Beyond the Surviving Time: ITAT Ahmedabad Quashes Reassessment Notice Issued 48 Days After Limitation Expired

48 Days Too Late: ITAT Quashes Reassessment Where Section 148 Notice Ignored the “Surviving Time” Rule

Table of Contents

• 1. Introduction
• 2. Factual Background
• 3. Petitioner’s Evidence and Arguments
• 4. Discrepancies and Issues in Dispute
• 5. Legal Reasoning and Analysis
• 6. Final Decision
• 7. Practical Takeaways for Tax Professionals
• 8. Why It Matters

AI-assisted conceptual representation of the legal and tax elements under review.

Introduction

Limitation is not a procedural technicality in reassessment proceedings; it is a jurisdictional wall. If the Assessing Officer (AO) crosses that wall, the entire reassessment falls, irrespective of the strength of the merits. The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has delivered a crisp reminder of this principle in Vishnu Pouch Packaging Pvt Ltd v. Deputy Commissioner of Income Tax.

In cross-appeals arising from a reassessment for A.Y. 2014-15, the Tribunal held that the fresh notice under Section 148 of the Income-tax Act, 1961 issued on 27 July 2022, was barred by limitation. The Tribunal applied the Supreme Court’s authoritative ruling in Union of India v. Rajeev Bansal and held that the AO had only a “surviving period” of seven days to complete the statutory steps after the assessee’s reply, not a fresh period of one month under Section 148A(d). The order under Section 148A(d) and the consequential Section 148 notice were issued 48 days after the permissible date. Both were quashed, and with them, the reassessment order and the additions.

Factual Background

The assessee, Vishnu Pouch Packaging Pvt Ltd, had filed its return of income for A.Y. 2014-15. The original assessment was completed under Section 143(3) on 24 September 2016, determining total income of Rs 2,42,95,900. Several years later, the case was reopened on the basis of information received from the Insight Portal that the assessee had taken an accommodation entry of Rs 2.15 crore from M/s Seema Enterprise in respect of purchase of raw materials.

On 30 June 2021, the AO issued a notice under Section 148 of the Act. Because this date fell within the window of 1 April 2021 to 30 June 2021, the notice was deemed, under the Supreme Court’s decision in Union of India v. Ashish Agarwal, to be a show-cause notice under Section 148A(b) of the substituted reassessment regime. The AO was required to supply the material relied upon and then proceed in accordance with the new procedure.

The relevant material was supplied to the assessee on 18 May 2022. The assessee filed its reply on 30 May 2022, well within the time allowed, which expired on 2 June 2022. The AO then passed the order under Section 148A(d) and issued a fresh notice under Section 148 on 27 July 2022 — more than seven weeks later.

Thereafter, the AO completed the reassessment under Section 147 read with Section 144B on 30 May 2023. The AO observed that the assessee had made total purchases of Rs 11,87,19,968 from Seema Enterprise and treated the entire amount as unexplained expenditure under Section 69C, without restricting the addition to the Rs 2.15 crore accommodation entry mentioned in the information. The CIT(A), in the impugned order, partly allowed the assessee’s appeal and restricted the addition to 6% of the purchases, i.e., Rs 71,23,198, applying the usual profit-margin approach for alleged bogus purchases.

Both sides were aggrieved. The assessee challenged the validity of the reassessment on limitation and also disputed the addition on merits. The Revenue challenged the CIT(A)’s decision to restrict the addition to 6%.

Petitioner’s Evidence and Arguments

The assessee’s preliminary ground was that the entire reassessment was without jurisdiction. The legal argument rested on the computation of the “surviving time” under the old reassessment regime read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), as explained by the Supreme Court in Rajeev Bansal.

The assessee argued that the original notice under Section 148 was issued on 30 June 2021, the last day of the extended limitation window under TOLA. Therefore, only one day of limitation survived under the Income-tax Act read with TOLA. Because the surviving period was less than seven days, the Fourth Proviso to Section 149 extended it to seven days. After excluding the period during which the deemed Section 148A(b) notice was effectively suspended — from the supply of material on 18 May 2022 to the expiry of the assessee’s response period on 2 June 2022 — the AO had only seven days from the due date of the reply to pass the order under Section 148A(d) and issue the fresh notice under Section 148. That deadline expired on 9 June 2022. The actual order and notice were issued only on 27 July 2022, 48 days after the permissible date.

The assessee also raised substantive grounds. It contended that the purchases from Seema Enterprise were genuine and supported by invoices, ledger accounts, bank statements and transport documents. It argued that the AO had relied on flimsy and contradictory statements of Seema Gupta without conducting independent enquiries. It also pointed out that the information itself mentioned only Rs 2.15 crore as accommodation entry, while the assessment order made an addition of Rs 11,87,19,968. However, the Tribunal did not need to reach these merits, because the legal ground succeeded.

The Revenue, in response, relied on the period prescribed in Section 148A(d) of the Act. The departmental representative argued that the AO was required to pass the order within one month from the end of the month in which the assessee’s reply was received, and that the order dated 27 July 2022 satisfied that requirement. Therefore, there was no infirmity.

Discrepancies and Issues in Dispute

The primary issue before the Tribunal was jurisdictional: whether the fresh notice under Section 148 issued on 27 July 2022 was time-barred. This required the Tribunal to decide how the legal fiction created by Ashish Agarwal operates with the surviving limitation period under TOLA as interpreted in Rajeev Bansal.

The secondary issue was whether the one-month limitation period built into Section 148A(d) operates as a fresh, independent period of limitation for the issuance of the Section 148 notice. The Tribunal was asked to settle this statutory interplay, particularly where the original notice was issued on the last day of the TOLA window.

There was also a factual discrepancy on the merits: the information received referred to an accommodation entry of Rs 2.15 crore, but the AO made an addition of the entire purchase value of Rs 11.87 crore from the same entity. The assessee argued that the assessment order travelled beyond the information on which the reopening was based. Again, this issue was not adjudicated because the assessee succeeded on the preliminary legal ground.

Legal Reasoning and Analysis

The Ashish Agarwal legal fiction

The Supreme Court in Ashish Agarwal directed that notices issued under Section 148 of the old regime between 1 April 2021 and 30 June 2021 would be deemed to be show-cause notices under Section 148A(b) of the substituted regime. The Revenue was required to supply the material and then proceed in accordance with the new law. This legal fiction was a practical solution to a transitional problem. But it did not create a fresh limitation period.

The Rajeev Bansal principle

In Union of India v. Rajeev Bansal, the Supreme Court carried the Ashish Agarwal legal fiction to its logical conclusion. The Court held that the time surviving under the Income-tax Act read with TOLA on the date of issuance of the original notice remains available to the Revenue for completing the reassessment proceedings pursuant to the deemed notice. The surviving period must be calculated with reference to the period between the date of the original notice and 30 June 2021.

The Supreme Court further clarified that the following periods are to be excluded while computing the surviving time:

• the period during which the deemed show-cause notice was effectively stayed, i.e., from the date of issuance of the original notice till the supply of the relevant material, and
• the period of two weeks granted to the assessee to respond to the show-cause notice.

After these exclusions, the limitation clock starts running from the date on which the Revenue receives the assessee’s response. However, what becomes available at that stage is only the balance or surviving period. There is no enlargement of that period by the subsequent proceedings under Section 148A.

Applying the calculation to the present case

The Tribunal found the chronology undisputed. The original Section 148 notice was issued on 30 June 2021. Therefore, the surviving period available up to 30 June 2021 was exactly one day. Because the remaining period was less than seven days, it stood extended to seven days under the Fourth Proviso to Section 149.

The material was supplied to the assessee on 18 May 2022, and the assessee was granted 15 days to reply, ending on 2 June 2022. The assessee filed its reply on 30 May 2022, which was within time. The period from 18 May 2022 to 2 June 2022 was to be excluded under the Rajeev Bansal framework. After that exclusion, the AO had only seven days from the due date to complete the remaining statutory steps, including passing the order under Section 148A(d) and issuing the fresh notice under Section 148. The last permissible date was therefore 9 June 2022.

The AO actually passed the order under Section 148A(d) and issued the fresh notice under Section 148 only on 27 July 2022. That was 48 days after the deadline. Both acts were therefore barred by limitation.

Why the Section 148A(d) argument failed

The Tribunal rejected the Revenue’s argument that Section 148A(d) contains its own one-month limitation period which the AO had complied with. The period prescribed in Section 148A(d) operates within the statutory scheme of reassessment. It cannot be read as conferring a fresh or independent period of limitation for issuing the notice under Section 148. The question was governed directly by the ratio of Rajeev Bansal: a notice under Section 148 issued pursuant to a deemed notice must be issued within the surviving period under the Act read with TOLA.

Support from the jurisdictional High Court

The Tribunal also drew support from the Gujarat High Court in Dhanraj Govindram Kella, where an identical issue was decided. The High Court had examined the data for multiple reassessment notices issued under TOLA and concluded that notices issued beyond the “surviving time” were invalid. It observed that each case must be considered separately on the basis of the date of the original notice, the date of supplying information, the date of the order under Section 148A(d), and the date of issuance of the fresh notice under Section 148. In the cases before it, the notices had been issued beyond the surviving period and were quashed accordingly.

Applying the same principle, the Tribunal held that the notice dated 27 July 2022 was invalid. The order under Section 148A(d) also did not survive, and the subsequent reassessment proceedings were without jurisdiction.

Final Decision

The Tribunal allowed the assessee’s appeal on the preliminary jurisdictional ground. It held that the fresh notice under Section 148 issued on 27 July 2022 was barred by limitation and, consequently, the reassessment proceedings were invalid.

Since the assessee succeeded on this legal ground, the Tribunal did not adjudicate the grounds relating to the genuineness of purchases or the correctness of the 6% profit-margin approach. Those grounds became academic.

The Revenue’s cross-appeal was dismissed. Once the foundational notice was quashed, the reassessment could not survive independently. The additions made pursuant to invalid proceedings could not be sustained. The Tribunal therefore dismissed the Revenue’s appeal as academic.

The order was pronounced in open court on 13 August 2026.

Practical Takeaways for Tax Professionals

• Limitation must be tested first: In every reassessment appeal where the original notice was issued between 1 April 2021 and 30 June 2021, the surviving-time computation under Rajeev Bansal should be the first ground of challenge. Even strong merits become unnecessary if jurisdiction fails.
• The Section 148A(d) one-month period is not a fresh lease of life: The time limit in Section 148A(d) is a procedural provision inside the reassessment framework. It cannot override the surviving limitation period available under the Act read with TOLA.
• Map the dates carefully: Tax professionals should prepare a limitation chronology for each case, showing the original notice date, the TOLA expiry date, the surviving days, the exclusion period, and the final deadline. This decision provides a ready template.
• Issue notices on the last day at your peril: If the original notice was issued on 30 June 2021, the surviving limitation is minimal. The AO must complete all post-deemed-notice steps within that surviving period, as extended by the statutory proviso, after allowing exclusions.
• Invalid notice invalidates everything downstream: Once the Section 148 notice is held time-barred, the order under Section 148A(d), the reassessment order and the additions all fall together. The department cannot salvage the assessment by relying on the CIT(A)’s merits findings.
• For pending matters, act now: Assessees facing reassessments under the TOLA window should review whether the Revenue satisfied the surviving-time deadline. If not, the reassessment may be vulnerable to quashing without entering the factual matrix.

Why It Matters

This decision is a significant addition to the reassessment jurisprudence generated by the transition from the old Section 148 regime to the new Section 148A regime. It confirms that the Supreme Court’s judgment in Rajeev Bansal is not an abstract principle; it is a concrete mathematical test that determines whether the Revenue validly assumed jurisdiction.

For the tax administration, the case is a cautionary tale. Issuing an order under Section 148A(d) within the period prescribed by that provision alone is not enough. The AO must also respect the surviving limitation period under the Act read with TOLA. For taxpayers and practitioners, the case is a valuable checklist item. Before fighting the merits of a bogus-purchase or accommodation-entry addition, verify whether the reassessment was born within the jurisdictional period. If it was not, the entire assessment is a nullity, and no amount of evidence on genuineness is needed.

The Ahmedabad ITAT’s order is a precise, disciplined application of binding Supreme Court law and the jurisdictional High Court’s reasoning. It protects the taxpayer from an expired reassessment and reinforces the fundamental rule that limitation is not a technicality — it is the measure of the state’s power to reopen settled matters.