The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings for Assessment Years (AYs) 2014-15 and 2015-16 after holding that the notices issued under Section 148 of the Income Tax Act were barred by limitation.
The decision was delivered by a Bench comprising Mahavir Singh (Vice President) and Krinwant Sahay (Accountant Member) has observed that the Section 148 notices for both assessment years had been issued on March 20, 2024, relying upon the relaxation under TOLA. At the same time, the alleged escaped income for both years was below ₹50 lakh.
The assessee had filed its return of income for AY 2014-15 under Section 139(1) on March 31, 2015, declaring nil total income. Subsequently, reassessment proceedings were initiated and an assessment under Section 147 was completed on March 21, 2025.
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The reassessment resulted in an assessed income of ₹34,77,060, following an addition of ₹34,77,056 under Section 69Cof the Income Tax Act. The assessee challenged the assessment before the Commissioner of Income Tax (Appeals), but the appeal was dismissed. It thereafter approached the ITAT.
Although the assessee had raised 16 grounds of appeal, its authorised representative pressed only the legal ground concerning limitation. The core contention was that the entire reassessment proceedings were void because the Section 148 notice had been issued after expiry of the permissible statutory period.
Before the Tribunal, the assessee pointed out that notices under Section 148 were issued on March 20, 2024 for AYs 2014-15 and 2015-16.
The alleged escaped income was stated to be ₹34,77,056 for AY 2014-15 and ₹49,79,231 for AY 2015-16. Both amounts were below the ₹50 lakh threshold relevant to the extended limitation provision under Section 149.
The assessee therefore argued that the cases fell within the three-year limitation contemplated under Section 149(1)(a), while the longer limitation under Section 149(1)(b) was not available because the alleged escaped income did not cross the ₹50 lakh threshold.
A central issue before the Tribunal was the effect of the Supreme Court’s decision in Union of India v. Rajeev Bansal on notices issued under the reassessment regime after the transition from the old provisions to the Finance Act, 2021 regime.
The assessee relied on the Supreme Court’s directions concerning the interaction between the amended reassessment provisions and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
According to the submissions recorded by the Tribunal, the Supreme Court had clarified that where the statutory three-year period from the end of the relevant assessment year expired during the period from March 20, 2020 to June 30, 2021, notices issued under the old regime during the relevant period could be treated as valid if reissued under the new regime within the surviving period.
The assessee argued that the notices issued in March 2024 could not derive validity from the relaxation provisions because the relevant three-year period had already expired and the alleged escaped income was below ₹50 lakh.
The Tribunal accepted the assessee’s legal contention.
The Tribunal specifically recorded that the alleged escaped income was ₹34,77,056 for AY 2014-15 and ₹49,79,231 for AY 2015-16, and concluded that the cases fell within the category governed by the Supreme Court’s decision in Rajeev Bansal.
The Bench consequently held that the limitation objection raised by the assessee had substantial merit.
Following the Supreme Court’s ruling, the ITAT held that the Section 148 notice dated March 20, 2024 was barred by limitation.
The Tribunal therefore declared the notice invalid and quashed the reassessment proceedings flowing from it. The legal ground raised by the assessee was consequently allowed in both appeals.
The decision effectively brought the reassessment proceedings to an end without the Tribunal having to examine the merits of the underlying addition under Section 69C.
Once the Tribunal decided the limitation issue in favour of the assessee, it held that the remaining grounds did not require adjudication.
The Bench observed that the other grounds had become academic because the reassessment itself stood quashed on the preliminary legal issue of limitation. Both appeals were accordingly allowed.
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