Reassessment notice issued after March 31, 2022 for Assessment

Reassessment notice issued after March 31, 2022 for Assessment Year 2015-16 is barred by limitation and quashed.

Issue

Whether a reassessment notice issued on April 23, 2022, under Section 148 for the Assessment Year 2015-16 is barred by limitation in view of the first proviso to Section 149 of the Income-tax Act, which prohibits reopening cases that had already become time-barred under the pre-amended law.

Facts

The assessee is a partnership firm that did not file its statutory return of income under Section 139(1) for the Assessment Year 2015-16.
The Assessing Officer received financial intelligence indicating that the assessee had made substantial cash deposits in its bank account during the relevant financial year.
Based on this bank information, the Assessing Officer initiated income-escaping assessment proceedings under Section 147.
The Assessing Officer subsequently issued the impugned reassessment notice under Section 148 on April 23, 2022.
The assessee challenged the validity of the notice, arguing that under the old provisions of the Act, the maximum limitation period of six years from the end of the relevant assessment year had already expired on March 31, 2022.
The assessee further contended that by virtue of the first proviso to the amended Section 149, the Revenue cannot issue a notice for assessment years beginning on or before April 1, 2021, if such notice had already become time-barred under the old regime.

Decision

Held, that the first proviso to Section 149 explicitly protects an assessee from being served a reassessment notice for any assessment year beginning on or before April 1, 2021, if the limitation period under the old law had already expired.
Held, that for the Assessment Year 2015-16, the maximum six-year window available to the Revenue under the pre-amended provisions expired completely on March 31, 2022.
Held, that because the statutory deadline of March 31, 2022, had passed, the Assessing Officer possessed no legal authority or jurisdiction to issue a Section 148 notice on April 23, 2022.
Held, that the impugned notice dated April 23, 2022, is hit by the law of limitation and is entirely invalid.
Held, that since the foundational jurisdictional notice was invalid, the consequential reassessment order passed by the Assessing Officer under Section 147 is bad in law and is hereby quashed in favor of the assessee.

Key Takeaways

Protection of the First Proviso: The first proviso to Section 149 acts as an absolute statutory bar that prevents the Revenue from utilizing the extended timelines of the new reassessment regime to revive cases that were already dead and time-barred under the old law.
Hard Cut-Off Date for A.Y. 2015-16: For the Assessment Year 2015-16, March 31, 2022, represents the absolute final date for issuing a reassessment notice; any notice issued after this date is invalid ab initio (from the beginning).
Jurisdictional Fatality: A valid and time-bound notice under Section 148 is a condition precedent for a valid assessment under Section 147. If the notice is barred by limitation, the entire subsequent assessment order automatically becomes void and liable to be quashed.

IN THE ITAT HYDERABAD BENCH ‘SMC’

Veera Hanuman Filling Station

Income-tax Officer^*

VIJAY PAL RAO, Vice President
and MANJUNATHA G, Accountant Member

I.T. Appeal No. 16 (Hyd) OF 2026
[Assessment year 2015-16]

MAY 6, 2026

S. Gopi Krishna, CA for the Appellant. Mookambikeyan S., Sr. AR for the Respondent.

ORDER

Manjunatha G., Accountant Member. – This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 25.11.2025, pertaining to the assessment year 2015-16.

2. The brief facts of the case are that, the assessee is a partnership firm, engaged in the business of retail trade of petroleum products. The assessee has not filed return of income under section 139(1) of the Act. As per the information available for A.Y. 2015-16, in accordance with the risk management strategy formulated by the Board on the Insight Portal of the Income-tax Department, the assessee has made cash deposits of Rs.1,51,90,970/- in the bank account. Therefore, the assessment has been reopened under section 147 of the Act, and notice under section 148 of the Act, dated 23.04.2022 was issued and served on the assessee. Since there was no response from the assessee, the A.O. issued notice under section 142(1) of the Act, on various occasions and called upon the assessee to file relevant details to explain the source for cash deposits. In response, the assessee vide letter dated 26.03.2022 submitted that, he is running a petrol pump business and due to inexperience incurred huge losses. Since the firm had incurred huge losses, it has not filed return of income. However, the source for cash deposits is out of sales of petrol products, and in this regard, furnished relevant details. The A.O., after considering the relevant submissions of the assessee and also taking note of the relevant details submitted by the assessee, observed that, the assessee has made total sales of Rs.3,65,01,000/-. Further, on average, dealers are currently getting a commission of Rs.3.78 per litre of petrol in Delhi and Rs.2.57 per litre of diesel. As a percentage of retail price, the current commission is about 3.9% for petrol and 2.9% for diesel, and the average commission works out to 3.4%. Since the assessee has not submitted any details, the A.O. has estimated 3.4% net profit on total sales of Rs.3,65,01,000/- and assessed income from business at Rs.12,41,034/- and completed assessment under section 147 r.w.s. 144 r.w.s. 144B of the Income-tax Act, 1961.

3. Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), the assessee neither appeared nor explained the case, which is evident from the appellate order passed by the learned CIT(A), where the Ld. CIT(A) provided sufficient opportunities, but there was no response from the assessee. Therefore, the learned CIT(A), based on the material available on record, disposed of the appeal filed by the assessee and upheld the additions made by the A.O. towards estimation of profit on total turnover.

4. Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal.

5. The learned counsel for the assessee, Shri S. Gopi Krishna, C.A. submitted that, the notice issued by the A.O. under section 148 of the Act, dated 23.04.2022 is beyond the period of limitation, because the notice has been issued beyond six years from the end of the relevant assessment year and in view of the first proviso to section 149 of the Act, no notice under section 148 of the Act, shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021, if a notice under section 148 of the Act, could not have been issued at that time on account of being beyond the time limit specified under the provisions of the Section 148 of the Act. In the present case, the assessment year involved is 2015-16 and six years from the end of the relevant assessment year expires on 31.03.2022 and therefore, the notice issued under section 148 of the Act, dated 23.04.2022 is beyond six years and consequently, the assessment order passed by the A.O. is invalid and liable to be quashed.

6. The learned CIT-DR, on the other hand, submitted that the A.O. has issued notice under section 148A(b) of the Act, on 26.03.2022 and passed an order under section 148A(d) of the Act, and issued notice under section 142(1) of the Act, dated 24.03.2022, and as per section 148 of the Act, as amended by the Finance Act, 2021, if the income escaped from the assessment is more than Rs.50,00,000/-, then the notice under section 148 of the Act can be issued beyond three years and up to ten years, and therefore, the argument of the assessee is incorrect and cannot be accepted.

7. We have heard both parties, perused the material available on record and had gone through the orders passed by the authorities below. We have also carefully considered the notice issued by the A.O. under section 148 of the Act dated 23.04.2022 in light of the provisions of section 149 of the Act, including the first proviso thereto. The first proviso to section 149 clearly provides that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 01.04.2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of the Act as it stood prior to amendment.

8. In the present case, the assessment year involved is 2015-16 and as per the unamended provisions of section 149 of the Act, where income escaping assessment exceeds the prescribed limit, the time limit for issuance of notice under section 148 of the Act, was six years from the end of the relevant assessment year. Accordingly, for the assessment year 2015-16, the notice under section 148 of the Act, could have been issued on or before 31.03.2022. However, it is an undisputed fact that the notice under section 148 of the Act, has been issued on 23.04.2022, which is beyond the period of six years from the end of the relevant assessment year. Therefore, in our considered view, in light of the first proviso to section 149 of the Act, the A.O. could not have issued notice under section 148 of the Act, after 31.03.2022 for the assessment year 2015-16.

9. We further find that, although the Revenue has contended that as per the amended provisions of section 149 of the Act, where income escaping assessment exceeds Rs.50,00,000/-, the time limit for issuance of notice under section 148 of the Act, has been extended up to ten years, such extended time limit cannot be applied to cases where the limitation under the old regime had already expired. The first proviso to section 149 restricts issuance of notice under the new regime in cases where such notice was already time barred under the earlier provisions. Therefore, once the limitation has expired on 31.03.2022, the extended time limit of ten years under the amended provisions cannot be invoked to reopen the assessment.

10. In the present case, since the limitation for issuance of notice under section 148 of the Act, had already expired on 31.03.2022, in our considered view, the notice issued by the A.O. under section 148 of the Act, dated 23.04.2022 is barred by limitation and consequently the assessment order passed by the A.O. under section 147 r.w.s. 144 r.w.s. 144B of the Act, is bad in law and liable to be quashed. Therefore, we hold that the notice issued under section 148 of the Act, is invalid and the consequent assessment order passed by the A.O. is liable to be quashed. Since we have quashed the reassessment proceedings on legal issue, the other grounds raised by the assessee on merits become academic in nature and hence not adjudicated.

11. In the result, the appeal filed by the assessee is allowed.