The Income Tax Appellate Tribunal's ruling in Sterling Agro Industries Ltd. v. Deputy Commissioner of Income Tax delivers a decisive clarification on the statutory limitation for issuing reassessment notices under the Income Tax Act. The judgment reaffirms that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, does not extend the six-year limitation period for assessment years ending before 2019, rendering notices issued after 31 March 2022 void.
Background & Facts
The Dispute
The Revenue initiated reassessment proceedings against Sterling Agro Industries Limited for Assessment Year 2015-16, alleging undisclosed purchases of rice husk worth Rs. 3.15 crore. The Assessing Officer made a substantial addition under Section 147 read with Section 144B based on bank transaction records linking a third party, Shri Naresh Singh, to the company. The assessee challenged the addition before the Commissioner of Income Tax (Appeals), who reduced the addition but upheld the reassessment.
Procedural History
- 31 March 2016: End of Assessment Year 2015-16
- 15 April 2021: First notice under Section 148 issued, later withdrawn
- 4 May 2022: Supreme Court delivered judgment in Union of India v. Ashish Agarwal, directing reassessment notices to be re-issued under revised interpretation
- 27 July 2022: Fresh notice under Section 148 issued
- 19 May 2023: Assessing Officer completed reassessment
- 29 April 2025: Commissioner (Appeals) partially upheld the addition but did not examine validity of notice
- 10 February 2026: Hearing before ITAT
- 18 February 2026: Judgment pronounced
Relief Sought
The assessee sought quashing of the reassessment proceedings on the ground that the notice under Section 148 was issued beyond the statutory limitation period prescribed under Section 149. The Revenue sought to uphold the addition and challenge the reduction made by the Commissioner (Appeals).
The Legal Issue
The central question was whether a notice issued under Section 148 on 27 July 2022 for Assessment Year 2015-16 is valid, given that the six-year limitation under Section 149 expired on 31 March 2022, and whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, extended this period.
Arguments Presented
For the Appellant (Assessee)
The assessee relied on the Supreme Court’s decision in Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC), which held that the first proviso to Section 149(1)(b), as amended by the Finance Act 2021, does not extend the limitation period for assessment years 2013-14 to 2015-16 beyond 31 March 2022. The assessee argued that the notice issued on 27 July 2022 was manifestly time-barred and that the reassessment proceedings were void ab initio. The Tribunal was urged to apply the principle of stare decisis and quash the proceedings.
For the Respondent (Revenue)
The Revenue contended that the notice was issued in compliance with the Supreme Court’s direction in Union of India v. Ashish Agarwal and that the assessee had not raised the limitation objection before the Assessing Officer. It argued that the assessee had waived the right to challenge the notice’s validity by failing to raise it at the earliest opportunity. The Revenue further submitted that the TOLA Act, 2020, implicitly extended the limitation period for reassessments initiated after 1 April 2021.
The Court's Analysis
The Tribunal examined the statutory framework under Section 149 and the legislative intent behind the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. It noted that the Finance Act 2021 introduced a new regime for reassessment, with Section 149 prescribing a six-year limitation for assessment years up to 2015-16. The first proviso to Section 149(1)(b), which extended the period for certain notices issued between 1 April 2021 and 30 June 2021, was explicitly limited to those assessment years where the original three-year period had not expired.
"The revenue concedes that for the assessment year 2015-16, all notices issued on or after 1st April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA."
The Tribunal emphasized that the Supreme Court in Rajeev Bansal had conclusively held that the TOLA Act, 2020, does not operate to extend the limitation period for assessment years ending before 2016. The notice issued on 27 July 2022 fell outside the permissible window, regardless of the Ashish Agarwal directive, which pertained to procedural compliance, not substantive limitation.
The Tribunal further rejected the Revenue’s waiver argument, holding that the validity of a notice under Section 148 is a jurisdictional defect that cannot be waived by the assessee. A void notice renders the entire assessment proceeding void ab initio, irrespective of whether the objection was raised before the Assessing Officer.
The Verdict
The assessee won. The Tribunal held that the notice under Section 148 issued on 27 July 2022 was invalid as it was issued beyond the statutory limitation under Section 149. Consequently, the reassessment proceedings were quashed as void ab initio. The Revenue’s appeal was dismissed as infructuous.
What This Means For Similar Cases
Notice Validity Is Jurisdictional
- Practitioners must verify the date of issuance of Section 148 notices against the expiry of the limitation period under Section 149 for each assessment year
- Objections to jurisdictional defects need not be raised before the Assessing Officer to be preserved for appellate forums
- Any reassessment initiated on the basis of a time-barred notice is void, regardless of the merits of the addition
TOLA Does Not Extend Limitation for Pre-2016 Assessment Years
- For A.Y. 2013-14 to 2015-16, the last date for issuing a valid Section 148 notice remains 31 March 2022
- Revenue authorities cannot rely on Ashish Agarwal to justify notices issued after this date for these years
- All pending reassessments based on notices issued after 31 March 2022 for these years must be challenged on limitation grounds
Procedural Compliance ≠ Substantive Validity
- Compliance with judicial directions to re-issue notices does not cure a fundamental statutory violation
- The Tribunal’s refusal to accept the Revenue’s argument underscores that procedural flexibility cannot override statutory timelines
- Practitioners should file applications for quashing reassessments on limitation grounds even if the assessee has not objected earlier
