The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has allowed an assessee’s appeal against reassessment involving additions totalling Rs. 1.345 crore, holding that the notice issued under Section 148 of the Income Tax Act, 1961 was barred by limitation.
The Bench of Vimal Kumar (Judicial Member) and Sanjay Awasthi (Accountant Member) delivered the ruling in Makrana Tradecom Private Limited v. Income Tax Officer, concerning Assessment Year 2014–15. The order was pronounced on September 29, 2026. Applying the limitation principles explained by the Supreme Court in Union of India v. Rajeev Bansal, the Tribunal held that the reassessment notice dated July 30, 2022 had been issued after the permissible period expired.
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The company originally filed its income tax return on September 29, 2014, declaring income of ₹30,812. The tax department subsequently reopened the assessment and issued a notice under Section 148 dated July 30, 2022.
The Assessing Officer completed the reassessment on May 30, 2023 under Section 147 read with Section 144B, making additions of ₹20 lakh and ₹1,14,50,000.
The company challenged the reassessment before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. However, the appellate authority dismissed its appeal on March 13, 2026, prompting the company to approach the Tribunal.
The central issue was whether the department could validly issue the fresh reassessment notice on July 30, 2022 after the procedural steps undertaken following the Supreme Court’s judgment in Union of India v. Ashish Agarwal.
The dispute arose from the transition to the new reassessment regime introduced with effect from April 1, 2021. The company’s written submissions explained that the original notice had been issued under the old provisions during the period between April 1 and June 30, 2021.
In Ashish Agarwal, the Supreme Court directed that such notices be treated as show-cause notices under Section 148A(b) of the new regime, enabling the department to proceed through the prescribed procedure.
The company argued, however, that this treatment did not give the department an unrestricted extension of time. Any subsequent notice under Section 148 still had to satisfy the applicable limitation requirements.
The assessee relied on Rajeev Bansal to contend that the department could use only the surviving limitation period available under the Income Tax Act read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, commonly known as TOLA.
Its submissions explained that the limitation clock stopped upon issuance of the original notice, which was subsequently treated as a deemed show-cause notice. The relevant exclusions covered the period until the department supplied the information and material, together with the time allowed to the assessee to respond.
Once the clock resumed, the department had to complete the remaining steps, including issuing the fresh Section 148 notice, within the available statutory period.
The company maintained that the notice in its case had been issued beyond that window and that the resulting reassessment was without jurisdiction.
The chronology reproduced by the Tribunal recorded that the relevant assessment year ended on March 31, 2015. The normal six-year limitation period under the erstwhile provisions expired on March 31, 2021, while the TOLA extension took the relevant deadline to June 30, 2021.
The original Section 148 notice was issued on June 30, 2021. The chronology recorded zero days of surviving limitation after that notice.
Following the Supreme Court’s decision in Ashish Agarwal, the Assessing Officer supplied information on May 25, 2022. The assessee submitted replies on June 9 and June 15, 2022.
The chronology also accounted for a seven-day procedural allowance and recorded June 22, 2022 as the resulting outer deadline. Nevertheless, the order under Section 148A(d) and the fresh notice under Section 148 were issued on July 30, 2022.
On examining these facts, the Tribunal concluded that the fresh notice had been issued after limitation expired.
The company also relied on the Delhi Tribunal’s decision in Deputy Commissioner of Income Tax v. Sterling Agro Industries Limited, delivered on February 18, 2026.
In that case, the Tribunal had applied to Rajeev Bansal and held that a fresh reassessment notice issued on July 27, 2022 was time-barred because the applicable deadline had expired on June 17, 2022. The consequential reassessment proceedings were therefore held liable to be quashed.
Reproducing the relevant portions of that ruling, the Bench in the present case followed the same limitation principle. The department’s representative relied on the impugned appellate order.
Apart from limitation, the company challenged the reassessment on several grounds. It contended that the reassessment order had been passed in the name of a non-existing entity following conversion into an LLP and that it had not been allowed to cross-examine the alleged entry operators or third parties.
The company also disputed the additions under Section 68, claiming that it had explained the nature and source of the transactions, furnished supporting evidence and conducted the transactions through banking channels.
These were grounds raised by the assessee. The Tribunal’s operative reasoning rested on the delayed Section 148 notice, rather than a separate examination of the merits of the additions or each of the other objections.
The Tribunal held that the notice dated July 30, 2022 was barred by limitation, accepted the assessee’s grounds and allowed the appeal.
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