Section 148 Reassessment Notice Issued for AY 2015-16 After March 31, 2026 is Barred by Limitation

ORDER

Padmavathy S., Accountant Member. – This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 23.05.2025 for Assessment Year (AY) 2015-16.

2. The assessee is a company. The assessee filed a return of income for AY 2015-16 on 30.11.2015 declaring a loss of Rs. 103,10,24,166/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessment u/s. 143(3) of the Act was completed after making several additions/disallowances. The AO issued a notice u/s. 148 of the Act dated 17.06.2021 stating that he has reason to belief that the income chargeable to tax as escaped assessment. Subsequently, as per the directions of Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal  (SC)/(Civil Appeal No. 3005/2022 dated 04.05.2022) the AO issued notice u/s.148A(b) of the Act on 24.05.2022. The A.O passed the order u/s.148A(d) of the Act on 29.07.2022 and issued the notice u/.s 148 of the Act on 31.07.2022. The AO completed the assessment u/s.147 assessing the income at Rs.12,35,53,260/-. On further appeal, the CIT(A) gave partial relief to the assessee. The assessee is in appeal before the Tribunal against the order of the CIT(A).

3. The Ld. Authorized Representative (AR) of the assessee submitted that if the legal contentions raised with regard to the notice u/s.148 of the Act being barred by limitation (Ground No.5) is considered and adjudicated in favour of the assessee then the other grounds would become academic. Accordingly, we proceed with adjudicate the ground raised with regard to the notice u/s. 148 being barred by limitation.

4. The contention of the Ld. AR at the outset is that the notice u/s. 148 issued on 31.07.2022 for AY 2015-16 is beyond the time limit of six years and therefore barred by limitation as per the first proviso to the un-amended provisions of section 149(1) as has been confirmed by the decision of the Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal [2024] 16 (SC)/[2024] (SCC online 754). The Ld. AR further submitted that the Coordinate Bench has been consistently holding that the notice u/s.148 of the Act issued beyond six years is not valid by placing reliance on the decision of the Hon’ble Supreme Court. Accordingly it was argued that the issue is covered by the judicial precedence.

5. The Ld. DR submitted that the reopening proceedings for AY 2015-16 were validly initiated within the limitation prescribed under the Act, read with TOLA and the decisions of the Hon’ble Supreme Court in the case of Ashish Agarwal (supra) and Rajiv Bansal(supra). It was contended that the decision in Ashish Agarwal (supra) extended to all notices issued under the old regime between 01.04.2021 and 30.06.2021 and the decision in the case of Rajiv Bansal (supra) did not dilute the benefit of the legal fiction created therein. According to the Ld. DR, since the escaped income for AY 2015-16 exceeded Rs.50 lakhs, the limitation under the old provisions was available up to 31.03.2022 i.e. 6 years from the end of the AY, and therefore for those case the period of the deemed stay arising from the directions of the Hon’ble Supreme Court in the case of Ashish Agarwal (supra) need to be excluded while calculating the time line. Consequently, the subsequent order under section 148A(d) and notice under section 148 issued on 31.07.2022 were within the permissible period. The Ld. DR also relied upon the decision of the Hon’ble Madras High Court in D.Tamilselvi v. The ITO [W.P. (MD) Nos. 30938, 30939 and 30940 of 2024, dated 15-9-2025], wherein it is held that the benefit of exclusion of period of stay arising from the decision of Ashish Agarwal (supra) is applicable to notices issued during the specified period, and contended that the reassessment proceedings were therefore not barred by limitation.

6. We heard the parties and perused the material on record. We will first look at the following observations of the Hon’ble Supreme Court in the case of Rajeev Bansal (supra) with regard to validity of notices issued for AY 2015-16 issued under the old regime –

19. Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue:

(a) to (e)****

(f). The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA;

46. The ingredients of the proviso could be broken down for analysis as follows:

(i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021;

(ii) if it is barred at the time when the notice is sought to be issued because of the “time limits specified under the provisions of” 149(1)(b) of the old regime.

Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime.

49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.”

7. The Hon’ble Supreme Court while dismissing the SLP filed by Revenue in the case of Asstt. CIT v. Nehal Ashit Shah [SLP (Civil) Diary No.(S) 57209/2024, dated 4-4-2025] held that impugned issued does not survive for further consideration. While holding so, Hon’ble Court noted in para 5 as under:

“5. In this regard, reference could also be made to paragraph 19(e) and (f) in the case of Union of India v. Rajeev Bansal, Civil Appeal No. 8629 of 2024 on 03.10.2024 (2024 SCC ONLINE 754) under which the learned Additional Solicitor General for India has made a concession insofar as the assessment year 2015-16 is concerned.”

8. The above view was again reiterated by the Hon’ble Supreme Court in Deepak Steel and Power Ltd. v. CBDT [2025]  476 ITR 369 (SC) by stating as under;

“5. As the revenue made a concession in the aforesaid decision that is for the assessment year 2015-2016, all notices issued on or after 1st April, 2021 will have to be dropped as they would not fall for completion during the period prescribed under the taxation and other laws (Relaxation and Amendment of certain Provisions Act, 2020). Nothing further is required to be adjudicated in this matter as the notices so far as the present litigation is concerned is dated 25.6.2021”.

9. The Hon’ble Supreme Court in a recent decision dated 04.05.2026 in the case of ITO v. Sai Kumar Mateti [SLP (Civil) No. 8682 of 2024, dated 04.05.2026] has once again reiterated the above stand by holding that:

4. The instant cases were segregated through the above-mentioned order on the premise that they may be pertaining to Assessment Year 2015-16. It is fairly conceded by Mr. N. Venkataraman, learned Additional Solicitor General of India, representing the Revenue, that in the assessment cases pertaining to the year 2015-16, the notices issued/proposed to be issued for reassessment would stand barred by time in light of the view taken by this Court in Union of India & Ors. v. Rajeev Bansal, 2024 SCC OnLine SC 2693.

5. There is no quarrel that if the instant cases are found to pertain to Assessment Year 2015-16, then the impugned notices are liable to be struck down outrightly in terms of the concession on behalf of the Department recorded in paragraph 19(f) of Rajeev Bansal (supra) and reiterated before us by the learned Additional Solicitor General of India.

6. However, if it is found that these cases pertain to an assessment year other than 2015-16, the respondent-assessees shall be entitled to raise all the contentions that have been permitted by this Court vide order dated 10.04.2026. Ordered accordingly.

7. Consequently, keeping in mind the reasons set out in order dated 10.04.2026, the impugned judgment in each appeal is set aside and the instant appeals are disposed of by remitting the matters to the jurisdictional High Courts for redetermination of the issues.

As observed above, the High Courts shall firstly determine whether the matters pertain to Assessment Year 2015-16. If it is found to be so, no further adjudicatory exercise shall be required to be undertaken by the High Court, except to declare the notices as being time-barred in light of Rajeev Bansal (supra). However, if it is found that the case does not pertain to Assessment Year 2015- 16, then all the issues shall be resolved in terms of the order dated 10.04.2026 passed in Civil Appeal No. 4716 of 2026.

10. Therefore in our considered view, the issue of validity of notice u/s.148 issued for AY 2015-16 after 31.03.2022 is no longer res integra and accordingly unable to appreciate the arguments of the ld DR. Section 149(1) of the Act contain the provisions with regard to the time limit for issue of notice under section 148 of the Act and the relevant provisions applicable for the year under consideration read as under –

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—

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 a notice under section 148 or section 153A or section 153C 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 or section 153A or section 153C, as the case may be], 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 sub-section, “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

11. The time limits for issue of notice under section 148 of the Act were amended as above w.e.f. 01.04.2021. Prior to the amendment the relevant provisions of section 149(1) of the Act read as under –

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) or clause (c);

(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 or more for that year;

(c) ****

Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.

(2) & (3) ****

12. The time limit for issue of notice under section 148 of the Act was revised with effect from 01.04.2021 and the legislature in order to make the amendment prospective introduced the first proviso to section 149(1). Now we will consider the contention of the ld DR’s regarding exclusion of deemed stay period. We notice that, in the case of Rajeev Bansal (supra), the Hon’ble Supreme Court has categorically recorded that, in respect of AY 2015-16, the six-year limitation prescribed under the un-amended section 149 expired on 31.03.2022 and that TOLA was not applicable. The Hon’ble Supreme Court has also recorded the concession of the Revenue that, for AY 2015-16, notices issued on or after 01.04.2021 would have to be dropped, as they did not fall within the period prescribed under TOLA. In these circumstances, the contention of the Ld. DR that the period during which the proceedings remained stayed pursuant to the directions in the case of Ashish Agarwal (supra) need to excluded and added to the limitation period upto 31.03.2022, so as to validate the notice issued on 31.07.2022, cannot be accepted. The directions in the case of Ashish Agarwal (supra) were issued in respect of notices to which the benefit of TOLA was available and cannot be employed to extend a limitation period to an assessment year which, was outside the ambit of TOLA as categorically held in the case of Rajeev Bansal (supra),. Therefore in our considered view the legal fiction created in the case of Ashish Agarwal (supra) cannot, have the effect of enlarging the statutory limitation prescribed under the un-amended section 149 for AY 2015-16. In view of above discussion both on facts and law including the judicial precedence, we hold that notice for A.Y. 2015-16 issued on 31.07.2022 u/s 148 of the new regime is barred by limitation. The resulting impugned reassessment proceedings as well as the impugned reassessment order are therefore bad in law and liable to be quashed.

13. In the result, the appeal of the assessee is allowed.