The Cochin Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment initiated against an assessee for Assessment Year (AY) 2015–16, holding that the notice issued under Section 148 on May 6, 2022, was barred by limitation and therefore void in law.
The Bench comprising Prashant Maharishi (Vice President) and Keshav Dubey (Judicial Member) has relied upon decisions including Assistant Commissioner of Income Tax v. Godrej Industries Ltd. (Bombay High Court), Assistant Commissioner of Income Tax v. Devika Fibres (P.) Ltd. (Gujarat High Court), and Mohammed Yaseen v. Income Tax Officer (Karnataka High Court), all of which reiterated that reassessment notices issued after expiry of limitation under the old regime cannot be validated through the amended provisions or the procedural framework of Section 148A.
The reassessment proceedings arose after the Assessing Officer (AO) received information indicating that the assessee had not filed an income tax return for AY 2015–16 despite allegedly making bank cash deposits exceeding ₹50 lakh during the relevant financial year. Based on this information, proceedings under Section 148A were initiated and a notice under Section 148 was ultimately issued on May 6, 2022.
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During the assessment proceedings, the assessee contended that he had been a Non-Resident Indian (NRI) until September 2014 and that the deposits represented proceeds from closure of NRE deposits and savings accumulated abroad rather than taxable income. However, according to the assessment order, the assessee did not furnish adequate documentary evidence in support of these claims.
Consequently, the AO treated ₹16.67 lakh as unexplained investment under Section 69 read with Section 115BBEand further added interest income of ₹1.15 lakh, determining total taxable income of ₹17.82 lakh.
The assessee challenged the reassessment before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC). The appellate authority dismissed the appeal, observing that the assessee had failed to establish his NRI status or substantiate the source of deposits through documentary evidence.
Before the Tribunal, the principal issue was whether the Section 148 notice issued on May 6, 2022, for AY 2015–16 was time-barred under the amended reassessment provisions introduced by the Finance Act, 2021.
The assessee argued that under the old reassessment regime, the six-year limitation for AY 2015–16 expired on March 31, 2022. Even after considering permissible exclusions under the third and fourth provisos to Section 149, the notice could have been issued only up to April 16, 2022. Since the notice was actually issued on May 6, 2022, it was beyond the statutory limitation period and therefore invalid.
The department contended that a show-cause notice under Section 148A(b) had been issued on March 28, 2022, and the assessee was granted time until April 6, 2022 to respond.
According to the Department, after excluding the period consumed in Section 148A proceedings and applying the extensions available under the third and fourth provisos to Section 149, the notice dated May 6, 2022, remained within limitation.
Rejecting the Revenue’s arguments, the Tribunal held that the limitation prescribed under Section 149 applies specifically to the issuance of notice under Section 148, and not merely to the initiation of proceedings under Section 148A.
The Tribunal observed that for AY 2015–16 the six-year limitation under the pre-Finance Act, 2021 regime expired on March 31, 2022; the first proviso to substituted Section 149(1) acts as a statutory bar where a notice had already become time-barred under the old law; and procedural compliance under Section 148A cannot cure or revive a notice that is otherwise barred by limitation.
The Bench emphasized that exclusion of time under the third and fourth provisos cannot override the first proviso, which serves as a threshold restriction on reopening completed assessments for earlier years.
The Tribunal placed substantial reliance on the Supreme Court’s landmark judgment in Union of India v. Rajeev Bansal (2024) 469 ITR 46, which clarified that reassessment notices under the new regime cannot be issued for earlier assessment years once the limitation under the old regime had expired.
Referring to the Supreme Court’s interpretation, the ITAT held that since the six-year period for AY 2015–16 had already lapsed by March 31, 2022, the Revenue was legally barred from issuing a fresh Section 148 notice on May 6, 2022.
Allowing the appeal, the Tribunal held that the notice issued under Section 148 on May 6, 2022, suffered from a fundamental jurisdictional defect as it was issued beyond the statutory limitation period.
Accordingly, the ITAT declared the reassessment notice invalid, quashed the reassessment order passed under Sections 147 read with 144, held that all consequential proceedings were liable to be set aside, and treated the remaining grounds raised by the assessee as academic. Since the assessment itself stood quashed, the connected stay application was dismissed as infructuous.
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