TaxTMI 
TaxTMI 
2026 (9) TMI 1863
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....r gross violation of the principles of natural justice and deserves to be quashed in limine. 3. The Learned Assessing Officer and the Learned CIT(A)failed to appreciate that the Appellant is engaged in the business of trading in Cement and Iron wherein the normal net profit margin in the line of trade is hardly around 1%, and therefore the alleged escapement of income would be far below the statutory threshold of Rs. 50,00,000 prescribed for reopening, rendering the very initiation of reassessment proceedings unsustainable in law. 4. The Learned Assessing Officer and the Learned CIT(A) grossly erred in proceeding on the erroneous premise that the entire bank receipts represent taxable income, ignoring the settled legal position that all receipts are not income and all incomes are not taxable, and that in a trading concern only the real income element embedded in turnover can be brought to tax. 5. The Learned Assessing Officer and the Learned CIT(A) failed to appreciate that the notice issued under Section 148 for Assessment Year 2015-16 is clearly barred by limitation in terms of Section 149(1)(b) of the Act, since the alleged escapement of income is admi....
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....dditional ground raised by the assessee is purely goes to the root of the matter and that there is no necessity of fresh investigation into facts for adjudicating the additional ground. He therefore, pleaded that the additional ground raised by the assessee may please be admitted for hearing and adjudication. In support of his contention, he has relied upon the Judgment of Hon'ble Supreme Court in the case of CIT vs. NTPC 229 ITR 383 (SC). 5. Sri A.P. Babu, learned Sr. AR for the Revenue opposed for admission of the additional ground raised by the assessee. He submitted that the assessee has not raised this ground either during the assessment proceedings or before the learned CIT(A). 6. We have heard learned Authorised Representative of the Assessee submitted that as well as learned DR on the admission of additional ground. It is also pertinent to note that for adjudication of the above additional ground, no fresh material or record or facts are required to be investigated, verified or considered, but the same can be adjudicated on the basis of the material and facts already on record. Accordingly, by following the Judgment of Hon'ble Supreme Court in the case of National The....
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....well as relevant material on record. In the case in hand, the Assessing Officer has issued show cause notice u/sec.148A(b) of the Act on 19.03.2022 as under: xxxxx xxxxx xxxxx 9.1. Thereafter, the Assessing Officer has passed an Order u/sec.148A(d) of the Act on 15.04.2022 and issued notice u/sec.148 of the Act dated 15.04.2022 as under: xxxxx xxxxx  ....
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....f the relevant assessment year unless the case falls under clause (b), (b) if three years, that not more than ten years, have elapsed from the end of the relevant assessment yes unless the Assessing Officer has it his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of- (i) an asset (ii) expenditure in respect of a transaction or in relation to an event of occasion; or (iii) an entry or entries in the books of account, Which has escaped assessment amounts to or in likely to amount to fifty lakh rupees or more; Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1 day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C. as the case may be, as they stood immediately before the commencement of the Finance Act, 2021; Provided also that for the purposes o....
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....ion 148 of the Act shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021, if a notice under Section 148 of the Act could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of Section 149 of the Act or as they stood immediately before the commencement of the Finance Act, 2021. For the purposes of appreciating the first proviso, the un-amended Section 149 of the Act is also extracted in the foot note. ------------------------- Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year; (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but nor more than six years, have elapsed trees the end of the relevant assessment year unless the chargeable to tax which has escaped assessment amounts or is likely to amount to one lakh rupees or more for that year. (c) if four years, but not more than sixteen years, have elapsed from the end of the relevan....
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.... The contention of the learned counsel for the Revenue that the time spent from the issuance of notice under Section 148A(b) of the Act up to the passing of the order under Section 148A(d) of the Act in terms of the fifth and sixth provisos stands excluded for reckoning the limitation period for issuance of notice under Section 148 of the Act is not worth acceptance. Section 148A of the Act lays down the procedure for issuance of notice under Section 148 of the Act whereas Section 149 of the Act prescribes strict time limit within which notice under Section 148 of the Act can be issued in the prescribed circumstances. The Revenue is therefore obliged to adhere to the timeline prescribed under Section 149 of the Act for issuance of such notice and undertake the procedure before issuance of notice under Section 148A of the Act. 13. In this regard, it is apposite to refer to opinion of the Delhi High Court. Paragraphs 15 and 16 of Godrej Industries Ltd., (supra) are extracted hereunder: "15. The validity of a notice must be judged on the basis of the law existing as on the date on which the notice is issued under Section 148 of the Act, which in the present case is 3....
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....17-18) beyond a certain date. Therefore, the way the section would operate, is to first decide whether a notice issued under Section 148 of the Net is within the period of limitation under Section 149(1)(2)(b) of the Act. To decide whether the notice is within the period of limitation under Section 149(1)(a) or (b) of the Act, the extension of time as prescribed in fifth and/or sixth proviso would be considered. The Court further held once, the notice is otherwise within the period of limitation. thereafter one has to see whether the said limit is within the prescribed restriction provided in first proviso or not. If the netice is beyond the restriction period, the notice is invalid, and the fifth and/or the sixth proviso cannot apply at this stage to extend the period of restriction as per first proviso. Hence, if a notice is not within the time prescribed under first proviso to Section 149(1) of the Act, then such period cannot be extended by fifth or sixth proviso. In Hexaware Technologies Ltd. (supra), the Court had relied upon another judgment of Bombay High Court in Godrej Industries Lid. v. Assistant Commissioner of Income-tax (2024) 160 tasmann.com 13 (Bombay)/(2024) 338 CT....
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....f the Act have been issued are already taken up in the rectification proceedings vide notice dated 20.01.2022. It is pertinent to refer to the grounds taken in the rectification notice under Section 154 of the Act which are extracted hereunder: "1. On perusal of the assessment order u/s 143(3), it is seen that addition made of Rs. 40,00,00,000/- on unexplained cash credits with regard to shares allotment to M/s. Cancer Treatment Services Hyderabad Pvt. Ltd. However, AO added only Rs. 40,00,000/- instead of Rs. 40,00,00,000/- in the computation of total income. This amounts to short addition made of Rs. 39,60,00,000/- having tax effect of Rs. 30,59,10,000/- excluding interest. 2. From the tax audit report in Farm 3CD, it is observed that the assessee's company has not paid employees contribution to PF within the due dates prescribed under the acts. In view of the same, the same has to be disallowed u/s 36(1)(va) of the Act. The AO has not made any disallowance u/s 35(1)(va). Hence, an amount of Rs. 6,35,949/- shall be disallowed u/s 36(1)(va). Tax effect (excluding interest) of disallowance u/s 36(1)(va) is Rs. 2.20,089/- 3. As verified from 3CD report....
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....hat the notice under section 154 was invalid as the same was beyond the period of limitation as prescribed/provided under section 154(7) of the Act. It is required to be noted that the proceedings under section 154 of the Act were not the subject-matter before the High Court. Nothing was on record that, in fact, the notice under section 154 of the Act was withdrawn on the ground that the same was beyond the period of limitation prescribed under section 154(7) of the Act. In the absence of any specific order of withdrawal of the proceedings under section 154 of the Act, the proceedings initiated under section 154 of the Act can be said to have been pending. 5. In that view of the matter, during the pendency of the proceedings under section 154 of the Act, it was not permissible on the part of the Revenue to initiate the proceedings under section 147/148 of the Act pending the proceedings under section 154 of the Act. The High Court has erred in presuming and observing that the proceedings under section 154 were invalid because the same were beyond the period of limitation." 20. In the aforesaid facts and circumstances, we are satisfied that the second issue raised ....
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.... assessment could have been reopened on or before 31.03.2022. Since the time limit available for issuance of notice under Section 148 of the Act, as per the old regime of reassessment, was up to 31.03.2022, in our considered view, the A.O. cannot issue reassessment notice under Section 148 of the Act for the assessment year 2015-16 on or after 01.04.2022. In the present case, it is an undisputed fact that the A.O. has issued notice under Section 148 of the Act on 09.04.2022, which is beyond six years from the end of the relevant assessment year. Therefore, the notice issued by the A.O. under Section 148 of the Act dated 09.04.2022 is barred by limitation in view of the first proviso to Section 149(1)(b) of the Act and consequently the impugned assessment order passed by the A.O. dated 28.11.2023 is bad in law and liable to be quashed. 19. This legal proposition is supported by the decision of the Hon'ble High Court of Telangana in the case of Cyberabad Citizens Health Services Private Limited Vs. D.C.I.T. (supra). A similar view has been taken by the Coordinate Bench in the case of A.C.I.T. Vs. Manish Financial in ITA No. 5055/Mum/2024 (supra), wherein the coordinate B....
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....s that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses. 7. This issue of notice under section 148 issued for 2015-16 being time barred is considered by the coordinate bench in the case of Pushpak Realities Pvt. Ltd. (supra) and it is held that "For the A.Y.2015-16, the Revenue itself has contended before the Hon'ble Supreme Court as noted above, all the notices issued on or after 01/04/2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA. Here notice w/s. 148 for the A.Y. 2015-16 has been issued on 28/07/2022 which is admittedly barred by limitation under the new provision of Section ....
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....ent of Hon'ble Jurisdictional High Court (supra), we hold that the notice issued by the Assessing Officer u/sec.148 of the Act dated 15.04.2022 is barred by limitation and the same is liable to be quashed. We Order accordingly. Since we have quashed the notice issued u/sec.148 of the Act being invalid which also vitiates the re-assessment order passed by the Assessing Officer, therefore, the other grounds raised by the assessee becomes infructuous." 9.2. Thus, the Hon'ble Jurisdictional High Court in case of Cyberabad Citizens Health Services Private Limited vs. DCIT, AP & PCCIT, Hyderabad (supra) as well as this Tribunal in case of Sudheer Parimala, Hyderabad vs. ITO, Ward-10(1), Hyderabad (supra) has held that the notice issued u/sec.148 of the Act after expiry of 06 years from the end of the assessment year is barred by limitation and liable to be quashed. Further, the Hon'ble Supreme Court in the case of ITO vs. Sai Kumar Mateti [2026] 187 taxmann.com 225 (SC) has re-affirmed this position regarding the validity of the notice issued u/sec.148 of the Act after expiry of six years from the end of the assessment year is barred by limitation in Para nos.3 to 7 as under: ....
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....er decision of this Tribunal in case of Sudheer Parimala, Hyderabad vs. ITO, Ward-10(1), Hyderabad (supra) and Judgment of Hon'ble jurisdictional High Court in the case of Cyberabad Citizens Health Services Private Limited vs. DCIT & Anr. (supra) as well as Judgment of Hon'ble Supreme Court in the case of ITO vs. Sai Kumar Mateti (supra), the notice issued by the Assessing Officer u/sec.148 of the Act on 07.04.2022 is invalid being barred by limitation and consequently vitiates the reassessment order. 10. Since, we have quashed the notice dated 07.04.2022 issued u/sec.148 of the Act which vitiates the re-assessment order passed by the Assessing Officer therefore, we do not propose to adjudicate the other grounds raised by the assessee. 11. In the result, appeal of the Assessee is allowed. Order pronounced in the open Court on 19.08.2026. ============= Document 1 2 GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT WARD 1,NARSARAOPET SURESH KUNCHANAPALLI 2-110/1 IKKURRU POST , NARASARAOPET GUNTUR 522601 , Andhra Pradesh India Dated: 21/03/2022 DIN & Notice No: TBA/AST/F/148A(SCN)/2021- 22/1041133196(1) Notice under clause(b) of section ....
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....e relevant assessment year represents chargeable to tax has escaped assessment. 3. Section 149(1)(b) of the IT Act, 1961 is reproduced as under: No notice under section 148 shall be issued for the relevant assessment year, -------- b) if three years, but not more than ten years, have elapsed from the end of the Assessing Officer has in his possession books relevant assessment years or evidence which weerhas tax, represented in the form of asset, which has escaped as or is likely to amount to fifty lakh rupees or more for that year: COME TAY DEPARTMENT Explanation :- For the purposes of clause (b) of this sub-section, "asset" shall include advances, deposits in bank account 4. It is pertinent to mention here that the cash deposits and time atoren by the assessee in bank accounts fall under the scope of "assets" within the meaning of Explanation to section 149(1) of the Income Tax Act, 1961. Further, the value of said assets amounts to more than fifty lakh rupees. It is further noticed that the assessee has not filed his return of income for AY 2015-16. In absence of filing of remains unexplained and consequently, the income in relation to the same has escaped....