued under Section 148 of the Income Tax Act, 1961, was beyond the surviving limitation period available to the Income Tax Department.
The Bench Sandeep Gosain (Judicial Member) and Bijayananda Pruseth (Accountant Member) held that the notice issued on July 30, 2022, was barred by limitation under Section 149 of the Income Tax Act. Consequently, the Tribunal also set aside the reassessment order through which an addition of ₹4.5 crore had been made under Section 68.
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The appellant/assessee had filed its return of income for AY 2014-15 on September 30, 2014, declaring a loss of ₹23.44 lakh. The case was initially selected for scrutiny, and an assessment order under Section 143(3) was passed on December 16, 2016, accepting the returned loss.
The assessment was subsequently reopened. A notice under Section 148 was issued on July 30, 2022, and the reassessment proceedings culminated in an order dated May 26, 2023. The Assessing Officer determined the assessee’s total income at ₹4.5 crore by making an addition of an equivalent amount under Section 68 of the Act.
The Commissioner of Income Tax (Appeals) dismissed the assessee’s challenge, following which the matter reached the Tribunal.
There was a delay of 72 days in filing the appeal before the Tribunal. The assessee explained through an affidavit that the person handling its income-tax matters could not attend the office because of his mother’s illness. His mother subsequently died on January 12, 2026, and a copy of the death certificate was placed on record.
The department did not oppose the request for condonation.
Relying on the Supreme Court’s decision in Collector, Land Acquisition v. Mst. Katiji and Others, the Tribunal observed that when substantial justice and technical considerations are placed against each other, the cause of substantial justice should ordinarily be preferred.
Finding that the delay was neither intentional nor deliberate, the ITAT condoned it and proceeded to decide the appeal.
The assessee raised additional grounds challenging the validity of the reassessment proceedings. It argued, among other things, that the notice under Section 148 was issued beyond the permissible limitation period calculated in accordance with the Supreme Court’s ruling in Union of India v. Rajeev Bansal.
Other objections concerned the Assessing Officer’s pecuniary jurisdiction, the absence of a valid Document Identification Number on the notice and the issuance of the reopening notice by the jurisdictional officer instead of the National Faceless Assessment Centre.
The Tribunal admitted the additional grounds after observing that they were legal in nature and arose from facts already available on the assessment record. No fresh factual investigation was required to decide them.
The Bench relied on the Supreme Court’s ruling in NTPC Ltd. v. CIT, which recognises the Tribunal’s wide powers under Section 254 to consider a legal question arising from facts already on record, even when that question was not raised before the lower authorities.
The ITAT also referred to the Bombay High Court’s decision in CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd.
The primary dispute concerned the calculation of the time available to the Revenue to issue the fresh notice under the post-April 2021 reassessment regime.
According to the chronology placed before the Tribunal, the original reopening notice was dated March 31, 2021, while the first notice under Section 148 was issued on June 11, 2021. After considering the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, or TOLA, the deadline for issuing the notice was June 30, 2021.
The assessee submitted that only 19 days of the limitation period remained when the earlier notice was issued on June 11, 2021.
A show-cause notice under Section 148A(b) was subsequently issued on May 31, 2022, granting the assessee time until June 14, 2022, to respond. The assessee did not file a reply.
Applying the surviving-period principle explained by the Supreme Court in Rajeev Bansal, the assessee contended that the Revenue had only 19 days from June 14, 2022, to issue the fresh notice. Therefore, the permissible period expired on July 3, 2022.
However, both the order under Section 148A(d) and the consequential notice under Section 148 were issued only on July 30, 2022.
The assessee argued that the notice was therefore issued 27 days after the surviving limitation period had expired. Since the notice itself was without jurisdiction, the consequential reassessment order could not survive.
Reliance was also placed on the Supreme Court’s decisions in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal, besides other decisions of the Bombay High Court and the Mumbai ITAT.
The Tribunal noted that the Revenue had not disputed the relevant dates or the factual chronology submitted by the assessee.
After examining the record, the Bench found that only 19 days were available to the Income Tax Department to issue the notice under the new reassessment regime after excluding the period granted to the assessee to respond to the notice under Section 148A(b).
Accordingly, the last permissible date for issuing the notice was July 3, 2022. The notice actually issued on July 30, 2022, fell outside the surviving or balance limitation period.
The Tribunal observed, “It is clear from the facts that there was surviving period of 19 days to issue the notice under Section 148 of the Act under the new regime in the present case, i.e. till 03.07.2022.”
Applying the principles laid down by the Supreme Court in Ashish Agarwal and Rajeev Bansal, the ITAT concluded that the notice was barred by limitation under Section 149.
The Bench declared the Section 148 notice void ab initio and bad in law. It accordingly quashed the notice as well as the reassessment order passed under Section 147 read with Section 144 for AY 2014-15.
Since the reassessment itself was set aside, the Tribunal held that the assessee’s remaining grounds—including its challenge to the substantive addition of ₹4.5 crore—had become academic and did not require separate adjudication.
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