Pranav B Prem

The Income Tax Appellate Tribunal (ITAT), Chennai Bench, comprising George George K. (Vice President) and S.R. Raghunatha (Accountant Member), has held that a notice issued under Section 148 of the Income Tax Act, 1961, after 31.03.2021 as per the old reassessment regime is time-barred, even if issued within the extended period allowed under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA). The Tribunal ruled that such a notice, being contrary to the revamped scheme introduced by the Finance Act, 2021 and interpreted by the Supreme Court in Rajeev Bansal v. Union of India [469 ITR 46], was invalid and that the reassessment proceedings initiated pursuant to it were liable to be quashed.

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The case pertains to Smt. Lakshmi Narasimhan Santhi, an individual taxpayer, who had filed her return of income for Assessment Year (AY) 2013–14 on 26.03.2024 declaring a total income of ₹14,19,860. The Assessing Officer (AO), having found that the assessee along with co-owners had sold an immovable property during the relevant year, suspected escapement of income and issued a notice under Section 148 of the Act on 30.06.2021. This notice was issued under the old reassessment regime, relying on the extended time period granted through TOLA due to the COVID-19 pandemic.

However, in view of the Supreme Court’s ruling in Union of India v. Ashish Agarwal [441 ITR 1], the CBDT had issued Instruction No. 1/2022 requiring AOs to treat notices issued under Section 148 between 01.04.2021 and 30.06.2021 as deemed show cause notices under Section 148A(b) of the new reassessment regime. Accordingly, on 02.06.2022, the AO communicated the material relied upon for reopening the assessment. The assessee submitted her response on 11.06.2022, which was considered while passing an order under Section 148A(d) dated 28.07.2022. A fresh notice under Section 148 was also issued on the same date.

Subsequently, assessment was completed under Section 143(3) read with Section 147 of the Act on 24.05.2023, resulting in an addition of ₹97,09,569 towards long-term capital gains, which the AO found to have escaped assessment.

The assessee challenged the assessment before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), which partly allowed her appeal subject to verification by the AO. Dissatisfied with this partial relief, the assessee filed a second appeal before the Tribunal, raising jurisdictional issues and relying heavily on the Supreme Court’s judgment in Rajeev Bansal v. Union of India (469 ITR 46).

The Tribunal took note of the sweeping changes brought in by the Finance Act, 2021, which overhauled the reassessment procedure from 01.04.2021 onwards. The old regime stood repealed on 31.03.2021, and any action taken thereafter had to comply with the requirements of the new regime, including the issuance of notice under Section 148A(b), passing of an order under Section 148A(d), and only then issuance of notice under Section 148.

The Tribunal also noted that in Ashish Agarwal [441 ITR 1], the Supreme Court had exercised its powers under Article 142 of the Constitution to temporarily validate notices issued under the old regime between 01.04.2021 and 30.06.2021 by treating them as show cause notices under Section 148A(b). However, subsequent litigation—especially the judgment in Rajeev Bansal—clarified that any reassessment notice issued beyond the “surviving period” calculated as per the Court’s interpretation, would be time-barred.

In the present case, the Tribunal undertook a computation of the surviving period. It found that the notice under the old regime was issued on 30.06.2021. The assessee’s reply to the show cause notice was received on 11.06.2022, and the deemed stay period of 14 days extended this to 16.06.2022. As per the Rajeev Bansal ruling, the AO had a surviving period of only 7 days from this date to issue a notice under Section 148 of the new regime, i.e., until 23.06.2022. However, the notice was actually issued on 28.07.2022, overshooting the deadline by 35 days.

While the Revenue attempted to justify the issuance by referring to the one-month time frame under Section 148A(d), the Tribunal held that such period stood “necessarily truncated” by the principle of surviving period laid down in Rajeev Bansal. The Tribunal also referred to multiple judicial precedents including those of the Madras High Court (Mrs. Thulasidass Prabavathi v. ITO [W.P.No.19010 of 2022] ), Delhi High Court (Ram Balram Buildhome Pvt. Ltd (2025) 9 NYPCTR 157 (Delhi] ), and other benches of the ITAT that have consistently applied the principle that reassessment notices beyond the surviving period are invalid.

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Rejecting the Revenue’s contention, the Tribunal emphasized that the law laid down by the Supreme Court in Rajeev Bansal had to be strictly followed. Since the reassessment notice dated 28.07.2022 was found to be time-barred, the consequential reassessment order was also set aside. In conclusion, the Tribunal allowed the assessee’s appeal and quashed the reassessment proceedings for AY 2013–14, holding that the notice under Section 148 issued on 28.07.2022 was invalid for having been issued beyond the permissible time period under the law.

Appearance

Counsel for Appellant/ Assessee: S.R. Srikrishna

Counsel for Respondent/ Department: Kumar Chandan

Cause Title: Smt. Lakshmi Narasimhan Santhi V. The Asst. Commissioner of Income Tax

Case No: ITA No.:3013/CHNY/2024

Coram: Shri. George George K. [Vice President], S.R. Raghunatha [Accountant Member]