An appellate authority cannot direct an Assessing Officer to reopen an assessment for a past year if, on the date the direction is given, that past year was already barred by the normal statute of limitations for reopening.

By | October 14, 2025
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An appellate authority cannot direct an Assessing Officer to reopen an assessment for a past year if, on the date the direction is given, that past year was already barred by the normal statute of limitations for reopening.

Issue

Does the power of an Assessing Officer to reopen an assessment for any past year, based on a direction from an appellate authority under Section 150(1) of the Income-tax Act, 1961, have any time limit, or is it an unlimited power?

Facts

  • An Assessing Officer (AO) made an addition to an assessee’s income for the Assessment Year 2014-15.
  • In the appeal, the Commissioner (Appeals) [CIT(A)] held that this addition should not have been made entirely in one year but should be spread over the assessment years 2011-12 to 2014-15. The CIT(A) gave a specific direction to the AO to do this.
  • To comply with this direction, the AO issued notices under Section 148 to reopen the assessments for the older years, AY 2011-12 and 2012-13.
  • The assessee objected to this, arguing that on the date the CIT(A) gave this direction, the normal time limit for reopening these older years, as prescribed under Section 149, had already expired.
  • The AO rejected this objection, stating that they were simply following the binding direction of the CIT(A).

Decision

The court ruled decisively in favour of the assessee.

  • The court explained the interplay between Section 150(1) and Section 150(2) of the Act.
  • While Section 150(1) gives the AO the power to reopen an assessment for any year to give effect to an appellate order, this power is not absolute.
  • It is subject to the critical restriction laid out in Section 150(2). This section states that such a direction cannot be given for a year that was already time-barred for reopening under the normal limitation rules (Section 149) on the date the appellate order was passed.
  • In this case, when the CIT(A) passed the order giving the direction, the time limit to reopen AY 2011-12 and 2012-13 had already expired. Therefore, the CIT(A)’s direction itself was legally invalid, and the AO had no jurisdiction to act upon it. The reopening was quashed.

Key Takeways

  1. The Power to Reopen Based on an Appeal Order is Not Unlimited: The power granted under Section 150(1) to bypass the normal time limits for reopening an assessment is severely restricted by the safeguard provided in Section 150(2).
  2. Section 150(2) is a Crucial Safeguard for Taxpayers: This provision is a vital protection for taxpayers. It ensures that an appellate authority cannot, in the process of deciding an appeal for a later year, inadvertently or otherwise give a direction that revives a long-closed and time-barred assessment for a much earlier year.
  3. Check the Date of the Appellate Order: The crucial date to check is the date on which the appellate authority passes its order. On that specific date, one must ask: “Could the AO have legally reopened the earlier assessment year under the normal rules of Section 149?” If the answer is no, then the appellate authority has no power to direct a reopening for that year.
  4. An AO Cannot Act on an Invalid Direction: An Assessing Officer cannot defend their action of reopening a time-barred assessment by claiming they were merely following the orders of a superior authority. If the superior authority’s direction was itself legally invalid, the AO has no jurisdiction to act upon it.
HIGH COURT OF GUJARAT
Shubh Buildcon
v.
Income-tax Officer
BHARGAV D. KARIA and Pranav Trivedi, JJ.
R/SPECIAL CIVIL APPLICATION NOS. 5817 & 5819 of 2022
AUGUST  18, 2025
Jaimin R. Dave for the Petitioner. Ms. Maithili D. Mehta for the Respondent.
JUDGMENT
Bhargav D. Karia, J.- Heard learned advocate Mr. Jaimin R. Dave for the petitioner and learned Senior Standing Counsel Ms. Maithili Mehta for the respondent.
2. Having regard to the controversy arising in the petition which is in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.
3. Rule returnable forthwith. Learned Senior Standing Counsel Ms. Maithili Mehta waives service of notice of rule on behalf of the respondent.
4. By these two petitions, the petitioner has challenged the notices dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961 (For Short “the Act”) for Assessment Year 2011-12 and Assessment Year 2012-13.
4.1. Since the issue involved is identical in both the matters, facts are recorded from Special Civil Application No. 5817 of 2022.
5. The brief facts of the case are as under :
5.1 The petitioner a Partnership Firm filed the return of income on 20.03.2012 along with detailed computation of income for the Assessment Year 2011-12 which were processed under Section 143(1) of the Act. The petitioner thereafter on 29.11.2014 filed the return of income for the Assessment Year 2014-15 declaring total income of Rs.3,74,440/- which was selected for scrutiny and by Assessment Order dated 30.12.2016 passed under Section 143(3) of the Act the Assessing Officer made additions of Rs.64,80,800/- in the hands of the petitioner as the petitioner disclosed such income during the survey proceedings during the period relevant to the Assessment Year 2014-15.
5.2. Being aggrieved by the order dated 30.12.2016 for the Assessment Year 2014-15, the petitioner preferred an appeal before the CIT (Appeals). The CIT (Appeals) by order dated 03.04.2019 partly allowed the appeal by estimating gross profit at the rate of 12.5% of the total receipts and confirmed the total additions of Rs.17,95,904/- for Assessment Year 2014-15. However, CIT (Appeals) held that such addition is to be made in respective Assessment Years instead of making additions only for Assessment Year 2014-15 inasmuch as the project based on which gross profits are estimated was completed between the duration of Assessment Years 2011-12 to 2014-15. Accordingly, the CIT (Appeals) worked out gross profit for each Assessment year as under :-
F.Y.2010-112011-122012-132013-14Total
A.Y.2011-122012-132013-142014-15
Gross Receipts49,92,850/-1,30,70,750/-2,20,30,053/-1,74,21,448/-5,75,15,101/-
Gross Profit declared5,54,423/-11,87,442/-17,09,213/-19,42,806/-53,93,884/-
% of GP11.19.087.7611.159.38
Estimated GP @ 12.5%6,24,106/-16,33,844/-27,53,757/-21,77,681/-71,89,388/-
G.P. Addition69,683/-4,46,402/-10,44,544/-2,34,875/-17,95,504/-

 

5.3. In compliance of the above directions, the respondent Assessing Officer issued impugned notices under Section 148 of the Act for reopening of the Assessment Years. On the basis of the order passed by the CIT (Appeals) notice for reopening of the Assessment Year 2011-12 was issued as the income escaped assessment of Rs.69,683/- whereas for the Assessment Year 2012-13, it was worked out at Rs.4,46,402/- to give effect as per the direction issued by the CIT (Appeals).
5.4. The petitioner thereafter by letter dated 12.10.2021 raised objections by challenging the validity of notice for reopening for both the Assessment Years on the ground that as per the provision of Section 150(2) of the Act, which restricts the power under Section 150(1) of the Act of giving direction to reopen the assessment for both the Assessment Years, the period of limitation prescribed under Section 149(1) of the Act has expired. It was contended by the petitioner that as the income proposed to have escaped assessment is less than Rs.1 lakh for Assessment Year 2011-12, the period of limitation would be over on 31.03.2015 whereas for the Assessment Year 2012-13 the period of six years would be applicable from the end of the Assessment Year as the proposed escapement of income is more than Rs.1 lakh. It was therefore submitted that for the Assessment Year 2011-12, no assessment can be made after 31.03.2015 whereas for Assessment year 2012-13, reassessment proceedings could not have been initiated after 31.03.2019, whereas CIT (Appeals) has passed the appellate order on 03.04.2019 in Assessment Year 2014-15 giving direction under Section 150(1) of the Act which is contrary to the provisions of the Act.
6. The respondent – Assessing Officer by order dated 03.03.2022 disposed of the objections on the ground that the notices were issued in compliance of the directions issued by the CIT (Appeals). Being aggrieved by the order dated 03.03.2022, the petitioner has preferred the present petition challenging the validity of the notices on the ground that the respondent could not have assumed the jurisdiction to reopen the assessment for the years under consideration in view of the provisions of Section 150(2) of the Act.
7. Learned advocate Mr. Jaimin R. Dave for the petitioner submitted that the issue raised in these petitions is no more res integra in view of the decision of the Hon’ble Apex Court in case of KM Sharma v. ITO  426/254 ITR 772 (SC) wherein the Hon’ble Apex Court held that in view of the provisions of Section 150(2) of the Act, no reassessment could be made after the assessment has attained finality as per the provisions of Section 149 of the Act.
7.1. In addition to the above submissions, it was further submitted that even as per the provision of sub-section (6) of Section 153 of the Act, the respondent could not have issued notices on 31.03.2021 in view of the order of the CIT (Appeals) passed on 03.04.2019. At the best reassessment ought to have been completed before 31.03.2021 i.e. within 12 months from the date of issuance of the direction by the CIT (Appeals). It was, therefore, submitted that on both the counts, the impugned notices are without jurisdiction and liable to be quashed and set aside.
8. On the other hand, learned Senior Standing Counsel Ms. Maithili Mehta for the respondent referred to and relied on the following averments made in the affidavit-in-reply filed on behalf of the respondent to justify assessment and assume jurisdiction to issue impugned notices for reopening, which read as under :
“7. With respect to Para 2.7 to Para 2.13, it is submitted that the issue raised by the Petitioner is challenged on the ground that as per section 150(1) of the IT Act it is stated that the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.
Considering the above, the Ld. CIT(A) vide order dated 03.04.2019 has directed AO to give telescopic effect to the A.Y.s 2011-12 to 2013-14 by taking appropriate action as permissible u/s. 150(1) of the IT Act by re-opening the assessments. Hence, in view of the above directions the case of the petitioner was reopened after recording the reasons and approval from the specified authority and notice u/s.148 of the IT Act was issued on 31.03.2021 for A.Y. 2012-13. Therefore, the issue raised by the assessee is incorrect.
8. With respect to the contentions raised in Para 3.1 & 3.2, it is submitted that the case of the assessee has been reopened after recording the reasons on the basis of factual information available with the department and approval through appropriate authority and as per the provisions of section 150(1) of the Income-tax Act, 1961. In view of the above, the notice u/s. 148 of the Act, issued by the Assessing Officer for A.Y. 2012-13, is legal and valid in all respect. Therefore, the issue raised by the assessee is incorrect.
9. With respect to the contentions raised in Para 3.3 to Para 3.11, it is submitted that the issue raised by the Petitioner is challenged on the ground that as per section 150(1) of the IT Act it is stated that the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.
Considering the above, the Ld. CIT(A) vide order dated 03.04.2019 has directed AO to give telescopic effect to the A.Y.s 2011-12 to 2013-14 by taking appropriate action as permissible u/s. 150(1) of the IT Act by re-opening the assessments. Hence, in view of the above directions the case of the petitioner was reopened after recording the reasons and approval from the specified authority and notice under Section 148 of the IT Act was issued on 31.03.2021. Therefore, the issue raised by the assessee is incorrect.
10. With respect to the contentions raised in Para 3.12. to Para 3.14, it is submitted that in this case, the assessee had raised objection and the same was disposed of after considering the submission of the assessee by passing a speaking order vide order bearing no. ITBA/AST/F/17/201-22/1040306503(1) dated 03.03.2022. The case of the petitioner was reopened after recording the reasons and approval from the specified authority and notice under Section 148 of the IT Act was issued on 31.03.2021. Hence, the contention the assessee is incorrect.”
8.1. It was further submitted that even the provision of subsection (6) of Section 153 of the Act would not be applicable in the facts of the case and has relied upon the further affidavit-in-reply filed by the respondent – Assessing Officer which reads as under :-
10. I state that accordingly, a notice under Section 148 of the Act was issued, and the case of the petitioner was reopened for the assessment proceedings for A.Y. 2012-13.
11. I state that the contention that the assessment proceedings in Othis case had become time-barred as per Section 150(2) is factually incorrect. I further state that as per the provisions of Section 149(a), the case for A.Y. 2012-13 would become time-barred on 31.03.2017, and as per the provisions of Section 149(b), it would become time-barred on 31.03.2019, unless the income chargeable to or likely to amount to one lakh rupees or more has escaped assessment. In the instant case, income chargeable of Rs. 4,46,402/ has escaped assessment.
12. I state that the petitioner has failed to appreciate that the provision of Section 150(2) pertains to the date of the order which was the subject matter of the appeal. In the present case, the order which is the subject matter of appeal is the order passed under Section 143(3) for A.Y. 2014-15, and the date of passing such order is 30.12.2016. Therefore, the case of the assessee was not time-barred ib 30.12.2016 as per the provisions of Section 150(2) of the Act.
13. I state that in view of the above, the petitioner’s contention that the case has become time-barred and that the Ld. CIT (Appeals) could not have issued directions to reopen the assessment which had already become time-barred is factually incorrect and does not hold any grounds.”
8.2. In view of the above submissions, it was submitted that no interference be made while exercising extraordinary jurisdiction under Article 226 of the Constitution of India.
9. Having heard the learned advocates for the respective parties and considering the facts of the case it would be germane to refer to the provisions of Section 149 and Section 150 of the Income Tax Act, 2012 as it exists for the relevant Assessment Years.
“149. Time limit for notice.
(1)No notice under section 148 shall be issued for the relevant assessment year,—
(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
[(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees of more for that year.]
(c) if four years, but not more than sixteen years have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.]
Explanation – In determining income chargeable to tax which has escaped assessment for the purpose of this sub-section, the provisions of Explanation 2 of Section 147 shall apply as they apply for the purposes of that section.]
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of Section 151.
(3) If the person on whom a notice under Section 148 is to be served is a person treated as the agent of a non-resident under Section 163 and the assessment, reassessment or recomputation, to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of [six] years from the end of the relevant assessment year.
[Explanation – For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012 shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012].
150, Provision for cases where assessment is in pursuance of an order on appeal, etc.
(1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or
recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law].
(2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.”
10. On perusal of the above provisions, it is clear that the time limit prescribed under Section 149(1) of the Act provides that reassessment is required to be done within a period of four years from the end of the relevant Assessment Year if the income escaped is less than Rs.1 lakh and upto 6 years from the end of the relevant Assessment Year if the income escaped is more than Rs.1 lakh. As per the provisions of Section 150(1) of the Act, non-obstante clause provides that notice under Section 148 of the Act can be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by the CIT (Appeals).
10.1. In the facts of the case, there is no dispute as to whether the order passed by the CIT (Appeals) is only a finding or direction as the CIT (Appeals) has issued specific direction as reproduced hereinabove under Section 150(1) of the Act. However, the provisions of Section 150(1) of the Act are subject to sub-section (2) of Section 150 of the Act which provides that sub-section (1) shall not be applied in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subjectmatter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.
11. This issue is dealt with by the Hon’ble Apex Court in the case of KM Sharma v. Income Tax Officer, Ward 13(7)New Delhi (supra) as under :-
“16. The High Court rejected the above contention of the assessee on the ground that on the amendment introduced with effect from 1.4.1989 in sub-section (1), which enables reopening of assessment based on any Order of ‘Court in any proceedings in any law’, there is no corresponding amendment made in subsection (2) of Section 150 to bar reassessment based on Order of Court passed in any proceedings in any law in cases where prescribed period of litigation for reassessment had already expired.
17. We do not find the above reasoning of the High Court is sound. The plain language of sub-section (2) of Section 150 clearly restricts application of sub-section (1) to enable the Authority to reopen assessments which have not already become final on the expiry of prescribed period of limitation under Section 149. As is sought to be done by the High Court, subsection (2) of Section 150 cannot be held applicable only to reassessments based on Orders ‘in proceedings under the Act’ and not to Orders of Court ‘in proceedings under any other law’. Such an interpretation would make the whole provision under Section 150 discriminatory in its application to assessments sought to be reopened on the basis of Orders under the IT Act and other assessments proposed to be reopened on the basis of Orders under any other law. Interpretation, which creates such unjust and discriminatory situation, has to be avoided. We do not find that sub-section (2) of section 150 has that result. Subsection (2) intends to insulate all proceedings of assessments, which have attained finality due to the then existing bar of limitation. To achieve the desired result it was not necessary to make any amendment in sub-section (2) corresponding to subsection (1), as is the reasoning adopted by the High Court.
18. Sub-section (2) aims at putting embargo on reopening assessments, which have attained finality on expiry of prescribed period of limitation. Sub-section (2) in putting such embargo refers to whole of sub-section (1) meaning thereby to insulate all assessments, which have become final and may have been found liable to reassessments or re-computation either on the basis of Orders in proceedings under the Act or Orders of Courts passed under any other law. The High Court, therefore, was in error in not reading whole of amended sub-section (1) into sub-section (2) and coming to the conclusion that reassessment proposed on the basis of order of Court in proceedings under Land Acquisition Act could be commenced even though the original assessments for the relevant years in question have attained finality on expiry of period of limitation under Section 149 of the Act. On a combined reading of sub-section (1) as amended with effect from 1.4.1989 and sub-section (2) of Section 150 as it stands, in our view, a fair and just interpretation would be that the Authority under the Act has been empowered only to reopen assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under Section 149.”
12. In view of the above dictum of law, once on the facts of the case when it is not in dispute that the CIT (Appeals) has issued direction after the expiry of four and six years respectively for the Assessment Year 2011-12 and Assessment Year 2012-13, no assessment or reassessment could be made as the time period prescribed under Section 149 of the Act has already expired. Therefore, there is no further requirement to discuss the applicability of provisions of sub-section (6) of Section 153 of the Act as raised by the petitioner.
13. For the foregoing reasons, both the petitions succeed. The impugned notices dated 31.03.2021 issued under Section 148 of the Act are held to be without jurisdiction in view of provisions of Section 150(2) of the Act. The petitions stand allowed. Rule is made absolute to the aforesaid extent with no order as to costs.