Search-based reassessment must still satisfy Section 149 limitation; a belated Section 148 notice can be invalid.

Reassessment initiated on the basis of search material was treated as governed by the pre-Finance (No. 2) Act, 2024 regime under Section 152(3) where the search occurred within that covered period. Even so, a notice under Section 148 must independently comply with the limitation in Section 149. On the stated facts, the assessment year ended on 31.03.2022, the notice was issued on 23.05.2025, and the alleged escaped income did not meet the threshold for the extended period, so the notice was beyond the three-year limit and invalid.

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Issues: Whether reassessment proceedings initiated on the basis of search material were governed by the earlier reassessment regime under Section 152(3) of the Income-tax Act, 1961, and whether the notice issued under Section 148 for Assessment Year 2021-22 was barred by limitation under Section 149.

Analysis: The search was conducted on 18.11.2023, i.e. within the period covered by Section 152(3), so the reassessment provisions as they stood before the Finance (No. 2) Act, 2024 applied. The reopening was founded on material allegedly found during search and the assessee's statement, but the relevant assessment year ended on 31.03.2022. Since the notice under Section 148 was issued on 23.05.2025 and the alleged escaped income was below the threshold for the extended period, the notice fell beyond the three-year limit under Section 149(1)(a).

Conclusion: The notice under Section 148 was time-barred and the reassessment could not be sustained.

Final Conclusion: The reopening was quashed because the reassessment was governed by the earlier regime, yet the notice was issued beyond the permissible limitation period.

Ratio Decidendi: Where reassessment is initiated on the basis of a search falling within the period covered by Section 152(3), the earlier reassessment regime applies, but the notice must still satisfy the limitation prescribed under Section 149; a notice issued beyond that period is invalid.

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