The Income Tax Appellate Tribunal (ITAT), Pune Bench "A", has quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2015-16, holding that the notice dated 06.04.2022 was time-barred. The Tribunal applied the doctrine of harmonious construction to reconcile conflicting provisos in Section 149(1), emphasizing that the fifth proviso’s exclusion of time for compliance with Section 148A(b) must be given effect before applying the first proviso’s restriction. The decision follows the Supreme Court’s concession in Deepak Steel & Power Ltd. v. CBDT that all reassessment notices for AY 2015-16 issued on or after 01.04.2021 are invalid.
Background & Facts
The Genesis
The assessee, an individual, did not file a return of income for Assessment Year (AY) 2015-16. The Assessing Officer (AO) received information about high-value transactions during Financial Year 2014-15. Pursuant to this, the AO issued a notice under Section 148A(b) on 23.03.2022, allowing the assessee time until 30.03.2022 to respond. The assessee failed to respond, leading the AO to pass an order under Section 148A(d) and issue a notice under Section 148 on 06.04.2022. The reassessment order under Section 147 read with Section 144B was passed on 11.03.2024, determining the total income at Rs.54,05,000.
Procedural History
- 06.04.2022: Notice under Section 148 issued for AY 2015-16.
- 11.03.2024: Reassessment order passed under Section 147 read with Section 144B.
- 15.10.2025: Commissioner of Income Tax (Appeals) [CIT(A)], NFAC, Delhi, passed an order under Section 250 of the Act.
- 23.07.2026: ITAT Pune Bench "A" pronounced its order in ITA No.3085/PUN/2025.
The Parties' Positions
The assessee contended that the notice under Section 148 dated 06.04.2022 was time-barred and bad in law, relying on the Supreme Court’s concession in Deepak Steel & Power Ltd. v. CBDT and decisions of the Bombay High Court and ITAT Pune in similar cases. The Revenue opposed the contention, arguing that the fifth proviso to Section 149(1) excludes the time allowed to the assessee under Section 148A(b) for computing the limitation period, making the notice valid.
Relief Sought
The assessee sought quashing of the reassessment notice dated 06.04.2022 and the consequential reassessment order dated 11.03.2024. The Revenue sought upholding the reassessment proceedings, contending that the notice was within the limitation period after excluding the time allowed under Section 148A(b).
The Legal Issue
The central question was whether the notice under Section 148 dated 06.04.2022 for AY 2015-16 was valid under the new reassessment regime introduced by the Finance Act, 2021, particularly in light of the interplay between the first and fifth provisos to Section 149(1).
Arguments Presented
For the Appellant (Assessee)
The assessee relied on the Supreme Court’s concession in Deepak Steel & Power Ltd. v. CBDT that all reassessment notices for AY 2015-16 issued on or after 01.04.2021 are invalid. The assessee also cited decisions of the Bombay High Court in Cherian Nallathu Abraham Annamma v. ITO and ITAT Pune in Sagar Bharat Alhat v. ITO, Vivek Prasad v. ITO, and Mangala Dilip Shewale v. ITO, all of which quashed similar notices.
For the Respondent (Revenue)
The Revenue argued that the fifth proviso to Section 149(1) excludes the time allowed to the assessee under Section 148A(b) for computing the limitation period, making the notice dated 06.04.2022 valid. The Revenue contended that the first proviso to Section 149(1) merely restricts the time limit for issuing notices for AYs before 2022-23 and does not override the fifth proviso. The Revenue also relied on the Bombay High Court’s decision in Hexaware Technologies Limited v. ITO to support its argument.
The Court's Analysis
The ITAT Pune Bench "A" examined the interplay between the first and fifth provisos to Section 149(1) of the Income Tax Act, 1961. The Tribunal noted that the first proviso restricts the time limit for issuing notices under Section 148 for AYs before 2022-23, while the fifth proviso excludes the time allowed to the assessee under Section 148A(b) for computing the limitation period.
The Tribunal observed that the Supreme Court in Deepak Steel & Power Ltd. v. CBDT had categorically conceded that for AY 2015-16, all notices issued on or after 01.04.2021 would 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. The Tribunal also noted that the Bombay High Court in Hexaware Technologies Limited v. ITO had held that the fifth proviso should be applied first to determine whether the notice falls within the limitation period, and only thereafter should the first proviso be applied to check if the notice is within the restriction period.
The Tribunal emphasized the doctrine of harmonious construction, stating that the provisos to Section 149(1) must be read together to give effect to both. The Tribunal held that the fifth proviso’s exclusion of time is essential for the working of the new reassessment regime and cannot be rendered otiose. The Tribunal also noted that ignoring the fifth proviso would create an absurd situation where the Revenue is burdened with more procedures but stripped of the time to complete them.
"The interpretation that views the first proviso as an overriding 'veto' over the rest of the section goes against the established principles of law. The first proviso specifies that a notice cannot be issued if it 'could not have been issued at that time' under the old law. This phrase 'at that time' refers to the limitation status as of 01.04.2021. Since AY 2015-16 was not barred as of 01.04.2021, the first proviso does not prohibit the issuance of the notice; it merely limits the Revenue's ability to use the new 10-year window for cases that were already dead under the 6-year window."
The Tribunal concluded that the notice under Section 148 dated 06.04.2022 was bad in law and accordingly quashed the consequential reassessment proceedings.
The Verdict
The ITAT Pune Bench "A" allowed the assessee’s appeal in part. The Tribunal held that the notice under Section 148 dated 06.04.2022 for AY 2015-16 was invalid and quashed the consequential reassessment order dated 11.03.2024. The Tribunal did not adjudicate on the merits of the addition, as the legal ground was decided in favor of the assessee. The appeal of the assessee was partly allowed.
What This Means For Similar Cases
Harmonious Construction Is Mandatory
- Courts must apply the doctrine of harmonious construction to reconcile conflicting provisos in Section 149(1).
- The fifth proviso’s exclusion of time for compliance with Section 148A(b) must be given effect before applying the first proviso’s restriction.
Provisos Must Be Read Together
- The first proviso restricts the time limit for issuing notices for AYs before 2022-23.
- The fifth proviso excludes the time allowed to the assessee under Section 148A(b) for computing the limitation period.
- Ignoring the fifth proviso renders it otiose and creates absurd situations where the Revenue is burdened with more procedures but stripped of the time to complete them.
Supreme Court’s Concession Is Binding
- The Supreme Court’s concession in Deepak Steel & Power Ltd. v. CBDT that all reassessment notices for AY 2015-16 issued on or after 01.04.2021 are invalid is binding on all authorities.
- Assessees can rely on this concession to challenge reassessment notices issued for AY 2015-16 on or after 01.04.2021.
Procedural Compliance Must Be Given Effect
- The fifth proviso to Section 149(1) is essential for the working of the new reassessment regime.
- Courts must give effect to the fifth proviso’s exclusion of time to ensure that the Revenue has sufficient time to comply with the new procedures.
