Delhi ITAT Rules, Reopening Notice Under Sec 148 Income Tax Act Falling Outside Completion Period Prescribed By ‘TOLA’ Cannot Sustain
Sangeetha Prathap
The Income Tax Appellate Tribunal (ITAT), New Delhi, has held that a reopening notice issued under Section 148 of the Income Tax Act on 22 April 2021 for Assessment Year 2015-16 falls outside the period of completion prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA), rendering the reassessment proceedings invalid. The Tribunal clarified that TOLA provides only a relaxation for completion or compliance of actions but does not extend the life of the old reassessment regime beyond the statutory time limits laid down under Section 149.
The respondent–assessee, Kolahai Infotech Private Limited, had filed its return of income on 15 September 2015 declaring a loss of ₹1,10,162. The assessment was originally completed under Section 143(3) on 21 November 2017 after making disallowance under Section 14A. In appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance. Subsequently, based on an Excel sheet recovered during a search in the Moser Baer Group, the Assessing Officer reopened the case and initiated reassessment proceedings.
The AO issued a notice under Section 148 on 22 April 2021. Following the Supreme Court’s ruling in Union of India v. Ashish Agarwal, the notice was treated as a show-cause notice under Section 148A(b), leading to an order under Section 148A(d) dated 28 July 2022 and a fresh notice issued the same day under Section 148. The reassessment was completed on 19 May 2023 by making an addition of ₹163 crores under Section 68 read with Section 115BBE. The CIT(A) annulled the reassessment proceedings by holding that the reopening notice itself was time-barred under the limitation framework applicable to Assessment Year 2015-16.
Before the Tribunal, the Revenue argued that the notice issued in July 2022 was within the limitation prescribed under the amended Section 149(1)(b) because the alleged escapement exceeded ₹50 lakhs. The Department contended that the notice was valid in light of Ashish Agarwal and issued after due approval of the specified authority.
The Tribunal rejected the contention and noted that the Supreme Court, in Union of India v. Rajeev Bansal, had expressly recorded the Revenue’s concession that for AY 2015-16, all notices issued on or after 1 April 2021 fall outside the completion period prescribed under TOLA and must be dropped. The Tribunal further relied upon the Delhi High Court’s judgment in Bhagwan Sahai Sharma v. DCIT to reiterate that TOLA does not revive time-barred reassessment rights and that the reopening notice issued after the expiration of limitation cannot be sustained.
The Bench comprising Sudhir Kumar (Judicial Member) and Manish Agarwal (Accountant Member) observed that the CIT(A) correctly applied the law laid down by the Supreme Court and took note of the Department’s own submissions before the Apex Court in Rajeev Bansal. The Tribunal agreed that reassessment proceedings for AY 2015-16 could not legally continue once the limitation expired and that any attempt to reopen the assessment after 1 April 2021 is non est.
Since the reassessment proceedings stood annulled on limitation, the Tribunal observed that other issues raised in the appeal became merely academic in nature. Accordingly, the ITAT dismissed the Revenue’s appeal and upheld the annulment of reassessment proceedings for AY 2015-16 in respect of Kolahai Infotech Private Limited.
Appearance
Appellant by Ms. Sita Srivastava, CIT, DR
Respondent by Ms. Ananya Kapoor Advocate Sh. Shivam Yadav, Advocate
Cause Title: ITO vs Kolahai Infotech Private Limited
Case No: ITA No.3399/Del/2025
Coram: Sudhir Kumar (Judicial Member), Manish Agarwal (Accountant Member)
