Reassessment notice under Section 148 held time-barred under TOLA, ITAT upholds annulment and dismisses Revenue appeal

ITAT Delhi dismissed the Revenue's appeal and upheld the order of CIT(A) quashing the reassessment. The notice under s.148 for AY 2015-16 was issued on 22.04.2021, which fell outside the extended limitation period prescribed under the TOLA regime governing reassessment proceedings. ITAT held that the CIT(A) correctly appreciated the legal position and judicial precedents in concluding that the reopening was time-barred and therefore invalid. Finding no infirmity in the reasoning or conclusions of CIT(A), ITAT confirmed the annulment of the reassessment.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the reassessment notice issued under section 148 on 22-04-2021 (old regime), and the subsequent notice dated 28-07-2022 under the new regime, for Assessment Year 2015-16, were within the period of limitation in view of section 149, the Finance Act 2021 amendments, Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and the decisions in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal.

1.2 Consequent to the above, whether the reassessment order dated 19-05-2023 passed under section 147 read with section 144B was valid and sustainable in law.

---

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation for reassessment notice for A.Y. 2015-16 under sections 148 and 149 read with TOLA and Supreme Court jurisprudence

Legal framework (as discussed in the order)

2.1 The judgment notes the shift from the old reassessment regime to the new regime introduced by the Finance Act 2021, under which section 148A was inserted and section 149 was substituted, prescribing fresh time limits and monetary thresholds for issuing notices under section 148.

2.2 In Union of India v. Ashish Agarwal, the Supreme Court held that all reassessment notices issued under section 148 of the old regime on or after 01-04-2021 were to be treated as show cause notices under section 148A(b) of the new regime, and that further proceedings had to conform to the new provisions.

2.3 The order extracts in detail the submissions recorded by the Supreme Court in Union of India v. Rajeev Bansal, including, inter alia: (a) TOLA is a relaxation statute overriding time limits under the Income-tax Act; (b) section 149 of the new regime shortens the general limitation period and introduces a monetary threshold; (c) TOLA relaxations apply "notwithstanding anything contained in the specified Act" and cover sections 149 and 151; and (d) a tabulation of limitation periods for assessment years 2013-14 to 2017-18 with reference to TOLA.

2.4 In those submissions, the Revenue expressly conceded before the Supreme Court that, for Assessment Year 2015-16, all notices issued on or after 01-04-2021 would have to be dropped as they would not fall for completion during the period prescribed under TOLA.

2.5 The Commissioner (Appeals) recorded that, in Rajeev Bansal, the Supreme Court noted that reassessment for Assessment Year 2015-16 fell outside the provisions of TOLA, and therefore the proceedings for that year were barred by limitation and invalid.

2.6 The Tribunal also referred to the Supreme Court order in Income Tax Officer v. R.K. Build Pvt. Ltd., where the Supreme Court dismissed an SLP on the ground that, having regard to the concession made by the Department in Rajeev Bansal, the SLP did not survive.

2.7 Further reliance was placed on the decision of the High Court in Bhagwan Sahai Sharma v. Deputy Commissioner of Income Tax, where it was held that a notice issued on 30-07-2022 for A.Y. 2015-16 was beyond limitation under section 149(1) and that TOLA was inapplicable for that year, as conceded by the Revenue in Rajeev Bansal.

Interpretation and reasoning

2.8 The facts, as recorded, were that: (i) an old-regime notice under section 148 was issued on 22-04-2021 for A.Y. 2015-16; (ii) pursuant to Ashish Agarwal, this notice was treated as a show cause notice under section 148A(b); (iii) a formal notice under section 148A(b) was issued on 19-05-2022; (iv) order under section 148A(d) was passed on 28-07-2022; and (v) a fresh notice under section 148 was issued on 28-07-2022 under the new regime.

2.9 The Commissioner (Appeals) reasoned that, in light of the Department's own submissions and concession before the Supreme Court in Rajeev Bansal, and the Supreme Court's acceptance that reassessment for A.Y. 2015-16 fell outside TOLA, any reassessment proceedings for A.Y. 2015-16 initiated on the basis of notices issued on or after 01-04-2021 are barred by limitation.

2.10 The Commissioner (Appeals) concluded that the case of the assessee for A.Y. 2015-16 falls outside the period of completion prescribed under TOLA, and, following the ratio and the Department's stand in Rajeev Bansal, that all such notices for A.Y. 2015-16 issued on or after 01-04-2021 "will have to be dropped" as not falling within the prescribed period.

2.11 The Tribunal examined these findings and the chronology of notices and orders and accepted that, for A.Y. 2015-16, the proceedings did indeed fall outside the permissible limitation as per the law expounded in Rajeev Bansal and subsequent judicial dicta.

2.12 The Tribunal rejected the Revenue's contention that the new regime under section 149(1)(b) extended the time limit to 31-03-2026 in the present case, holding that such a contention is inconsistent with the binding position accepted and recorded before the Supreme Court in Rajeev Bansal, as also with the subsequent affirmation in R.K. Build Pvt. Ltd. and the High Court's view in Bhagwan Sahai Sharma.

Conclusions

2.13 It was held that the reassessment proceedings for A.Y. 2015-16, based on the notice under section 148 dated 22-04-2021 (treated under section 148A(b)) and the subsequent notice under section 148 dated 28-07-2022, are barred by limitation and invalid, as they fall outside the period of completion prescribed under TOLA and as clarified by the Supreme Court in Rajeev Bansal.

2.14 Consequently, the notices issued and proceedings initiated for A.Y. 2015-16 on or after 01-04-2021 cannot be sustained in law.

---

Issue 2: Validity of reassessment order passed under section 147 read with section 144B based on time-barred notice

Interpretation and reasoning

2.15 The reassessment order dated 19-05-2023 under section 147 read with section 144B was passed pursuant to the notice under section 148 dated 28-07-2022, which itself flowed from the old-regime notice dated 22-04-2021 and the order under section 148A(d) dated 28-07-2022.

2.16 The Commissioner (Appeals) held that since the initiation of reassessment proceedings for A.Y. 2015-16 is barred by limitation and invalid, the consequent reassessment order is "non est in the eyes of law" and not sustainable, and accordingly annulled the assessment made under section 147 read with section 143(3) (as recorded in the appellate order).

2.17 The Commissioner (Appeals) further held that, once the assessment is annulled on the ground of limitation, the remaining grounds on merits become academic and need not be adjudicated.

2.18 The Tribunal, after hearing both sides, concurred with the Commissioner (Appeals) that the initiation of proceedings itself was time-barred, and that the reasoning of the Commissioner (Appeals) was in consonance with the judicial position and the Department's concession before the Supreme Court.

Conclusions

2.19 The reassessment order dated 19-05-2023 passed under section 147 read with section 144B, having been founded upon time-barred and invalid notices, was held to be unsustainable in law and stood effectively annulled.

2.20 As a result, the Revenue's appeal challenging the order of the Commissioner (Appeals) was dismissed, and the appellate relief in favour of the assessee was affirmed.

---