Introduction
The jurisdictional boundaries of reassessment proceedings under the Income Tax Act, 1961, have been a subject of intense litigation, particularly in the wake of the Supreme Court’s landmark rulings in Union of India vs. Ashish Agarwal and Union of India vs. Rajeev Bansal. These decisions have fundamentally altered how courts and tribunals interpret the interplay between the erstwhile reassessment regime, the substituted provisions introduced by the Finance Act, 2021, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The recent ruling of the Income Tax Appellate Tribunal (ITAT), Ahmedabad “SMC” Bench, in Yogeshkumar Kasturji Prapapati vs. ITO (ITA No. 1407/Ahd/2026) for Assessment Year 2017-18 provides a compelling illustration of how the ITAT applies the strict limitation principles laid down by the Supreme Court. This case commentary analyzes the Tribunal’s decision to quash a reassessment order on the ground of limitation, emphasizing the critical importance of adhering to jurisdictional timelines in tax assessments.
Facts of the Case
The appellant, Yogeshkumar Kasturji Prapapati, had not filed an original return of income for the Assessment Year 2017-18. In response to a notice issued under Section 148 of the Act, the assessee filed a return declaring income of Rs. 2,87,588/-. Subsequently, the Assessing Officer (AO) passed a reassessment order on 28-05-2023, making an addition of Rs. 5,90,000/- as unexplained money under Section 69A of the Act. Aggrieved by this order, the assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi. The CIT(A) dismissed the appeal vide order dated 26-02-2026. The assessee then filed the present appeal before the ITAT, Ahmedabad.
The core dispute revolved around the validity of the reassessment proceedings initiated against the assessee. The appellant raised multiple grounds, including the legality of the reassessment order, the notice under Section 148 being beyond the limitation prescribed under Section 149(1)(a), and the merits of the addition made under Section 69A. However, the Tribunal focused on the preliminary issue of limitation, which proved decisive.
Reasoning and Legal Analysis
The ITAT’s reasoning is anchored in a meticulous examination of the timeline of notices and the binding precedents of the Supreme Court. The Tribunal identified the preliminary issue as whether the notice issued under Section 148 on 28-07-2022 was barred by limitation. The facts were undisputed: the original notice under Section 148 was issued on 29-06-2021. In accordance with the Supreme Court’s judgment in Union of India vs. Ashish Agarwal, this notice was required to be treated as a notice under Section 148A(b) of the substituted provisions. Consequently, the AO furnished the information/material to the assessee on 26-05-2022, and the assessee submitted a reply on 10-06-2022.
The Tribunal then turned to the Supreme Court’s subsequent ruling in Union of India vs. Rajeev Bansal, which clarified the interplay between TOLA, the substituted reassessment provisions, and the directions in Ashish Agarwal. The Supreme Court held that after giving effect to permissible exclusions, the AO is entitled only to the period of limitation that survived on the date of issuance of the original or deemed notice. Notices issued beyond this surviving period are barred by limitation.
Applying this principle, the ITAT calculated the surviving period. The original notice was issued on 29-06-2021, against the extended terminal date of 30-06-2021. Therefore, the balance period available was less than seven days. Even granting the minimum period of seven days contemplated by the relevant proviso to Section 149, the Tribunal determined that upon the assessee furnishing its response on 10-06-2022, the consequent proceedings were required to be completed and the notice under Section 148 issued within the surviving period, i.e., on or before 17-06-2022.
However, the actual timeline deviated significantly. The approval of the Principal Commissioner of Income Tax (PCIT) was obtained only on 26-07-2022. The order under Section 148A(d) was passed on 28-07-2022, and the consequential notice under Section 148 was also issued on 28-07-2022. This was well beyond the deadline of 17-06-2022.
The Revenue contended that the period prescribed under Section 148A(d) permitted the AO to pass the order during July 2022, thereby extending the limitation. The ITAT emphatically rejected this argument. It held that the period prescribed for passing an order under Section 148A(d) cannot operate to enlarge the outer jurisdictional limitation prescribed under Section 149. The Tribunal reasoned that the approval obtained under Section 151 after the expiry of such limitation similarly cannot revive an otherwise time-barred jurisdiction. This interpretation is consistent with the strict construction of limitation provisions, which are mandatory and cannot be relaxed by procedural provisions.
The ITAT found support for its view in the decision of the Hon’ble Punjab and Haryana High Court in Shashank Garg vs. ITO (CWP-28020-2022, order dated 06-02-2026). This citation reinforces the principle that the limitation period for issuing a notice under Section 148 is sacrosanct and cannot be extended by the time taken for other procedural steps.
Respectfully following the Supreme Court’s decision in Rajeev Bansal, the ITAT concluded that the notice issued under Section 148 on 28-07-2022 was barred by limitation. Consequently, the assumption of jurisdiction under Section 147 was invalid, and the reassessment passed pursuant thereto could not be sustained. The Tribunal quashed the reassessment order.
Since the reassessment itself was held to be without jurisdiction, the grounds relating to the addition on merits were rendered academic and required no adjudication. This approach is judicially sound, as a jurisdictional defect vitiates the entire proceedings, rendering any discussion on the merits superfluous.
The ITAT’s decision underscores the importance of adhering to the strict timelines prescribed under the Income Tax Act, particularly in reassessment matters. The ruling serves as a reminder that the AO cannot rely on subsequent procedural extensions to cure an initial jurisdictional defect. The interplay between TOLA, the substituted provisions, and the Ashish Agarwal directions has been clarified by Rajeev Bansal, and the ITAT has applied this framework rigorously.
Furthermore, the Tribunal’s reliance on the Punjab and Haryana High Court’s decision in Shashank Garg demonstrates a consistent judicial approach across different forums. This alignment strengthens the legal position that limitation periods in reassessment are non-negotiable and must be strictly construed.
The case also highlights the consequences of administrative delays. The gap between the assessee’s reply on 10-06-2022 and the approval on 26-07-2022 proved fatal to the Revenue’s case. The ITAT’s calculation of the surviving period, even with the minimum seven-day extension, left no room for the Revenue to argue that the notice was timely. This meticulous arithmetic reflects the Tribunal’s commitment to upholding the rule of law.
In conclusion, the ITAT’s reasoning is a robust affirmation of the principles laid down by the Supreme Court. It reinforces that jurisdictional requirements are not mere technicalities but substantive safeguards for taxpayers. The decision will likely serve as a precedent for similar cases where notices under Section 148 are issued beyond the surviving period of limitation.
Conclusion
The ITAT Ahmedabad’s ruling in Yogeshkumar Kasturji Prapapati vs. ITO is a significant victory for the assessee and a clear message to the tax administration. By quashing the reassessment order on the ground of limitation, the Tribunal has upheld the sanctity of statutory timelines. The decision reinforces the binding nature of the Supreme Court’s judgments in Ashish Agarwal and Rajeev Bansal, and it clarifies that the period for passing an order under Section 148A(d) cannot extend the outer limit under Section 149. The appeal was allowed, and the addition on merits was not adjudicated, as the jurisdictional defect was fatal. This case serves as a crucial precedent for taxpayers and practitioners, emphasizing that reassessment notices issued beyond the surviving period are invalid and cannot be sustained.