The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that a reassessment notice issued under Section 148 of the Income Tax Act, 1961, for Assessment Year (AY) 2015-16 after expiry of six years from the end of the relevant assessment year could not be sustained.
Relying on the Supreme Court’s interpretation of the transitional limitation provisions under Section 149, the bench of Justice (Retd.) C.V. Bhadang (President) and Prabhash Shankar (Accountant Member) allowed the assessee’s appeal and deleted additions aggregating to ₹65.78 lakh.
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The assessee had not filed a return of income for the assessment year under consideration. The Assessing Officer (AO) received information indicating that the assessee had deposited cash of ₹13,84,650 in a savings bank account on March 31, 2015. The information also showed purchase of an immovable property for ₹45 lakh and payment of ₹6,93,655 towards credit card bills on the same date.
Based on this information, the assessment was sought to be reopened. The assessee raised objections to the proposed reopening. Thereafter, the AO passed an order under Section 148A(d) of the Income Tax Act on April 13, 2022, followed by issuance of a notice under Section 148 on the same date.
During the reassessment proceedings, the AO made an addition of ₹65,78,305 under Sections 69 and 69A of the Income Tax Act. The addition was subsequently upheld in appeal by the National Faceless Appeal Centre (NFAC), leading the assessee to approach the ITAT.
The assessee challenged the validity of the notice issued under Sections 148 and 148A of the Act. The assessee relied upon the Supreme Court’s decision in Union of India v. Rajeev Bansal, reported at 469 ITR 46 (SC), and submitted that the Revenue had made a specific concession concerning reassessment proceedings for AY 2015-16 and subsequent years.
The Departmental Representative, appearing for the Revenue, fairly submitted that an appropriate order could be passed.
The Tribunal noted that a coordinate bench had already considered a similar issue in Babu Hasan Shaikh, ITA No. 926/Mum/2025, decided on April 28, 2025. In that case also, the assessment year involved was AY 2015-16 and the notice under Section 148 had been issued after expiry of the relevant limitation period.
The coordinate bench had examined the impact of the amendment to Section 149, which came into effect from April 1, 2021. The Tribunal noted that the legislature had introduced the first proviso to Section 149(1) to ensure that the extended reassessment period under the amended law did not retrospectively revive proceedings that had already become time-barred under the earlier regime.
The Tribunal referred extensively to the Supreme Court’s decision in Union of India v. Rajiv Bansal. The Supreme Court had explained that, for assessment years beginning on or before April 1, 2021, a notice under the new reassessment regime could be issued only where the limitation period under the old Section 149(1)(b) continued to remain available.
The Supreme Court had further explained that the old reassessment regime prescribed a four-year period in ordinary cases and permitted reopening beyond four years and up to six years where the income chargeable to tax that had escaped assessment amounted to ₹1 lakh or more. Following the 2021 amendment, the ordinary period under the new regime was reduced to three years, while the extended period was subject to the statutory conditions prescribed under the amended Section 149.
Importantly, the Supreme Court had held that the first proviso to Section 149(1)(b) required the Revenue to determine whether the limitation available under the old regime continued to exist for assessment years up to AY 2021-22. Consequently, a notice under the new Section 148 regime could not be issued if six years from the end of the relevant assessment year had already expired when the notice was issued.
The Tribunal noted that the legal position emerging from the Supreme Court judgment was that the Revenue could not issue a notice under Section 148 for assessment years preceding AY 2021-22 once six years from the end of the relevant assessment year had expired.
Applying this principle to AY 2015-16, the Tribunal observed that the six-year limitation period under the old regime expired on March 31, 2022. Therefore, any notice under Section 148 issued after that date would fall beyond the permissible limitation period.
In the present case, the notice under Section 148 was issued on April 13, 2022, after expiry of the six-year period applicable to AY 2015-16.
The Tribunal accordingly concluded that the reopening could not be sustained merely on the basis of the reassessment provisions introduced with effect from April 1, 2021.
The ITAT held that the reopening was invalid on the basis of the date of issuance of the notice itself. Since the notice was issued beyond the applicable limitation period, the reassessment proceedings could not survive.
The Tribunal therefore allowed the appeal and deleted the impugned additions of ₹65,78,305 made under Sections 69 and 69A of the Income Tax Act.Â
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