2025 (9) TMI 611 - AT - Income Tax

First reassessment notice under Section 148 held invalid; second notice dated 24.08.2022 time-barred beyond six-year limit

Income Tax Officer, Ward – 3 (1) (1), Ahmedabad Versus Pel Industries Limited

ITAT AHMEDABAD - AT held the first reassessment notice u/s 148 dated 25.06.2021 invalid because notices issued on or after 01.04.2021 for the relevant ... Reopening of assessment u/s 147 - scope of notices issued on or after 1st April 2021 - scope of extended time limit by TOLA, 2021 - as alleged first notice was beyond the period of three years from the end of relevant A.Y. whereas the second notice was beyond the period of six years from the relevant A.Y. HELD THAT:- There is no dispute to the fact that the first notice under Section 148 for A.Y. 2015-16 was issued on 25.06.2021. In the case of Deepak Steel and Power Limited [2025 (4) TMI 1367 - SC ORDER] the identical issue was involved wherein notice u/s 148 of the Act for A.Y. 2015-16 was issued after 1st April 2021. The Hon’ble Supreme Court, in that case, had referred to the submission of the Revenue made in the case of Union of India vs. Rajeev Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] as held that for the A.Y. 2015-16 all the notices issued on or after 1st April 2021 was required to withdrawn. In the present case, the first notice under Section 148 of the Act dated 25.06.2021, which was after 1st April, 2021, and was required to be dropped. Therefore, the said notice is held as invalid. Period of limitation - Second notice under Section 148 of the Act dated 24.08.2022 was beyond the period of six years from the end of the relevant A.Y. This aspect was examined by the jurisdictional High Court in the case of Mayurkumar Babubhai Patel [2025 (6) TMI 1838 - GUJARAT HIGH COURT] held the notice issued under Section 148 of the Act on 27/28/29.07.2022 as time barred. Appeal of the Revenue is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the reassessment proceedings under Section 147 read with Sections 148/148A of the Income Tax Act were validly initiated where the first notice under Section 148 was issued on 25.06.2021 (after 01.04.2021) for Assessment Year 2015-16. 2. Whether a subsequent notice under Section 148 dated 24.08.2022 is time-barred because it was issued beyond six years from the end of the relevant assessment year. 3. Whether, having held reopening to be time-barred/invalid, it is necessary to adjudicate the substantive addition under Section 68 treating large sales as accommodation entries. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of first notice under Section 148 dated 25.06.2021 (post 01.04.2021) Legal framework: Reopening of assessment requires valid notice under Section 148; statutory timelines and special relaxation/amendment provisions enacted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 affect completion periods and notices falling for completion after specified dates. Precedent treatment: The Supreme Court's ruling in the referred authority (and the stated concession of the revenue in related Supreme Court proceedings) established that for Assessment Year 2015-16 all notices issued on or after 01.04.2021 must be dropped insofar as they will not fall for completion during the period preserved by the 2020 Act; the Tribunal follows that treatment. Interpretation and reasoning: The Tribunal applied the Supreme Court's finding and the revenue's concession to hold that a notice dated 25.06.2021 for AY 2015-16 falls on or after 01.04.2021 and therefore must be dropped; such a notice is invalid as initiating proceedings under Section 147 because it could not lawfully be completed within the prescribed period under the 2020 Act. Ratio vs. Obiter: Ratio - where a notice under Section 148 for AY 2015-16 is issued on or after 01.04.2021 it is invalid and must be dropped, following the Supreme Court's pronouncement and the revenue's concession. Conclusion: The first notice dated 25.06.2021 is invalid; proceedings based thereon are time-barred and cannot sustain reassessment for AY 2015-16. Issue 2 - Validity of second notice under Section 148 dated 24.08.2022 (beyond six years) Legal framework: Reopening beyond six years from the end of the relevant assessment year is permissible only if income has escaped assessment by reason of certain specified omissions/claims; otherwise such notices are time-barred. Section 148A and subsequent procedural steps are governed by the statutory time limits and judicial interpretations applicable to notices issued after the 2020 Act period. Precedent treatment: The Tribunal relied on the jurisdictional High Court's decision holding notices issued after 01.04.2021 (and specifically notices dated in July/August 2022) to be time-barred for AY 2015-16; that High Court decision applied the Supreme Court's concession and reasoning in similar factual/timeframe circumstances. Interpretation and reasoning: The second notice dated 24.08.2022 was issued beyond six years from the end of the relevant AY and, in line with the High Court precedent, is time-barred. The Tribunal respectfully follows the High Court's approach that such notices - issued after the cut-off identified by the Apex Court's concession and judicial pronouncements - cannot validly initiate reassessment. Ratio vs. Obiter: Ratio - a notice under Section 148 issued beyond six years for the relevant AY (and after the applicable cut-off arising from the 2020 Act and subsequent jurisprudence) is time-barred unless statutory exceptions are properly shown; the present notice of 24.08.2022 is time-barred. Conclusion: The second notice dated 24.08.2022 is time-barred; consequently, the proceedings under Section 147 premised on that notice are invalid. Issue 3 - Necessity of adjudicating substantive addition under Section 68 given invalid reopening Legal framework: Merits of additions under substantive provisions (e.g., Section 68 additions treating alleged sales as accommodation entries) are adjudicable only if the initiation of reassessment is legally valid; jurisdictional competence to decide quantum arises from validly reopened proceedings. Precedent treatment: Where reassessment is struck down as time-barred or improperly initiated, courts/tribunals have declined to decide substantive additions and rely on the jurisdictional defect to dispose of appeals. Interpretation and reasoning: Having held both the first and the second notices invalid/time-barred following controlling judicial pronouncements, the Tribunal concluded that reassessment proceedings under Section 147 do not subsist; therefore adjudication of the substantive addition under Section 68 was unnecessary. The Tribunal expressly refrained from addressing the merits of the accommodation-entry/ Section 68 issue because the legal defect in initiation was dispositive. Ratio vs. Obiter: Ratio - where reassessment is invalid for lack of a valid notice or because it is time-barred, the tribunal need not, and should not, adjudicate substantive additions premised solely on those invalid proceedings. Obiter - observations about the factual matrix suggesting paper transactions or absence of corroboration by third parties remain unadjudicated and do not form the basis for the decision. Conclusion: Because the reassessment proceedings were held invalid/time-barred, the Tribunal declined to adjudicate the substantive Section 68 addition; the reopening being void, the assessment stands as per the originally processed return and the appellate order in favour of the assessee. Overall Disposition For AY 2015-16, both the notice dated 25.06.2021 (post 01.04.2021) and the later notice dated 24.08.2022 (beyond six years) were held invalid/time-barred in view of binding judicial pronouncements and revenue concession; accordingly, proceedings under Section 147 were quashed and the substantive addition under Section 68 was not adjudicated.