Reassessment Notice for AY 2014-15 Issued in 2022 Held Valid due to TOLA and >₹50 Lakhs Limit
Issue
Whether a reassessment notice issued under Section 148 (New Regime) on July 29, 2022, for Assessment Year (AY) 2014-15 is barred by limitation, or if it is saved by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the extended 10-year limit for serious tax evasion.
Facts
Assessment Year: 2014-15.
Initial Timeline: Under the “Old Regime” (pre-April 1, 2021), the 6-year limitation for AY 2014-15 would normally have expired on March 31, 2021.
TOLA Extension: Due to COVID-19, TOLA extended these deadlines. The Revenue issued a Section 148 notice (Old Regime) on June 30, 2021 (within the TOLA extended window).
Legal Transition: Following the Supreme Court’s Ashish Agarwal judgment, this initial notice was deemed a show-cause notice under Section 148A(b) of the New Regime.
Final Notice: After considering the assessee’s reply, the Assessing Officer (AO) passed an order under Section 148A(d) and issued the final Section 148 notice on July 29, 2022.
Assessee’s Argument: The assessee argued that under the 1st Proviso to Section 149, the notice was invalid because the time limit to issue a notice under the old law had already expired before the new law took effect.
Decision
The Court held in favor of the Revenue:
TOLA Saved the Limitation: The “Old Regime” notice issued on June 30, 2021, was valid because TOLA extended the limitation period for AY 2014-15 up to June 30, 2021. Therefore, the condition of the 1st Proviso to Section 149 (that the case must not be time-barred under the old law) was satisfied.
Conversion to New Regime: Once the initial notice was deemed valid and converted to a Section 148A(b) notice, the proceedings legally shifted to the New Regime.
10-Year Window Applies: Under the New Regime (Section 149(1)(b)), if the escaped income exceeds ₹50 Lakhs, the time limit is 10 years.
For AY 2014-15, the 10-year period normally ends on March 31, 2025.
Therefore, the final notice issued on July 29, 2022, was well within the limitation period.
Conclusion: The proceedings are valid. The AO technically has time until June 30, 2025 (taking into account exclusions/TOLA) to issue notices for this AY if the income escaping assessment exceeds ₹50 lakhs. [In favour of Revenue]
Key Takeaways
TOLA overrides the “Dead” Period: Notices for AY 2013-14 and AY 2014-15 that were issued between April 1, 2021, and June 30, 2021, are generally valid because TOLA effectively extended the “Old Law” limitation date to June 30, 2021.
The ₹50 Lakh Threshold: For older years (like AY 2014-15), the Revenue must possess evidence of escaped income exceeding ₹50 lakhs. If the amount is less than ₹50 lakhs, the notice would be time-barred (limit is 3 years).
Litigation Impact: This ruling closes the “Limitation Loophole” many taxpayers tried to use by arguing that TOLA cannot extend the limitation under the New Act.
HIGH COURT OF MADRAS
Kandasamy Veluswamy
v.
Assistant Commissioner of Income-tax*
C.Saravanan, J.
W.P.No.26533 of 2022
W.M.P.Nos.25594 and 25596 of 2022
W.M.P.Nos.25594 and 25596 of 2022
NOVEMBER 28, 2025
Mrs.G.Vardini Karthik for the Petitioner. Dr. B. Ramasamy, Sr. Standing Counsel for the Respondent.
ORDER
1. In this Writ Petition, the Petitioner has challenged the impugned order dated 29.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the impugned notice dated 29.07.2022 issued under Section 148 of the Act for the Assessment Year 2014-2015 under the new regime which came into effect from 01.04.2021.
BRIEF FACTS OF THE CASE:-
2.The impugned order dated 29.07.2022 has been passed in the background of a Notice dated 02.06.2022 issued under Section 148A(b) of the Act, in the light of the decision of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal (SC)/[2022] 444 ITR 1 (SC)/(2023) 1 SCC 617.
3.The impugned order dated 29.07.2022 passed under Section 148A(d) of the Act proposes to issue the impugned Notice dated 29.07.2022 under Section 148 for the Assessment Year 2014-2015 on the grounds of (i) limitation and (ii) change of opinion.
4.Reading of the impugned order indicates that the Respondent has examined the petitioner’s reply dated 20.06.2022 to the Notice dated 02.06.2022 issued under Section 148A(b) of the Act. The conclusions arrived at by the respondent for justifying the impugned order and the issuance of consequential Section 148 Notice both dated 29.07.2022, are as follows:
“U/s.148A(d):
13. On perusing the return of income filed for this asst.year as well as previous asst.year and the other details furnished during the course of assessment proceedings as well as with the above submission.
(i) It is noticed that during this asst.year the assessee has got 5575 shares on the demerger transaction from relinquishing the rights over 46600 shares, which, was transferred at the cost of Rs.490 share. Since, the assessee retains these shares as on 31.03.2014 and these transfers are not an exempted one as per the provisions of section 47 of the IT Act, the assessee shall have admitted the capital gain on the above relinquishment, which, the assessee has failed. Accordingly, the sum of Rs.22834000/-, being the sale consideration for the transferring of the 46600 shares has escaped assessment.
(ii) Though, the assessee stated that he got 65500 shares, being an equity shares, as gift from his son, he has failed to furnish any sort of evidences that evinced the gift has actually taken place.
(iii) Further, the assessee has failed to furnish any kind of proof like ledger copy etc with respect to the share dealing that substantiate the claim made in the above submission.
14. All the above information, the evidences and reasons available with the undersigned reveal that during the financial year 2013-2014 relevant to the asst.year 2014-15, the assessee got capital gain chargeable u/s 45 of the IT act to the extent of Rs.22834000/- which is chargeable to tax, represented in the form of investment in shares – an asset as per the provisions of sub-section (1)(b) and explanation to the section 149 of the I.T Act, has escaped assessment.
15. All the above facts and figures clearly established, beyond doubt, that the assessee has failed to disclose the above income to the department.
16. Therefore, in the light of the above facts and reasons, it is concluded that for the asst.year 2014-15, the income at least to the extent of Rs.22834000/- chargeable to tax represented in the form of asset as per the provisions of sub-section (1)(b) and explanation to the section 149 of the I.T Act has escaped assessment and based on the above material evidences available on record, I am satisfied with reason to believe that this is a fit case for reopening the assessment for the asst.year 2014-15 as per the provisions of section 147 of the I.T Act by issuing the notice u/s 148 of the I.T.Act.
Hence, as due compliance with the provisions of section 148A of the IT Act have been taken with respect to all provisions therein, the necessary approval as per the provisions of section 151(ii) of the I.T Act to pass this order u/s 148A(d) of the I.T Act and to proceed further to issue the notice u/s 148 of the IT Act for the asst.year 2014-15 being a fit case have been obtained from Principal Chief Commissioner of Income Tax (TN&P), Chennai vide CHE/COORD/148A/2022-23/341 dated 27.07.2022 and hence, this order is passed.
SUBMISSIONS MADE ON BEHALF OF THE PETITIONER:-
5. The Petitioner primarily assails the impugned re-assessment proceedings on the ground of limitation stating the time limit to issue a Notice under Section 148 of the Act has expired as per Section 149 of the Act as in force with effect from 01.04.2021. In this connection, the learned counsel for the Petitioner relies on the 1st proviso to Section 149 of the Act under the new regime, which is extracted in the ensuing paragraph of this order.
6. It is further submitted by the learned counsel for the Petitioner that the time limit to issue Section 148 Notice under the old regime as in force till 31.03.2021 has expired as the time limit of four years for the Assessment Year 2014-2015 expired on 31.03.2019 and the six year limit for the relevant Assessment Year expired on 31.03.2021 as per Section 149 of the Act as in force till 31.03.2021.
7. The learned counsel for the petitioner would further submit that although the Notice under Section 148A(b) was issued on 02.06.2022 pursuant to the order dated 04.05.2022 of the Hon’ble Supreme Court in Ashish Agarwal case referred to (supra), the said notice refers to an alleged failure on the part of the petitioner to disclose details of shares valued at Rs.70,84,94,889/- to which the petitioner had effectively replied on 20.06.2022. It is therefore submitted that despite accepting the petitioner’s explanation, the respondent has concluded that the petitioner had received a sum of Rs.4,38,13,400/- as sale consideration for 46,600 shares, which had allegedly escaped assessment.
8. The learned counsel for the petitioner would further submit that this issue was already the subject matter of consideration in the assessment proceedings initiated pursuant to a Notice issued under Section 142(1) of the Act under the old regime on 03.10.2016, after a notice under Section 143(2) had been issued on 29.08.2015, pursuant to the return of income filed on 31.07.2014.
9. Specifically, the learned counsel for the petitioner would submit that in the Notices issued on 29.08.2015 under Section 143(2) of the Act and on 03.10.2016 under Section 142(1) of the Act, the petitioner was specifically called upon to explain with supporting evidence, the transactions relating to the purchase and sale of equity shares claimed to be eligible for special income tax treatment under Section 111A of the Act.
10. It is further submitted that the petitioner was also required to clarify whether the transactions fell within the purview of Section 43(5) of the Act, and to furnish the relevant contract notes pertaining to the securities transactions undertaken during the assessment year.
11. It is submitted that, in response, the petitioner furnished all required details on 02.11.2016, 07.11.2016 and 10.11.2016 along with annexures, including the break-up of the sale of 46,600 shares, which is the very subject matter of the present re-assessment proceedings.
12.The learned counsel for the petitioner drew the attention of this Court to the annexures forming part of the Return of Income filed by the Petitioner for the relevant Assessment Year, as well as the Reply dated 10.11.2016 of the Petitioner, wherein specific reference was made to the sale of 6,500 shares and the computation relating to the sale of 46,000 shares. It is therefore submitted that the assessment was completed on 11.11.2016 under Section 143(3) of the Act, wherein the petitioner’s explanation was duly accepted.
13.The learned counsel for the petitioner would therefore submit that the impugned re-assessment proceedings, which commenced with the issuance of a Notice under Section 148 of the Act under the old regime and were subsequently substituted by a Notice under Section 148A(b) of the Act on 02.06.2022, are vitiated as they are founded on a mere change of opinion.
14. It is therefore submitted that the impugned proceedings are without jurisdiction and contrary to law as laid down by (i) the Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (SC)/[2010] 320 ITR 561 (SC); (ii) Hon’ble Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [19-04-2002]; (iii) Hon’ble Bombay High Court in the case of Mira Bhavin Mehta v. ITO (Bombay)/[2024] 464 ITR 778 (Bombay) [13-02-2024] and (iv) Hon’ble Bombay High Court in the case of Sir Jamsetjee Jejeebhoy Charity Fund v. ITO (Exemption) (Bombay) in WP.4941 of 2024. [07.11.2025].
SUBMISSIONS MADE ON BEHALF OF THE RESPONDENTS:-
15.Defending the impugned order, the learned counsel for the respondent would submit that the impugned order has recorded a categorical finding that income to the extent of Rs.2,28,34,000/- arising from the sale of 46,600 shares had escaped assessment. It is therefore submitted that even under the new regime, the respondents were entitled to reopen the assessment by passing the impugned order under Section 148A(d) and issuing the impugned Notice under Section 148 of the Act.
16.The learned counsel for the respondent specifically drew the attention of this Court to the following passages from the Counter Affidavit:
G. As the assessee has categoriacally failed to submit any kind of material evidences in support of his arguments either during the course of assessment proceedings u/s 143(3) or during the proceedings u/s148A(d) of the IT Act and thereby, he has discharged neither the burden of proof nor the onus of proof by any measure till date, the above ground is inadmissible.
17.The learned counsel also drew the Court’s attention to the decision of the Hon’ble Supreme court in Ashish Agarwal case, referred to (supra) as under:
(M) In Charanjit Singh v.CBCT (2016) 388 ITR 469 (P&H) (HC) it was held that the factual matrix was required to be established by producing material evidence before IT authorities. As the assessee was unable to give evidence or materials neither did the assessee prove that he was prevented from producing evidence, the writ petition cannot be entertaine. It was held that the assessee could not be allowed de novo trial under the garb of allowing one more opportunity, that absence of any material on record cannot give assessee a right to file a writ petition the Court relied upon decisions of the SC that wherever disputed questions of fact are raised in writ proceedings, writ was not an appropriate remedy.
18.Hence, the learned counsel for the Respondent prays for the dismissal of the writ petition.
DISCUSSION:-
19.Section 148 in Chapter XIV of the Act was amended by the Finance Act, 2021 with effect from 01.04.2021. After the amendment, Notice was issued under Section 148 of the Act for income that had allegedly escaped assessment.
20. However, these Notices were issued under Section 148 of the Act under the old regime as in force till 31.03.2021 leading to flurry of Writ Petitions in various High Courts. There Section 148 Notices issued on or after 01.04.2021 under the old regime as in force till 31.03.2021 were challenged. Conflicting views were expressed by different High Courts.
21. Therefore, to quell further confusions arising out of different/conflicting views of different High Courts, the Hon’ble Supreme Court stepped in a batch of cases and finally disposed of the cases on 04.05.2024 in Ashish Agarwal case referred to (supra).
22. In Paragraph 28 of Ashish Agarwal case (cited supra), it was held as under:-
28. In view of the above and for the reasons stated above, the present Appeals are allowed in part. The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under:
(i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be showcause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assessees can reply to the showcause notices within two weeks thereafter;
(ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a onetime measure visavis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required;
(iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted);
(iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.
23.The aforesaid decision of the Hon’ble Supreme Court in Ashish Agarwal case (supra) referred to supra was subsequently followed with the Instruction No. 1/2022 dated 11.05.2022 of the Central Board of Direct Taxes (CBDT). It clarified that the clarification issued there on will apply to all cases where reassessment notices had been issued, irrespective of whether such notices had been challenged or not.
24.The aforementioned Instruction No. 1/2022 specifically stated that reassessment notices would ‘travel back in time’ to the original date on which such notices under the old regime have been issued, and that the new Section 149 of the Act must be applied at that point in time.
25.The decision of the Hon’ble Supreme Court in Ashish Agarwal case referred to (supra) as which was implemented by Central Board of Direct Taxes (CBDT) vide Instruction No. 1/2022 dated 11.05.2022 was reexamined by a larger bench of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal ITR 46 (SC)/2024 SCC Online SC 2693.
26. In Rajeev Bansal case (supra), the above decision of the Hon’ble Supreme Court in Ashish Agarwal case (cited supra) was re-examined by the Court framing the following issues/questions of law:-
“(a) Whether the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and notifications issued under it will also apply to reassessment notices issued after April 1, 2021; and
(b) Whether the reassessment notices issued under section 148 of the new regime between July and September 2022 are valid.”
27. In Paragraph No. 112 and 114 of Rajeev Bansal case (cited supra), the Hon’ble Supreme Court observed and concluded as under:-
“112. Let us take the instance of a notice issued on May 1, 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show-cause notices will also come into effect from May 1, 2021. After accounting for all the exclusions, the Assessing Officer will have sixty-one days (days between May 1, 2021 and June 30, 2021) to issue a notice under section 148 of the new regime. This time starts ticking for the Assessing Officer after receiving the response of the assessee. In this instance, if the assessee submits the response on June 18, 2022, the Assessing Officer will have sixty one days from June 18, 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on August 18, 2022.
….
114. In view of the above discussion, we conclude that:
| 1. | After April 1, 2021, the Income Tax Act has to be read along with the substituted provisions; |
| 2. | Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will continue to apply to the Income-tax Act after April 1, 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between March 20, 2020 and March 31, 2021; |
| 3. | Section 3(1) of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 overrides section 149 of the Income-tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under section 148; |
| 4. | Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will extend the time limit for the grant of sanction by the authority specified under section 151. The test to determine whether Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will apply to section 151 of the new regime is this : if the time limit of three years from the end of an assessment year falls between March 20, 2020 and March 31, 2021, then the specified authority under section 151(i) has extended time till June 30, 2021 to grant approval; |
| 5. | In the case of section 151 of the old regime, the test is : if the time limit of four years from the end of an assessment year falls between March 20, 2020 and March 31, 2021, then the specified authority under section 151(2) has extended time till March 31, 2021 to grant approval; |
| 6. | The directions in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617] will extend to all the ninety thousand reassessment notices issued under the old regime during the period April 1, 2021 and June 30, 2021; |
| 7. | The time during which the show- cause notices were deemed to be stayed is from the date of issuance of the deemed notice between April 1, 2021 and June 30, 2021 till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617], and the period of two weeks allowed to the assessees to respond to the show-cause notices; and |
| 8. | The Assessing Officers were required to issue the reassessment notice under section 148 of the new regime within the time limit surviving under the Income-tax Act read with the Taxation and other Laws (Relaxation and Amendment of Certain Provisions Act, 2020. All notices issued beyond the surviving period are time barred and liable to be set aside;” |
28. Before the Hon’ble Supreme Court in Rajeev Bansal case referred to supra, the Revenue itself conceded the position regarding limitation under both the old and the new regimes, in the light of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extensions for Assessment Years 2013-14 to 2017-18 as follows:-
| Assessment Year | Within 3 years (2) | Expiry of limitation read with TOLA for (2) (3) | Within six years (4) | Expiry of limitation read with TOLA for (4) (5) |
| 2013-2014 | 31.03.2017 | TOLA not applicable | 31.03.2020 | 30.06.2021 |
| 2014-2015 | 31.03.2018 | TOLA not applicable | 31.03.2021 | 30.06.2021 |
| 2015-2016 | 31.03.2019 | TOLA not applicable | 31.03.2022 | TOLA not applicable |
| 2016-2017 | 31.03.2020 | 30.06.2021 | 31.03.2023 | TOLA not applicable |
| 2017-2018 | 31.03.2021 | 30.06.2021 | 31.03.2024 | TOLA not applicable |
29. In this regard, the Hon’ble Supreme Court in Rajeev Bansal case referred to supra further observed as under:-
“50. Another important change under section 149(1) (b) of the new regime is the increase in the monetary threshold from rupees one lakh to rupees fifty lakhs. The old regime prescribed a time limit of six years from the end of the relevant assessment year if the income chargeable to tax which escaped assessment was more than rupees one lakh. In comparison, the new regime increases the time limit to ten years if the escaped assessment amounts to more than rupees fifty lakhs. This change could be summarized thus:
| Regime | Time limit | Income chargeable to tax which has escaped assessment |
| Old regime | Four years but not more than six years | Rupees one lakh or more |
| New regime | Three years but not more than ten years | Rupees fifty lakhs or more |
30. Applying the above ratio, particularly, in the light of the limitation for issuance of Notice under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) prescribed under Section 149 of the Act read with Section 151 of the Act, it is clear that the Notice that was issued after 1st April, 2021 under the old regime as it stood till 31.03.2021 has to be treated as a Notice under Section 148A(b) of the Act under the new regime in terms of Paragraph No. 28.1 of Ashish Agarwal case (cited supra) and in terms of Paragraph No. 114(g) of Rajeev Bansal case (cited supra).
31.The time during which the aforesaid Show Cause Notices were deemed to be stayed is from the date of issuance of the deemed notice between April 1, 2021 and June 30, 2021 till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Ashish Agarwal case (cited supra), and the period of two weeks allowed to the assessees to respond to the show-cause notices as confirmed by Rajeev Bansal case (cited supra).
32.Thus, it is clear that the Notice that was issued on 30.06.2021 under Section 148 of the Act under the old regime as it stood till 31.03.2021 has to be treated as a Notice issued under Section 148A(b) of the Act in terms of Ashish Agarwal case (cited supra) and Rajeev Bansal case (cited supra).
33.The Hon’ble Supreme Court in Rajeev Bansal case referred to supra, thus held that the combined effect of the legal fiction and the directions issued by the Hon’ble Supreme Court in Ashish Agarwal case referred to supra was that the time begins to run for an assessee to respond to the show-cause notices, after the supply of the relevant material and information to the assessee.
34.This has been explained by the Hon’ble Supreme Court in Rajeev Bansal case referred to (supra) in Paragraph Nos. 94 to 107, which are extracted as under:-
“94. Before we proceed, we need to bear in mind three important periods:
(i) The period up to June 30, 2021 – this period is covered by the provisions of the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020;
(ii) The period from July 1, 2021 to May 3, 2022 – the period before the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] ; and
(iii) The period after May 4, 2022 – the period after the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.]. This period is covered by the directions issued by this court in Ashish Agarwal (supra) and the provisions of the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
(a) Third proviso to section 149
95. The third proviso to section 149 reads thus: “Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded.”
96. The third proviso excludes the following periods to calculate the period of limitation : (i) the time allowed to the assessee under section 148A(b); and (ii) the period during which the proceedings under section 148A are “stayed by an order or injunction of any court”.
…
98. A legal fiction is created for a definite purpose and it should be limited to the purpose for which it is enacted or applied. It is a well-established principle of interpretation that the courts must give full effect to a legal fiction by having due regard to the purpose for which the legal fiction is created. (State of Maharashtra v. Laljit Rajshi Shah [(2000) 2 SCC 699; 2000 SCC (Cri) 533.]) The consequences that follow the creation of the legal fiction “have got to be worked out to their logical extent”. (Bengal Immunity Comany Ltd. v. State of Bihar [(1955) 6 STC 446 (SC); 1955 SCC OnLine SC 2.]) The court has to assume all the facts and consequences that are incidental or inevitable corollaries to giving effect to the fiction. (Industrial Supplies Pvt. Ltd. v. Union of India [(1980) 4 SCC 341.].
…
101. Under section 148A(b), the Assessing Officer has to comply with two requirements : (i) issuance of a showcause notice; and (ii) supply of all the relevant information which forms the basis of the show-cause notice. The supply of the relevant material and information allows the assessee to respond to the show-cause notice. The deemed notices were effectively incomplete because the other requirement of supplying the relevant material or information to the assessees was not fulfilled. The second requirement could only have been fulfilled by the Revenue by an actual supply of the relevant material or information that formed the basis of the deemed notice.
102. While creating the legal fiction in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], this court was cognizant of the fact that the Assessing Officers were effectively inhibited from performing their responsibility under section 148A until the requirement of supply of relevant material and information to the assessees was fulfilled. This court lifted the inhibition by directing the Assessing Officers to supply the assessees with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. Thus, during the period between the issuance of the deemed notices and the date of judgment in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], the Assessing Officers were deemed to have been prohibited from proceeding with the reassessment proceedings..
…
107. The third proviso to section 149 allows the exclusion of time allowed for the assessees to respond to the show-cause notice under section 149A(b) to compute the period of limitation. The third proviso excludes “the time or extended time allowed to the assessee”. Resultantly, the entire time allowed to the assessee to respond to the showcause notice has to be excluded for computing the period of limitation. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617], this court provided two weeks to the assessees to reply to the show-cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is : (i) the time during which the show-cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between April 1, 2021 and June 30, 2021 till the supply of relevant information or material by the Assessing Officers to the assessees in terms of the directions in Ashish Agarwal (supra) ; and (ii) two weeks allowed to the assessees to respond to the show-cause notices. (b) Interplay of Ashish Agarwal (supra) with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.”
35. The discussions leading to the above conclusion in Rajeev Bhansal case referred to (supra) are in Paragraph Nos.108 to 111 which are reproduced below:-
“108. The Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extended the time limit for issuing reassessment notices under section 148, which fell for completion from March 20, 2020 to March 31, 2021, till June 30, 2021. All the reassessment notices under challenge in the present appeals were issued from April 1, 2021 to June 30, 2021 under the old regime. Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] deemed these reassessment notices under the old regime as showcause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. (East End Dwellings Co. Ltd. v. Finsbury Borough Council [[1952] A.C. 109. (Lord Asquith, in his concurring opinion, observed:”If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.”)]) Therefore, the logical effect of the creation of the legal fiction by Ashish Agarwal (supra) is that the time surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and June 30, 2021.
109. If this court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. This construction gives full effect to the legal fiction created in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] and enables both the assessees and the Revenue to obtain the benefit of all consequences flowing from the fiction. (See State of A.P. v. A.P. Pensioners’ Association [(2005) 13 SCC 161; 2006 SCC (L&S) 666. (This court observed that the “legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequencesflowing therefrom”.)])
110. The effect of the creation of the legal fiction in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] was that it stopped the clock of limitation with effect from the date of issuance of section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assessees to reply to the show-cause notices must also be excluded in terms of the third proviso to section 149.
111. The clock started ticking for the Revenue only after it received the response of the assessees to the showcauses notices. After the receipt of the reply, the Assessing Officer had to perform the following responsibilities : (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the Assessing Officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, was available to the Assessing Officers to issue the reassessment notices under section 148 of the new regime.”
36. Thus, if an assessee replies within the time stipulated in the above illustrations, the Assessing Officer has time up to sixty-one days from the date of reply. Therefore, the notices issued under Section 148 of the new regime issued in pursuance of the deemed notices ought to have been issued within the time limit surviving under the Act read with TOLA.
37. Thus, for the Assessment Years 2013-2014, 2014-2015, 2015-2016, 2016-2017 and 2017-2018, the Hon’ble Supreme Court in Rajeev Bhansal case referred to (supra) held to assume jurisdiction to issue notices under Section 148 under the new regime with respect to these Assessment Years, an Assessing Officer has to:
| 1. | issue the such notices within the period prescribed under Section 149(1) of the new regime read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. |
| 2. | obtain the previous approval of the authority specified under Section 151. |
38.For the purpose of issuing Notice under Section 148 of the Act under the new regime, this Court in W.P.(MD) No. 30938 of 2024 etc batch had simplified the name of the specified authority to issuance of sanction under Section 151 of the Act as under:-
| Section 151 | Specified authority for Section 148 and 148A of the Act |
| Within three years | (i) Principal Commissioner / or (ii) Principal Director / or (iii) Commissioner / or (iv) Director |
| After three years | (i) Principal Chief Commissioner / or (ii) Principal Director General / or (iii) Chief Commissioner / or (iv) Director General |
39.The time limit for issuance of Notice under Section 148 as per Section 149 of the Act under the new regime with effect from 01.04.2021 is 3/10 years. Section 149 of the Act is extracted hereunder:-
“149. Time limit for notice.
(1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:
Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:
Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:
Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.
Explanation.— For the purposes of clause (b) of this subsection, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.”
40. Relevant dates of the events in the present case are as follows:-
| Assessment Year 2014-2015 | |
| Notice / Event | Date |
| Notice under Section 148 of the Act (old regime) | 30.06.2021 |
| Ashish Agarwal case | 04.05.2022 |
| Notice under Section 148A(b) of the Act | 02.06.2022 |
| Time granted to issue Notice under Section 148A(b) of the Act as per Ashish Agarwal case (30 days) | 02.06.2022 |
| Reply given by the Petitioner | 20.06.2022 |
| Order under Section 148A(d) of the Act (new regime) | 29.07.2022 |
| Notice under Section 148 of the Act (new regime) | 29.07.2022 |
41. For the sake of clarity, relevant dates for the calculation of limitation period are captured hereunder:-
| Assessment Year | Old tax regime with effect until 31.03.2021 | New tax regime with effect from 01.04.2021 | ||
| 4 years | 6 years | 3 years | 10 years | |
| 2014-2015 | 31.03.2019 | 30.06.2021 | 31.03.2018 | 30.06.2025 |
42. Thus, a Notice under Section 148 of the Act was required to be issued for reassessment within the time limit surviving under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
43. For the Assessment Year 2014-2015, the Notice under Section 148 of the Act ought to have been issued on 31.03.2018 within three years from the end of the Assessment Year, if the income allegedly escaping assessment was less than Rs.50,00,000/- and within Ten years on 31.03.2025, if the income allegedly escaping assessment was more than Rs.50,00,000/-.
44. In the present case, the income that has allegedly escaped assessment is more than Rs.50,00,000/- viz., Rs.9,36,83,489/-. Therefore, the assessing officer has a period upto ten years from the end of the Assessment Year to issue the reassessment notice under Section 148 of the Act under the new regime, provided the said Notice issued under Section 148 of the Act under the old regime was in time.
45. As per the 1st Proviso to Section 149 of the Act, no notice can be issued under Section 148 of the Act under the new regime as in force with effect from 01.04.2021, if the limitation to issue Notice under Section 148 of the Act under the old regime had already expired.
46. 1st Proviso to Section 149 of the Act reads as under:-
“Provided that no notice under section 148 shall be issued at any time in case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153A or section 153C could have been issued at that time on account of being behind the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C as the case may be], as they stood immediately before the commencement of the Finance Act, 2021;”
47. By virtue of TOLA extensions, the six year limitation for issuance of Notice under Section 148 under the old regime was extended upto 30.06.2021 in view of the extension under Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) for the Assessment Year 2014-2015. The limitation would have otherwise expired on 31.03.2021 under the old regime.
48. This will be in accordance with the ratio in Ashish Agarwal case (cited supra) and Rajeev Bansal case (cited supra) and in accordance with the 1st proviso to Section 149 of the Act as in force with effect from 01.04.2021.
49. Dealing with a somewhat similar situation, this Court, in Mrs. Thulasidass Prabavathi v. ITO (Madras)vide order dated 24.01.2025 rendered in W.P.No.19010 of 2022, observed as under:-
”16. However, the first proviso to Section 149 prohibits issuance of a reassessment notice under the new regime if such notices have become timebarred under the old regime. Therefore, the last date for issuance of Notice under Section 148 of the Act would have expired on 30.06.2021, as per the third Proviso 149(1)(b) of the Act as in force with effect from 01.04.2021. The time during which stay was in operation or the time during which, the assessee took time to file the reply, the Notice issued under Section 148 (A)(b) of the Act stands expelled. In this case, the reply itself was filed by the petitioner only on 31.05.2022, pursuant to which the Impugned Order was passed on 30.06.2022 under Section 148(A)(d) of the Act and Notice under Section 148 of the Act was issued. Though the limitation for issuance of a Notice under Section 148 of the Act under the old regime would have expired on 31.03.2024, a reading of conclusion in Paragraph 114 of the decision of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, 2024 SCC OnLine SC 2693 however indicates that the Impugned Notice dated 30.06.2022 has to be treated as having been issued beyond the limitation period. Relevant paragraph of the aforesaid Judgment reads as under-
*(Deliberately left black as it has been reproduced above)
17. Dealing with almost an identical situation pursuant to the decision of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, 2024 SCC OnLine SC 2693, the Delhi High Court quashed the notice dated 31.03.2021 issued to the assessee under Section 148 of the Act and the proceedings. Since the law laid down by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, 2024 SCC OnLine SC 2693 is a settled law, it is binding on this Court. I am therefore unable to take a contra view in the light of the aforesaid decision of the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, 2024 SCC OnLine SC 2693.
18. Therefore, this Writ Petition deserves to be allowed and is accordingly allowed. No costs. Connected miscellaneous petitions are closed.”
50.Since Notice issued under Section 148 of the old regime on 30.06.2021 was issued within the limitation of six years, the impugned notice issued on 29.07.2022 under Section 148 of the Act is in time. As the income that had allegedly escaped assessment was more than Rs.50,00,000/-, the Assessing Officers has time upto 30.06.2025 to issue a Notice under Section 148 of the Act under the new regime with effect from 01.04.2021.
51. Therefore, impugned Notice dated 29.07.2022 issued under the new regime under Section 148 of the Act has to be held to be in time. The impugned Notice dated 29.07.2022 was also preceded with an approval from the specified authority under Section 151 of the Income Tax Act, 1961 viz., the Principal Chief Commissioner of Income Tax vide CHE/COORD/148A/2022-23/341 dated 27.07.2022 as under amended Section 151 of the Act with effect from 01.04.2021, the challenge to the impugned order has to fail.
52.Therefore, this Writ Petition is liable to be dismissed. However, all legal issues are left open to be canvassed during the course of reassessment proceedings.
53.The respondent shall proceed to complete the assessment as expeditiously as possible, preferably within a period of six months from the date of receipt of a copy of this order. The petitioner may be given adequate opportunity to respond to any proposals before passing the final assessment order in accordance with law.
54.This Writ Petition stands dismissed with the above observation.
No costs. Connected Writ Miscellaneous Petitions are closed.