Introduction
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, delivered a significant ruling in the cross-appeals of Vishnu Pouch Packaging Pvt Ltd vs DCIT (ITA No. 1784/Ahd/2025 and ITA No. 1818/Ahd/2025) for Assessment Year 2014-15. The core dispute revolved around the validity of reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961, after issuance of a notice under Section 148 on 27.07.2022. The Tribunal, composed of Accountant Member Shri Narendra Prasad Sinha and Judicial Member Shri Tapas Ram Misra, quashed the reassessment proceedings and the consequential addition under Section 69C on the ground that the notice was barred by limitation. The decision provides crucial clarity on the interplay between the Income-tax Act, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and the Supreme Court’s mandates in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal.
Facts
The assessee filed its return of income for A.Y. 2014-15 on 22.11.2024 declaring Nil income, after which the original assessment was completed under Section 143(3) on 24.09.2016 at a total income of Rs. 2,42,95,900. Subsequently, the case was reopened based on information that the assessee was a beneficiary of an accommodation entry of Rs. 2.15 crores from M/s. Seema Enterprise concerning purchase of raw materials. A notice under Section 148 was issued on 30.06.2021. In the reassessment, the Assessing Officer (AO) observed that the assessee had made total purchases of Rs. 11,87,19,968 from Seema Enterprise. The assessment was completed under Section 147 read with Section 144B of the Act on 30.05.2023, making an addition of Rs. 11,87,19,986 under Section 69C.
Aggrieved, the assessee appealed to the CIT(A), who partially allowed the appeal by restricting the addition to a 6% profit margin, i.e., Rs. 71,23,198. Both the assessee and the Revenue challenged this before the ITAT. The assessee’s primary ground was that the notice under Section 148 was time-barred, relying on the Gujarat High Court’s order in Keenara Industries Pvt. Ltd. (in which the assessee was a co-petitioner), while the Revenue contested the CIT(A)’s decision to restrict the addition.
Reasoning
The ITAT focused on the preliminary objection raised by the assessee: whether the fresh notice under Section 148 issued pursuant to the order passed under Section 148A(d) was barred by limitation. The chronology of events, undisputed by both parties, was meticulously examined.
The original notice under Section 148 was issued on 30.06.2021 – the last day of the extended limitation period under TOLA. Following the Supreme Court’s judgment in Ashish Agarwal, this notice was deemed to be a show-cause notice under Section 148A(b) of the substituted regime. The Tribunal noted that under Rajeev Bansal, the order under Section 148A(d) and the fresh notice under Section 148 must be issued within the time limit surviving under the Income-tax Act read with TOLA. Since the original notice was issued on the last day of the extended period (30.06.2021), only one day of limitation survived. The Fourth Proviso to Section 149 of the Act extends this to seven days when the remaining period is less than seven days.
Thereafter, the AO supplied information under Section 148A(b) on 18.05.2022, granting the assessee 15 days to reply, i.e., up to 02.06.2022. The assessee filed its reply on 30.05.2022, well within the granted time. Under the Third Proviso to Section 149, the period from 18.05.2022 to 02.06.2022 is to be excluded while computing limitation. Adding the extended seven days to 02.06.2022, the last permissible date for passing the order under Section 148A(d) and issuing the fresh notice under Section 148 was 09.06.2022. However, the AO passed the order and issued the notice only on 27.07.2022 – 48 days after the last permissible date.
The Tribunal categorically rejected the CIT-DR’s contention that the one-month period prescribed under Section 148A(d) provides a fresh and independent limitation. The ITAT held that the limitation is governed by the surviving period mandated by the Supreme Court’s rulings read with TOLA, not by the procedural timeline for passing the order. Following the jurisdictional High Court’s decision in Dhanraj Govindram Kella, the Tribunal held that the notice issued on 27.07.2022 was barred by limitation, thereby invalidating the entire reassessment proceedings. Consequently, the addition made under Section 69C was quashed. The Revenue’s cross-appeal, challenging the CIT(A)’s partial relief of restricting the addition to 6%, was dismissed as academic, because the foundational assessment itself was held to be invalid.
Conclusion
The ITAT allowed the assessee’s appeal and dismissed the Revenue’s cross-appeal. This ruling reinforces that the reassessment mechanism post-Ashish Agarwal cannot travel beyond the surviving limitation period under TOLA. The procedural timeline under Section 148A simply cannot extend the statutory period beyond what the legal fiction and the Supreme Court’s directives permit. By quashing the reassessment and the Section 69C addition, the Tribunal reaffirmed that a notice issued beyond the permissible limitation period is a jurisdictional defect that invalidates all subsequent proceedings, regardless of the merits of the underlying allegations.