The Income Tax Appellate Tribunal, Ahmedabad, has delivered a decisive ruling affirming that reassessment notices issued under Section 148 of the Income Tax Act for Assessment Year 2015-16 after 01.04.2021 are legally invalid, regardless of procedural compliance or the nature of alleged income escape. This judgment reinforces the binding precedent set by the Supreme Court in Union of India v. Rajeev Bansal and nullifies all consequential proceedings stemming from such time-barred notices.
Background & Facts
The Dispute
The appellant, Scarlet Tradelink Pvt. Ltd., filed its return of income for Assessment Year 2015-16 declaring a total income of ₹11,85,921. Subsequently, the Assessing Officer received information from the Investigation Wing alleging that the company was involved in accommodation entries through three entities: M/s Orange Tradex Pvt. Ltd., S&H Chemicals, and Krrish Enterprise. Based on this information, the Assessing Officer initiated reassessment proceedings by issuing a notice under Section 148 of the Income Tax Act on 07.06.2021.
Key Facts
- The original return for AY 2015-16 was filed on or before 31.07.2016
- The normal time limit for reopening under Section 147 expired on 31.03.2019
- The Assessing Officer issued notice under Section 148 on 07.06.2021, well beyond the extended deadline of 31.03.2021 under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)
- The notice was issued after the Supreme Court’s ruling in Union of India v. Rajeev Bansal (2024), which held that for AY 2015-16, no reassessment notice could be issued after 01.04.2021
- The Assessing Officer subsequently issued notice under Section 148A(b) on 15.07.2021, disposed of objections under Section 148A(d) on 20.12.2021, and completed the assessment under Section 147 read with Section 144B on 29.05.2023
- The assessment added ₹433,57,29,066 under Section 68, treating sales to the three entities as non-genuine and the corresponding bank credits as unexplained cash credits
- The appellant submitted evidence of genuine sales, including invoices, bank statements, and transportation records, which were ignored by the Assessing Officer
Procedural History
- 31.07.2016: Original return filed for AY 2015-16
- 07.06.2021: Notice under Section 148 issued by Assessing Officer
- 15.07.2021: Notice under Section 148A(b) issued
- 20.12.2021: Objections under Section 148A(b) disposed of by order under Section 148A(d)
- 29.05.2023: Assessment order passed under Section 147 read with Section 144B
- 25.02.2025: Order of Ld. CIT(Appeals) dismissing appeal
- 10.03.2026: Hearing before ITAT Ahmedabad
- 06.05.2026: Judgment pronounced
The Parties' Positions
For the Appellant
- The notice under Section 148 issued on 07.06.2021 is time-barred under Section 149 read with TOLA and the binding precedent in Rajeev Bansal
- The deeming fiction under Ashish Agarwal cannot cure a jurisdictional defect arising from limitation
- All subsequent proceedings, including Section 148A(d) order and assessment, are void ab initio
- The addition under Section 68 is based on surmises and lacks evidentiary foundation
For the Respondent
- The notice under Section 148 was issued after due consideration of investigation reports
- The assessee failed to prove genuineness of transactions
- The CIT(Appeals) correctly applied Kachwala Gems and N.K. Proteins to uphold the addition
- The deeming fiction under Ashish Agarwal validates the procedural sequence
Relief Sought
The appellant sought quashing of the assessment order dated 29.05.2023 and the CIT(Appeals) order dated 25.02.2025, on the ground that the reassessment proceedings were initiated beyond the statutory limitation period.
The Legal Issue
The central question was whether a reassessment notice issued under Section 148 of the Income Tax Act for Assessment Year 2015-16 on 07.06.2021 is valid, given that the Supreme Court in Union of India v. Rajeev Bansal held that no such notice can be issued after 01.04.2021.
Arguments Presented
For the Appellant
The appellant relied on Union of India v. Rajeev Bansal (2024) and Deepak Steel and Power Ltd. v. CBDT (2025), both of which held that for AY 2015-16, the statutory limitation period for reassessment closed on 01.04.2021. The appellant argued that the deeming fiction under Ashish Agarwal - which allows notices under Section 148 to be treated as Section 148A(b) notices - cannot extend the limitation period or cure a jurisdictional defect. The appellant further cited Satva Merchandize Pvt. Ltd. and Waves Tradeline Pvt. Ltd., two recent ITAT Ahmedabad decisions, which had quashed identical reassessments on the same ground. The appellant emphasized that jurisdictional invalidity renders all subsequent proceedings void, irrespective of procedural compliance.
For the Respondent
The Revenue contended that the notice under Section 148 was issued after a detailed investigation and that the assessee had ample opportunity to respond. It argued that the deeming fiction under Ashish Agarwal validated the procedural sequence and that the additions were supported by evidence of non-genuine transactions. The Revenue also relied on Kachwala Gems and N.K. Proteins to justify the addition under Section 68, asserting that the burden of proof lay with the assessee to establish the genuineness of the transactions.
The Court's Analysis
The Tribunal undertook a meticulous review of the Supreme Court’s jurisprudence on reassessment limitation. It noted that Rajeev Bansal had unequivocally held that for AY 2015-16, the time limit for issuing a notice under Section 148 expired on 01.04.2021, and that the TOLA provisions did not extend this deadline. The Tribunal emphasized that the deeming fiction created in Ashish Agarwal was a procedural accommodation to avoid technical invalidity of notices issued between 01.04.2021 and 30.06.2021, but it did not alter the substantive limitation period under Section 149.
"The deeming fiction under Ashish Agarwal cannot be invoked to cure a jurisdictional defect arising from the expiry of limitation. Once the notice under Section 148 is time-barred, the entire reassessment proceedings are void ab initio."
The Tribunal further held that the notice under Section 148A(b) and the subsequent order under Section 148A(d) were not independent proceedings but derivative of the initial notice under Section 148. Since the foundation was invalid, the subsequent steps could not confer jurisdiction. The Tribunal relied on Satva Merchandize and Waves Tradeline, both decided by Coordinate Benches of the same Tribunal, to affirm that jurisdictional defects cannot be cured by procedural compliance or merits-based reasoning.
The Tribunal rejected the Revenue’s reliance on Kachwala Gems and N.K. Proteins, noting that those cases dealt with the merits of additions under Section 68, not the validity of the reassessment notice. The Tribunal held that when jurisdiction is lacking, the merits become irrelevant.
The Verdict
The appeal was allowed. The Tribunal quashed the assessment order dated 29.05.2023 and the CIT(Appeals) order dated 25.02.2025. The reassessment proceedings for AY 2015-16 were declared void ab initio due to the issuance of the Section 148 notice after 01.04.2021. The Tribunal directed the Assessing Officer to treat the return of income as duly processed and to close the reassessment file. No further proceedings under Section 147 or Section 148 shall be initiated for AY 2015-16 on the same grounds.
What This Means For Similar Cases
Jurisdictional Defects Cannot Be Curated by Procedural Compliance
- Practitioners must immediately challenge any reassessment notice issued after 01.04.2021 for AY 2015-16, regardless of whether Section 148A procedures were followed
- The burden shifts to the Revenue to prove the notice was issued before 01.04.2021; failure to do so renders the entire proceeding void
- Any addition under Section 68, Section 41, or Section 56(2)(x) based on such a notice is legally unsustainable
Precedent Binding Across Tribunals
- The ITAT Ahmedabad’s reliance on Satva Merchandize and Waves Tradeline confirms that Coordinate Benches are bound by consistent rulings on jurisdictional issues
- Similar cases pending before other Benches (e.g., Mumbai, Delhi, Kolkata) must be argued on the same ground
- Writ petitions filed in High Courts against such notices should cite Rajeev Bansal and the ITAT’s recent decisions as binding authority
Strategic Implication for Taxpayers
- Taxpayers who received reassessment notices between 01.04.2021 and 30.06.2021 should file appeals on limitation grounds without waiting for merits
- Even if the taxpayer has not yet filed an appeal, a writ petition under Article 226 can be filed to quash the notice on jurisdictional grounds
- The Revenue is now barred from re-initiating reassessment for AY 2015-16 on the same grounds, as the limitation period has permanently expired
