Reassessment for AY 2015-16 is quashed due to limitation bars and incorrect investment year.

By | May 28, 2026
0 Comment

Reassessment for AY 2015-16 is quashed due to limitation bars and incorrect investment year.

Issue

  • Whether the reassessment proceedings initiated via a section 148 notice dated April 12, 2022, for the assessment year 2015-16 were barred by limitation and lacked proper application of mind by the Assessing Officer.

  • Whether an addition for an unexplained investment in immovable property can be legally sustained in the assessment year 2015-16 when the underlying transaction payments and housing loan were fully executed in the preceding financial year.

Facts

  • The Reopening: The Assessing Officer (AO) reopened the assessee’s case for the assessment year 2015-16 by issuing a reassessment notice under section 148 on April 12, 2022, based on information regarding the purchase of an immovable property.

  • The Property Transaction: The property purchase was tied to a registered Agreement for Sale dated December 12, 2013. The agreed-upon payment schedule showed that the transactions took place during the financial year 2013-14 (relevant to AY 2014-15).

  • Funding Source: To fund the purchase, the assessee had secured a housing loan of Rs. 53 lakhs from the Bank of Baroda during the financial year 2013-14. All remaining balance payments were similarly cleared during that same fiscal period.

  • The Tax Addition: Despite the transactions and capital flows occurring entirely within the window for AY 2014-15, the AO made a tax addition of Rs. 12.75 lakhs under section 69 as an unexplained investment for the subsequent assessment year 2015-16, simply because the final Deed of Apartment was registered in that later year.

  • Documentary Oversight: The AO issued the reopening notice and completed the reassessment order without verifying or cross-referencing the explicit clauses inside the registered Deed of Apartment and the prior registered Agreement for Sale.

Decision

  • Reassessment Barred by Time: Held that the reassessment proceedings initiated by the section 148 notice dated April 12, 2022, for AY 2015-16 were completely barred by the statutory limitation periods and were legally unsustainable.

  • Lack of Application of Mind: Held that the AO acted mechanically. Failing to review existing public registration documents like the sale agreements before shifting tax years demonstrates a clear failure of independent application of mind, rendering the notice void ab initio.

  • Wrong Year of Chargeability: Held that since the entire purchase consideration and bank loan disbursements were finalized in the financial year 2013-14, no addition could be legally made under section 69 for AY 2015-16. The year of investment is determined by the actual movement of funds, not the subsequent formal registration date.

  • Assessment Quashed: Consequently, both the section 148 notice and the final reassessment order for AY 2015-16 were declared bad in law and set aside in favor of the assessee.

Key Takeaways

  • Deed Dates Do Not Dictate Investment Year: For the purpose of assessing unexplained investments under section 69, the year in which the money was actually paid out and deployed governs taxability—not the year the final civil registry or sale deed is recorded.

  • Mechanical Reopenings Are Void: An Assessing Officer cannot issue reassessment notices based on raw information snippets without cross-checking available legal documents (like registered agreements). Doing so constitutes mechanical processing, which invalidates the entire proceeding from inception.

  • Strict Limitation Boundaries: Reassessment triggers must strictly satisfy the prevailing statute of limitations. Any notices issued outside the permissible legal timelines cannot be saved by the subsequent merits of a tax evasion claim.

IN THE ITAT PUNE BENCH ‘SMC’
Rahul Purswani
v.
Income-tax Officer*
Vinay Bhamore, Judicial Member
and DR. DIPAK P. RIPOTE, Accountant Member
IT Appeal No. 2106 (PUN) OF 2025
[Assessment Year 2015-16]
APRIL  9, 2026
Milind Wadhwani, CA for the Appellant. Sailee Dhole, JCIT for the Respondent.
ORDER
Dr. Dipak P. Ripote, Accountant Member. – This is an appeal filed by the Assessee against the Order u/s 250 of the Income Tax Act 1961for AY 2015-16 dated 23/07/2025 emanating from the Assessment Order dated 26/03/2024 passed u/s 147 rws 144B of the Income Tax Act 1961.
Findings and Analysis :
2. We have heard both the parties and perused the records. Ld.AR has filed paper book
2.1 In this case the Notice u/s 148 for AY 2015-16 was dated 12/04/2022 and the Order u/s 148A(d) was dated 12/04/2022 for AY 2015-16.
2.2 Ld.AR submitted that the Notice u/s 148 is time barred. Ld.AR relied on the case laws filed in the paper book.
Ld.DR has accepted that Notice u/s 148 was issued on 12/04/2022.
3. The Hon’ble Supreme Court in the case of Deepak Steel and Power Ltd. v. CBDT 476 ITR 369 (SC)/[2025] 476 ITR 369 (SC) [02-04-2025] held as under :
Quote, ” 4. The learned counsel appearing for the revenue with his usual fairness invited the attention of this Court to a three judge bench decision of this Court in Union of India v. Rajeev Bansal 2024 SCC OnLine SC2693/ 469 ITR 46 (SC), more particularly, paragraph 19(f)which reads thus:-

“19. (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.”

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.
6. In view of the aforesaid, in such circumstances referred to above the original writ petition nos.2446 of2023, 2543 of 2023 and 2544 of 2023 respectively filed before the High Court of Orissa at cuttack stands allowed.
7. The impugned notice therein stands quashed and set aside.” Unqote.
3.1 The above referred decision of Hon’ble Supreme Court was respectfully followed by Hon’ble Gujarat High Court in the case of Mayurkumar Babubhai Patel v. Asstt. CIT (Gujarat). The Hon’ble Gujarat High Court held as under :
Quote, “15. Considering the facts of the case, it is not in dispute that the respondent Assessing Officer has issued the notice under section 148A(b) of the Act after the period of six years were over on 31.03.2022. As observed by the Hon’ble Apex Court in case of Deepak Steel and Power Ltd (supra) and in view of the concession made by the Revenue before the Apex Court for the Assessment Year 201516, all the notices issued on or after 01.04.2021 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 and therefore, nothing further is required to be adjudicated in the matters as the notice so far as the present petitions are concerned, though dated 31.03.2021, admittedly have been issued after 01.04.2021.
16. It is also not in dispute that the notices under section 148A(b) have been issued pursuant to the decision ofthe Hon’ble Apex Court in Ashish Agarwal (supra) dated 04.05.2022 admittedly after 31.03.2022. Therefore,on both counts, the notices issued under section 148 of the Act dated 27/28/29.07.2022 would be time barred.”Unqote.
3.2 Similarly, Hon’ble Bombay High Court in the decision of Cherian Nallathu Abraham Annamma v. ITO, International Tax (Bombay) Mumbai held as under :
Quote.”11. In light of the above discussion, we find merit in the submissions as canvassed by the Petitioner. The Revenue has categorically made a concession that for A.Y.2015-16 they would drop all notices issued under Section 148 after 1st April 2021. Once this is the position, it is appropriate that the notice under Section 148dated 5th April 2022, and the consequential assessment order, notice of demand, penalty notices/orders as well as the recovery notices be quashed and set aside. It is accordingly so ordered.” Unquote.
3.3 ITAT Visakhapatnam in the case of Bhargav Ram Munagapati v. ITO [IT Appeal No. 510 (Viz) of 2025, dated 21-11-2025] has held as under :
Quote, “”13. Respectfully following the decision of the Hon’ble Supreme Court in Deepak Steel and Power Ltd., v. Central Board of Direct Taxes (supra) and consistently following the view taken in ITA No. 251/VIZ/2025, we are of theview that re-assessment proceedings initiated for the A.Y. 201516 in the instant case are without jurisdiction and hence assessment completed u/s. 147 of the Act consequent to the notice issued u/s. 148 of the Act dated 03.04.2022 cannot be sustained and liable to be quashed. Since the legal grounds are adjudicated in favour of the assessee by quashing the re-assessment order the other grounds raised by the assessee on merits are not adjudicated.
14. In the result, appeal of the assessee is allowed.” Unquote.
3.5 Similar view has taken by ITAT Pune Bench in the case of Vishnu Subhash Agarwal v. ITO [IT Appeal No. 2881(PUNE) of 2024, dated 25-4-2025] wherein, notice u/s.148 dated 18.07.2022 was quashed by ITAT.
4. Respectfully following the judicial precedence , we quash the Notice u/s 148 dated 12/04/2022 for AY 2015-16. Therefore, the Assessment Order u/s 147 for AY 2015-6 is void ab initio.
4.1 Accordingly Ground Number 7 raised by the Assessee is allowed.
5. In this case the AO had issued notice u/s 148 based on the information that Assessee had purchased immovable property . During the Assessment proceedings the Assessee filed copy of registered Deed of Apartment along with details of payments. It has been accepted by the Assessing Officer in the Assessment Order that the Assessee had purchased the Immovable property jointly with his mother vide registration number 7115/2014 registered on 21/07/2014, for Rs.66,41,850/-.
5.1 The assessee filed details of payments which have been reproduced by the AO in the Assessment Order. It is Observed that Assessee had obtained Loan from Bank of Baroda of Rs.53,00,000/-on 21/01/2014. The Loan Account number is mentioned in the Assessment Order. The remaining payments were made in FY 2013-14(AY 2014-15). All these dates are mentioned in the Assessment Order. Thus, the payments for the impugned property were made in FY 2013-14 (AY 2014-15), hence NO addition can be made in AY 2015-16. The immovable property was registered in AY 2015-16 but the Payments were made in AY 2014-15. In this case the Assessee had executed Registered Agreement for Sale on 12/12/2013 which specifies the payment schedule. This fact is mentioned in the Registered Deed of Apartment dated 21/07/2014. Therefore, the addition of Rs.12,75,000/- made for AY 2015-16 is bad in law.Hence, the AO is directed to delete the addition. This shows that the AO has not applied his mind.
6. Be it as it may be, the reasons for reopening were that assessee had purchased immovable property as per the information received by the AO on the Income Tax Portal. However, the AO has not bothered to verify the facts. AO issued Notice u/s 148 without application of mind mechanically. Had the AO read the impugned Deed of Apartment dated 21/07/2014 which also mentions Registered Agreement to Sale dated 12/12/2013 ,the AO would have understood that the payments were made in earlier year. However, the AO issued Notice u/s 148 without verifying basic facts.
6.2 Hon’ble Bombay High Court in the case of Smt. Sunita Purushottam Virgincar v. ITO466 ITR 238 (Bombay) [04-07-2024]has held as under :
Quote, “19. The next reason cited by the Revenue for rejecting the explanation is, “Copy of the Sale Deed was not available at the time of recording of reasons”. We find that even such reasoning is fallacious and not tenable in law. The information from the office of the Sub Registrar’s for any registration is duly transmitted to the respondents. The execution of such Sale Deed was already on record. In such a case if the respondents fail to take note of the document which was available for transmission to the respondents from the Sub-Registrar’s office, in our view, the assumption of jurisdiction will have to be regarded as erroneous. In any case, we find that at the time of passing of the order dated 16.07.2021, the Sale Deeds (which were available) ought to have been taken into consideration.
20. For the reasons aforesaid, we are satisfied that in view of the aforesaid jurisdictional errors, the notice dated 28.05.2019 and the order dated 16.07.2021 deserve to be quashed and set aside” Unquote.
6.3 The facts in the case of Smt. Sunita Virgincar (supra) and the Assessee are identical. In the case of the Assessee also the AO has issued Notice u/s 148 without verifying the Registered Sale deed. Therefore, respectfully, following the Hon’ble Jurisdictional High Court (supra) we hold that the Notice u/s 148 is bad in law.
7. The Assessee in the grounds of Appeal has raised the JAO/FAO issue. However, since we have allowed the appeal of the Assessee as discussed above, the Ground related to JAO/FAO is dismissed as unadjudicated.
8. In the result Appeal filed by the Assessee is allowed.