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Judgment
PER MANISH AGARWAL, AM:
These two appeals are filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi [“CIT(A)”, in short] in Appeal No. NFAC/2012-13/10290290 and NFAC/2014-15/10290307, both dated 12.08.2025 u/s 250 of the Income Tax Act, 1961 (“the Act”) arising out of the orders passed u/s 147 of the Act dated 18.05.2023 and 24.05.2023 for Assessment Years 2013-14 and 2015-16 respectively.
ITA No. 6447/Del/2025 [AY 2013-14]
First we take appeal filed by the assessee for AY 2013-14 in ITA No. 6447/Del/2025 wherein Ground of appeal No. 1, the assessee has raised legal issue of limitations on account of issue of notice u/s 148 of the Act on 27.07.2022.
Heard the parties and perused the material available on record. It is observed that first notice u/s 148 was issued on 08.06.2021. Thereafter, the notice u/s 148A(b) of the Act was issued on 26.05.2022 asking the assessee to file the objections, if any, within a period of two weeks, which expires on 13.06.2022. The assessee had filed reply on 13.06.2022 and the order u/s 148A(d) was passed on 27.07.2022 and thereafter, the notice u/s 148 of the Act was issued on 27.07.2022. The surviving period available with the AO was of 22 days i.e. from 08.06.2021 to 30.06.2021 when the extended time limit under TOLA was expired.
The Hon’ble Supreme Court in the case of Union of India & others Vs. Rajeev Bansal reported in (2024) 469 ITR 46, in cases where earlier notice issued u/s 148 were treated as notice u/s 148A(b) of the Act in terms of the order of Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal reported in 444 ITR 1 (SC), has framed a time line for the issue of fresh notice u/s 148 of the Act. The relevant observations are as under:
105.“A direction issued by this Court in the exercise of its jurisdiction under Article 142 is an order of a court. The third proviso to Section 149 of the new regime provides that the period during which the proceedings under Section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under Section 148A(b) and the date of the decision of this Court in Ashish Agarwal (supra), the assessing officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show cause notices were deemed to have been stayed by order of this Court from the date of their issuance (somewhere from 1 April 2021 till 30 June 2021) till the date of decision in Ashish Agarwal (supra), that is, 4 May 2022.
106.In Ashish Agarwal (supra), this Court directed the assessing officers to provide relevant information and materials relied upon by the Revenue to the assesses within thirty days from the date of the judgment. A show cause notice is effectively issued in terms of Section 148A(b) only if it is supplied along with the relevant information and material by the assessing officer. Due to the legal fiction, the assessing officers were deemed to have been inhibited from acting in pursuance of the Section 148A(b) notice till the relevant material was supplied to the assesses. Therefore, the show cause notices were deemed to have been stayed until the assessing officers provided the relevant information or material to the assesses in terms of the direction issued in Ashish Agarwal (supra). To summarize, the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices.
107.The third proviso to Section 149 allows the exclusion of time allowed for the assesses to respond to the show cause notice under Section 149A(b) to compute the period of limitation. The third proviso excludes “the time or extended time allowed to the assessee.” Resultantly, the entire time allowed to the assessee to respond to the show cause notice has to be excluded for computing the period of limitation. In Ashish Agarwal (supra), this Court provided two weeks to the assesses to reply to the show cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to Section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is: (i) the time during which the show cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information or material by the assessing officers to the assesses in terms of the directions in Ashish Agarwal (supra); and (ii) two weeks allowed to the assesses to respond to the show cause notices.
b. Interplay of Ashish Agarwal with TOLA
108.The Income Tax Act read with TOLA extended the time limit for issuing reassessment notices under Section 148, which fell for completion from 20 March 2020 to 31 March 2021, till 30 June 2021. All the reassessment notices under challenge in the present appeals were issued from 1 April 2021 to 30 June 2021 under the old regime. Ashish Agarwal (supra) deemed these reassessment notices under the old regime as show cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this Court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income Tax Act read with TOLA will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under Section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and 30 June 2021.
109.If this Court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under Section 148 of the new regime would have to be issued within the time limits extended by TOLA. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income Tax Act read with TOLA. This construction gives full effect to the legal fiction created in Ashish Agarwal (supra) and enables both the assesses and the Revenue to obtain the benefit of all consequences flowing from the fiction.
110.The effect of the creation of the legal fiction in Ashish Agarwal (supra) was that it stopped the clock of limitation with effect from the date of issuance of Section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra) has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assesses to reply to the show cause notices must also be excluded in terms of the third proviso to Section 149.
111.The clock started ticking for the Revenue only after it received the response of the assesses to the show causes notices. After the receipt of the reply, the assessing officer had to perform the following responsibilities: (i) consider the reply of the assessee under Section 149A(c); (ii) take a decision under Section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under Section 148 if it was a fit case for reassessment. Once the clock started ticking, the assessing officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income Tax Act read with TOLA, was available to the assessing officers to issue the reassessment notices under Section 148 of the new regime.
112.Let us take the instance of a notice issued on 1 May 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show cause notices will also come into effect from 1 May 2021. After accounting for all the exclusions, the assessing officer will have sixty-one days [days between 1 May 2021 and 30 June 2021] to issue a notice under Section 148 of the new regime. This time starts ticking for the assessing officer after receiving the response of the assessee. In this instance, if the assessee submits the response on 18 June 2022, the assessing officer will have sixty-one days from 18 June 2022 to issue a reassessment notice under Section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under Section 148 of the new regime will end on 18 August 2022.
113.In Ashish Agarwal (supra), this Court allowed the assesses to avail all the defences, including the defence of expiry of the time limit specified under Section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume jurisdiction to issue notices under Section 148 with respect to the relevant assessment years, an assessing officer has to: (i) issue the notices within the period prescribed under Section 149(1) of the new regime read with TOLA; and (ii) obtain the previous approval of the authority specified under Section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the assessing officer. Therefore, the reassessment notices issued under Section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income Tax Act read with TOLA. A reassessment notice issued beyond the surviving time limit will be time barred.
G. Conclusions
114.In view of the above discussion, we conclude that:
a. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions;
b. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021;
c. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148;
d. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval;
e. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval;
f. The directions in Ashish Agarwal (supra) will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021;
g. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and
h. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside.”
In the case of Communist Party of India (Marxist) vs. CIT Exmpt. reported in [2025] 174 taxmann.com 925 (Delhi), the Hon'ble Delhi High court held as under:
"8.The AO issued a notice dated 29.07.2022 under Section 148 of the Act accompanied with the order dated 29.07.2022 passed under Section 148A(d) of the Act. It is the petitioner's case that the said notice is barred by limitation.
9.It is material to note that the original notice under Section 148 of the Act [deemed to be a show cause notice under Section 148A(b) of the Act in terms of the decision in the case of Union of India & Ors. v. Ashish Agarwal (supra)] was issued on 28.06.2021, that is, two days prior to the expiry of the limitation period as extended by virtue of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [TOLA]. Thus, the AO had two days to issue the notice under Section 148 of the Act after receiving the reply dated 08.06.2022 filed by the petitioner. Since the said period was less than seven days, the AO had, by virtue of the fourth proviso to Section 149(1) of the Act, seven days to pass an order under Section 148A(d) of the Act (which was necessarily required to accompany a notice under Section 148 of the Act). The said period expired on 16.06.2022. Therefore, the order passed under Section 148A(d) of the Act was beyond the period of limitation.
10.The impugned notice is also liable to be set aside on the ground that it was issued without the approval of the authority specified under Section 151 of the Act. Since the impugned notice was issued beyond the period of three years from the end of the relevant assessment year, thus, in terms of Section 151(ii) of the Act, the same was required to be approved by the Principal Chief Commissioner or Principal Director General or where there is no such authority, by Chief Commissioner or Director General. The determination of the specified authority for grant of approval under Section 151 of the Act depends on whether the notice under Section 148 of the Act has been issued after the expiry of three years from the end of the relevant assessment year or within the said period."
Further the Hon'ble Delhi High Court in Ram Balram Buildhome (P.) Ltd. v/s Income-tax Officer, reported in [2025] 171 taxmann.com 99 (Delhi), wherein the hon’ble court has made following observation:
69.“As noted above, by virtue of TOLA, the AO had period of twenty-nine days limitation left on the date of commencement of the reassessment proceedings, which began on 01.06.2021, to issue a notice under Section 148 of the Act. The said notice was required to be accompanied by an order under Section 148A(d) of the Act. Thus, the AO was required to pass an order under Section 148A(d) of the Act within the said twenty-nine days notwithstanding the time stipulated under Section 148A(d) of the Act. This period expired on 12.07.2022.
70.Since the period of limitation, as provided under Section 149(1) of the Act, had expired prior to issuance of the impugned notice on 30.07.2022. The said is squarely beyond the period of limitation.
71.It is contended on behalf of the Revenue that the AO is required to pass an order under Section 148A(d) of the Act by the end of the month following the month on which the reply to the notice under Section 148A(b) of the Act was received. Thus, the order under Section 148A(d) of the Act as well as the notice under Section 148 of the Act (both dated 30.07.2022) are within the prescribed period. This contention is without merit as it does not take into account that proceedings under Section 148A of the Act necessarily required to be completed within the period available for issuing notice under Section 148 of the Act, as prescribed under Section 149 of the Act. Thus, the time available to the AO to pass an order under Section 148A(d) of the Act was necessarily truncated and the same was required to be passed on or before 12.07.2022. The fourth proviso to Section 149 of the Act did not come into play as the time period available for the AO to pass an order under Section 148A(d) of the Act was in excess of the seven days.
72.In view of the above, we find merit in Mr.Sehgal's contention that the impugned notice dated 30.07.2022 has been issued beyond the period of limitation.
73.The petition is accordingly allowed and the impugned order dated 30.07.2022 passed under Section 148A(d) of the Act; the impugned notice dated 30.07.2022 issued under Section 148 of the Act; and the assessment order dated 30.05.2023 framed under Section 147 of the Act pursuant to the notice dated 30.07.2022 for AY 2013-14, are set aside. Pending application is also disposed of."
In the instant case, notice u/s 148 of the Act has been issued beyond the period of limitation as prescribed by the Hon'ble Supreme Court in the case of Rajeev Bansal (supra). As per the "Third proviso" to Section 149(1) of the Act, the time allowed for making reply to the notice issued under section 148A(b) of the Act shall be excluded for the purpose of computing the period of limitation. This provision has clearly been explained by the Hon’ble Supreme Court in the case of Union of India Vs. Rajiv Bansal (supra) in para 107 of the said order as reproduced herein above. In the instant case, the notice u/s 148A(b) of the Act was issued on 26.05.2022 and two weeks period allowed to the assessee for reply of the same, expired on 13.06.2022, as per Third proviso to section 149(1) of the Act, when the assessee has filed the reply. Since the surviving period of 22 days was available with the AO, therefore, after excluding the period of 22 days, the AO should have passed the order u/s 148A(d) and must issue notice u/s 148 of the Act upto 05.07.2022 (22 days from 13.06.2022). However, the order u/s 148A(d) was passed on 27.07.2022 and thereafter, the notice u/s 148 was issued on same day i.e. 27.07.2022 which is barred by limitations and thus, is invalid and consequent reassessment order passed u/s 147 r.w.s.144 is quashed. Accordingly, Ground of appeal No.1 of the assessee is allowed.
Since we have allowed the legal Ground of appeal taken by the assessee and quashed the reassessment order, therefore, the remaining grounds of appeal taken by the assessee become academic.
In the result, the appeal of the assessee is allowed.
ITA No. 6448/Del/2025 [AY 2015-16]
The brief facts of the case are that case of the assessee was reopened u/s 148 of the Income Tax Act (“the Act” for short) and the assessment was completed vide order dated 24.05.2023 passed u/s 147 r.w.s 144B of the Act at total income of INR 4,69,66,113/- as against declared income of INR 27,75,250/-.
Against such order, the assessee preferred an appeal before Ld. CIT(A), who dismissed the appeal of the assessee wherein assessee has failed to make compliance on various occasions. Thus, the present appeal is preferred before us.
In Ground of appeal No. 2, the assessee has challenged the reopening on the ground that the notice issued u/s 148 is barred by limitation.
Before us, Ld. AR of the assessee submitted that the impugned year is Asst. Year 2015-16, for which notice u/s 148 of the Act was originally issued on 08.06.2021 and, thereafter, following the judgment of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal (supra), a fresh notice u/s 148 of the Act was issued on 28.07.2022. As per Ld. AR of the assessee, the notice so issued u/s 148 of the Act dated 28.07.2022 is barred by limitation. According to the time limit provided in the old provisions of section 149 of the Act, notice u/s 148 of the Act could be issued within a period of six years from the end of relevant assessment year which limitation expired on 31.03.2022. In the instant case, the notice u/s 148 of the Act was issued on 28.07.2022, however, the time limit available as per erstwhile section 149 of the Act expired on 31.03.2022 thus, is beyond the period of limitation. Ld. AR further submits that during the course of hearing in the case of Union of India & Ors. vs. Rajiv Bansal (supra) before the Hon’ble Apex Court, the Learned Additional Solicitor General of India, Mr. N. Venkataraman has made a statement that the Revenue will drop all the notices issued on or after 1st April, 2021 related to Assessment Year 2015-16. It is, submitted by Ld. AR that since in the instant case notice u/s 148 of the Act for Asst. Year 2015-16 was issued after 1st April, 2021, therefore, in terms of the statement of Additional Solicitor General of India, reassessment proceedings for AY 2015-16 deserves to be dropped and consequently re-assessment order be quashed.
On the other hand, Ld. Sr. DR vehemently supported the orders of the lower authorities and submitted that the matter be decided in terms of the judgment of Hon’ble Supreme Court in the case of Rajiv Bansal (supra).
We have heard the rival submissions and perused the materials available on record. It is an admitted fact that on first occasion, notice u/s 148 in the case of assessee was issued on 09.06.2021 which was dropped and fresh proceedings u/s 148 of the Act were initiated in terms of order of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal and after following the amended provisions of section 148A, fresh notice u/s 148 of the Act was issued on 28.07.2022. The Ld. Additional Solicitor General of India in the case of Rajiv Bansal (supra) has made categorical statement before the Hon’ble Supreme Court that all the notices issued for Asst. Year 2015-16 on or after 1st April 2021 will be dropped. However, in the instant case, no such action has been taken and re-assessment order was passed on the basis of fresh notice issued u/s 148 of the Act on 28.07.2022. The relevant extract of the assertion made by the Ld. Additional Solicitor General of India before the Hon’ble Supreme Court as reproduced in para 19(f) of the order of Rajeev Bansal (supra) are as under:
“19.Mr. N. Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue:
a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID-19. TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income Tax Act;
b. Section 149 of the new regime provides three crucial be nefits to the assesses: (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to Section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the re-assessment for previous assessment years;
c. The relaxations provided under Section 3(1) of TOLA apply "notwithstanding anything contained in the specified Act." Section 3(1), therefore, overrides the time limits for issuing a notice under Section 148 read with Section 149 of the Income Tax Act;
d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime;
e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income Tax Act, Including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below:
Assessment year (1) Within 3 Years (2) Expiry of Limitation read with TOLA for (2)(3) Within six Years (4) Expiry of Limitation read with TOLA for (4)(5) 2013-2014 31.03.2017 TOLA not applicable 31.03.2020 30.06.2021 2014-2015 31.03.2018 TOLA not applicable 31.03.2021 30.06.2021 2015-2016 31.03.2019 TOLA not applicable 31.03.2022 TOLA not applicable f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA;
g. Section 2 of TOLA defines "specified Act" to mean and include the Income Tax Act. The new regime, which came into effect on 1 April 2021, is now part of the Income Tax Act. Therefore, TOLA continues to apply to the Income Tax Act even after 1 April 2021; and
h. Ashish Agarwal (supra) treated Section 148 notices issued by the Revenue between 1 April 2021 and 30 June 2021 as show-cause notices in terms of Section 148A(b). Thereafter, the Revenue issued notices under Section 148 of the new regime between July and August 2022. Invalidation of the Section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income Tax Act read with TOLA will completely frustrate the judicial exercise undertaken by this Court in Ashish Agarwal (supra).
Looking to the facts and considering the assessment year involved is 2015-16, notice issued in the case of originally on 08.06.2021 and later on 28.07.2022 which both the dates have fallen on or after 1st April, 2021, therefore, both the notice deserves to be dropped in view of the admission made by the Revenue before the Hon’ble Supreme Court in the case of Rajeev Bansal (supra). Further, for Assessment Year 2015-16, no notice u/s 148 of the Act could be issued after the expiring of six years from the end of the relevant assessment year which limitation expired on 31st March, 2022. As the Hon’ble Supreme Court in the case of Rajiv Bansal (supra) has observed that TOLA is not applicable for Asst. Year 2015-16, therefore, even otherwise, under the old provisions of section 149 of the Act, the notice issued u/s 148 of the Act for Asst. Year 2015-16 on 28.07.2022 is barred by limitation.
In view of these facts, the notice issued u/s 148 of the Act dated 28.07.2022 is bad in law and consequent reassessment order passed u/s 147 r.w.s. 144B of the Act is hereby, quashed. Accordingly, legal Ground of appeal No.1 taken by the assessee is allowed.
Since, the legal ground taken by the assessee is allowed, other grounds of appeal relate to the merits of the case became academic in nature and need not fresh adjudication.
In the result, appeal of the assessee is allowed.
In the final result, both the appeals filed by the assessee in ITA No. 6447/Del/2025 for AY 2013-14 and ITA No. 6448/Del/2025 for AY 2015-16 are allowed.