Reassessment notice issued beyond outer time limit of 31-3-2023 for AY 2016-17 is barred by limitation.

By | October 21, 2026
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Reassessment notice issued beyond outer time limit of 31-3-2023 for AY 2016-17 is barred by limitation.

Issue

  1. Whether the outer limit for issuing a reassessment notice under section 148 for AY 2016-17 was 31-03-2023 as per the first proviso to section 149.
  2. Whether the time granted to the assessee to reply under section 148A(b) is excluded for calculating the limitation period for passing an order under section 148A(d).
  3. Whether a notice under section 148 and the consequential assessment order issued beyond the outer limitation period are liable to be quashed.

Facts

  • Assessment Year & Statutory Period: The matter pertains to Assessment Year 2016-17, where the outer time limit for issuing a reassessment notice under Section 148 was 31-03-2023 under the first proviso to Section 149.
  • Show-Cause Notice Issued: The Assessing Officer (AO) issued a notice under Section 148A(b) on 03-03-2023, granting time to the assessee to file a response by 20-03-2023.
  • Non-Response & Exclusion Window: The assessee failed to respond within the given timeframe, making the period allowed (from notice issuance to reply date) excludable, leaving the AO with seven days to pass the order under Section 148A(d).
  • Delayed Order & Notice: The AO passed the order under Section 148A(d) and issued the consequential Section 148 notice on 16-04-2023, which fell beyond the outer limitation date of 31-03-2023.
  • Consequential Assessment: Pursuant to the Section 148 notice, the AO completed the reassessment by passing an order under Section 147 read with Section 144C(13) on 26-12-2025.

Decision

  • Applicability of Limitation Bar: The outer time limit for issuing a notice under Section 148 for AY 2016-17 expired on 31-03-2023 under the first proviso to Section 149. (In favour of assessee)
  • Exclusion Calculation: Even after excluding the period granted under Section 148A(b) to file a reply, the Section 148 notice issued on 16-04-2023 was barred by limitation. (In favour of assessee)
  • Quashing of Reassessment Order: The notice issued under Section 148 and the consequential reassessment order dated 26-12-2025 were held to be time-barred and quashed. (In favour of assessee)

Key Takeaways

  • Strict Outer Limits: Section 148 reassessment notices must adhere strictly to the outer limitation boundaries set by the first proviso to Section 149 (e.g., 31-03-2023 for AY 2016-17).
  • Calculation of Excluded Time: While the period granted to an assessee to respond under Section 148A(b) is excluded when computing limitation, the extension cannot stretch the final issuance date beyond the statutory outer cap unless explicitly permitted by law.
  • Invalidity of Subsequent Orders: If the foundational Section 148 notice is rendered void due to time-barring, all subsequent assessment proceedings and orders passed under Section 147 read with Section 144C(13) become legally unsustainable and void ab initio.
IN THE ITAT DELHI BENCH ‘D’
Manoj Garg
v.
DCIT
Vikas Awasthy, Judicial Member
and S. Rifaur Rahman, Accountant Member
IT(IT) Appeal No. 50 (DEL) OF 2026
[Assessment Year 2016-17]
OCTOBER  14, 2026
Rakesh Kumar Khiwani, CA for the Appellant. Dr. Shalini Verma, CIT DR for the Respondent.
ORDER
S. Rifaur Rahman, Accountant Member. – This appeal preferred by the assessee is directed against the assessment order dated 26.12.2025 passed by the ACIT, Circle Int. Tax 1 (3)(1), Delhi u/s 147 read with section 144C(13) of the Income-tax Act, 1961 (for short ‘the Act”) for Assessment Year 2016-17 pursuant to the directions of the Dispute Resolution Panel u/s 144C(5) of the Act.
2. At the outset of the hearing, Id. AR for the assessee submitted that assessee has raised following additional ground of appeal and it is purely legal issue and the same are reproduced below
“That the notice u/s 148 dated 16.04.2023 is barred by limitation of time u/s 149 having been issued beyond the period of six years from the end of the AY 2016-17 i.e. 31.03.2023 and hence needs to be quashed.”
3. Since the above ground of appeal is purely legal, do not require fresh facts to be investigated and go to the root of the matter, Id. AR of the assessee prayed that the same may be admitted in view of the judgement of National Thermal Power Co. Ltd. v. CIT   358/229 ITR 383 (SC).
4. On the other hand, Id. DR for the Revenue has no objection of admitting the additional ground of appeal being purely legal issue.
5. In view of the reliance made by the Id. AR for the assessee on the judgment of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra) and issue being purely legal, we proceeded to admit the additional ground of appeal being legal issue.
6. At the time of hearing, the Id. AR of the assessee raised the legal issue vide additional ground that notice dated 16.04.2023 issued under section 148 of the Income-tax Act, 1961 (for short ‘the Act’) is barred by limitation. In this regard, he submitted that for the assessment year under consideration i.e. 2016-17. the limitation period available to the AO for issuance of notice u/s 148 of the Act as per section 149 after considering the extended period on or before is 3 1.03.2023. However, the notice u/s 148 of the Act was issued on 16.04.2023. He submitted that thus, the issuance of notice u/s 148 on 16.04.2023 is barred by limitation and consequently, the reassessment proceedings culminating in the order u/s 147 r.w.s. 144C(13) of the Act are illegal, bad in law and void ab initio, having been initiated beyond the prescribed statutory period and lacking legal sustainability. In this regard, he relied on the judgment of Hon’ble High Court of Delhi in Shailendra Nath Rai v. Asstt. CIT   (Delhi)/WP (C) 15305/2024 dated 29.05.2026 and specifically relied on the decision of Hon’ble Supreme Court in the case of Union of India v. Rajeev Bansal 469 ITR 46 (SC).
7. On the other hand, the Ld. DR for the Revenue placed reliance on the orders passed by the lower authorities.
8. Considered the rival submissions and material placed on record. We observed that the assessee has raised addilional ground that the notice issued u/s 148 of the Act dated 16.04.2023 for AY 2016-17 is barred by limitation and accordingly, the assessment order so framed u/s 147 r.w.s. 144C(13) of the Act and consequent demand deserves to be quashed. In this regard, before dealing with the issue, we gave relevant dates relevant to the issue as under
03.03.2023 Notice u/s 148A(b) was issued by Assessing Officer, giving time till 20.03.2023 to file the reply.
– No reply filed by the assessee till limitation period ends i.e. on 20.03.2023
31.03.2023 LIMITATION FOR 148 NOTICE
16.04.2023 The order came to be passed by the Assessing Officer u/s 148A(d) of the Act.
16.04.2023 Notice u/s 148 of the Act was issued by the AO

 

9. We observed that as per the applicable provisions of the Act, a notice u/s 148 could be issued within six years of the end of the assessment year and the outer limit for issuing notice u/s 148 of the Act for AY 2016-17 was 31.03.2023 as per the first proviso to section 149 of the Act.
10. We further observed that this issue is squarely covered by the decision of Hon’ble Delhi High Court in the case of Shailendra Nath Rai (supra). The relevant findings of Hon’ble High Court is reproduced below :-
“15. Heard learned counsel for the parties.
16. Though the facts of the case are handful but they present an interesting and intricate question to be dilated upon. There can be no gainsaying the fact that in the case of BKR Capital Private Limited (supra), the first notice being the notice under Section 148A(b) of the Act of 1961 was issued on 21.03.2024 calling upon the assessee therein to file reply by 28.03.2024. Whereafter, 2-3 adjournments were granted, whereas in the case in hand, the notice under Section 148A(b) of the Act of 1961 came to be issued on 29.03.2024. Though seven days’ time was given, but if the limitation under Section 149 of the Act of 1961 is to be taken into account, the same appears to have elapsed, well within two days of such notice i.e. on 31.03.2024.
17. But what appears to be time barred on the first look, turns out to be a misconception. Because, while providing for the opportunity of hearing to an assessee under clause (b) of Section 148A, the parliament thought it fit to accord an opportunity of minimum seven days and a maximum of 30 days for an assessee to file reply. We are firmly of the view that simply because on 29.03.2024, 7 days’ time was not available, the proceeding cannot be alleged to be vitiated. Because 7 days’ time is not the maximum time allowable for filing reply. In a given case it can extend to 30 days.
18. According to us, if the intention of the Parliament was not to extend the limitation period for the time elapsed in filing the reply, then they would certainly have provided separate limitation for issuance of notice under Section 148A(b) of the Act of 1961. But instead of doing so, the Fifth proviso has been stringed/appended with Section 149, which stipulates that the time taken for filing the reply shall be excluded from the limitation period. It will not be out of place to reproduce Section 149 with fifth and sixth proviso, which would read as under:

“Section 149 (As substituted by the Finance Act of 2021)

“149. Time limit for notice

149.(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—
(i) an asset;
(ii) expenditure in respect of a transaction or in relation to an event or occasion; or
(iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:

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 153 A 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 cases referred to in clauses (i), (iii) and (iv) of Explanation 2 to section 148, where,—

(a) a search is initiated under section 132; or
(b) a search under section 132 for which the last of authorisations is executed; or
(c) requisition is made under section 132A, after the 15th day of March of any financial year and the period for issue of notice under section 148 expires on the 31st day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under section 148 in such case shall be deemed to have been issued on the 31st day of March of such financial year:
Provided also that where the information as referred to in Explanation 1 to section 148 emanates from a statement recorded or documents impounded under section 131 or section 133A, as the case may be, on or before the 31st day of March of a financial year, in consequence of,—
(a) a search under section 132 which is initiated; or
(b) a search under section 132 for which the last of authorisations is executed; or
(c) a requisition made under section 132A, after the 15th day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under clause (b) of section 148A in such case shall be deemed to have been issued on the 31st day of March of such financial year:
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 does not exceed 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.
(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of subsection (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of subsection (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151″
19. If the facts of the present case are examined, it is clear that on 29.03.2024, the assessee was called upon to file his reply as provided in Section 148A(b) and (c) of the Act of 1961. On 08.04.2024 instead of filing reply, he sought an adjournment and on 12.04.2024, the petitioner sought another adjournment and it was only on 21.04.2024 that the petitioner filed reply, with a plea that the proceedings have become time-barred.
20. We are firmly of the view that in the face of fifth and sixth proviso, which clearly provide that for the purpose of computing the period of limitation, the time or extended time allowed to the assessee as per show cause notice issued under clause (b) of Section 148A is required to be excluded. The period from 29.03.2024 to 21.04.2024 was thus in any event required to be excluded.
21. If argument of Mr. Aggarwal, learned senior counsel for the petitioners is to be accepted, then every notice under Section 148A(b) issued after 1st March would be invalid because time for reply may vary from 7 days to 30 days and in each case, the validity of notice under Section 148A(b) would be depending upon an uncertain event of time taken by the assessee in filing reply. Because fifth and sixth proviso requires time taken in filing the reply by the assessee (subject to maximum 30 days) which has to be excluded. Such interpretation would not only lead to uncertainty but would frustrate the very purpose of a provision which has been introduced to ensure observance of principles of natural justice.
22. A combined reading of fifth and sixth proviso to Section 149 suggests that the time between the date of notice under Section 148A(b) i.e. 29.03.2024 and the date on which the petitioner had filed reply i.e. 21.04.2024 (as given under fifth proviso) is to be excluded and then, from that date, a period of 7 days is to be taken as per sixth proviso for the purpose of determining the last date of limitation, by which the AO has to pass the order under Section 148A(d) and issue the notice under Section 148 of the Act of 1961.
23. Accordingly, having received reply on 21.04.2024, the AO had only 7 days at his disposal to pass order under Section 148Atd) of the Act of 1961 and to issue notice under Section 148 of the Act of 1961, whereas he has passed the order under Section 148A(d) of the Act of 1961 and issued notice under Section 148 of the Act of 1961 on 30.04 2024 – he has taken 9 days’ time to issue notice under Section 148 of the Act of 1961.
24. The notice under Section 148 was required to be issued within maximum of 7 days from the date, when reply was filed i.e. 21.04.2024. The notice could therefore be issued by 28.04.2024. whereas the same came to be issued on 30.04.2024. The impugned notice dated 30 04.2024 is, thus, barred by limitation.
25. The writ petition is allowed. Order under Section 148A(d) and notice under Section 148 of the Act of 1961 both passed/issued on 30.04.2024 are, therefore, quashed, being issued beyond the limitation.”
11. Accordingly, in view of the aforesaid decision of Hon’ble Delhi High Court, the time allowed to the assessee to file reply in the notice was 20.03.2023, as per 4th & 5th proviso, the period allowed to the assessee be excluded, hence, the period upto 20.03.2023 needs to be excluded as the assessee failed to respond. Then, the Assessing Officer had only 7 days to pass order u/s 148A(d) of the Act. Therefore, the Assessing Officer should have passed order on 28.03.2023 still he had time upto 31.03.2023. Issuing notice beyond 31.03.2023 is barred by limitation. Therefore, we hold that the notice issued u/s 148 of the Act beyond 31.03.2023 is barred by limitation and thus, following the principles of judicial discipline, we hereby quash the notice so issued u/s 148 of the Act dated 16.04.2025 in case of the assessee and also quash the assessment order so framed u/s 147 r.w.s. 144C(13) of the Act dated 26.12.2025 along with consequent demands being barred by limitation, void-ab-initio and bad in law.
12. Since we have already quashed the entire assessment order by allowing the additional ground so raised by the assessee, therefore, the other grounds of appeal so raised by the assessee are not being adjudicated and are kept open.
13. In the result, the appeal of the assessee is allowed as indicated above.