The Income Tax Appellate Tribunal, Agra Bench, has delivered a decisive ruling affirming that any notice under Section 148 of the Income-tax Act issued on or after 1 April 2021 must strictly comply with the amended procedural framework under Section 148A. Failure to do so renders the entire reassessment void ab initio, regardless of the Assessing Officer’s intent or the underlying suspicion of undisclosed income.
Background & Facts
The Dispute
The appellant, Pashupati Castings Ltd, was subjected to reassessment proceedings initiated by the Assessing Officer under Section 147 read with Section 148 of the Income-tax Act, 1961, based on information received from the Serious Fraud Investigation Office (SFIO). The SFIO had identified that during the financial year 2016-17, the company had deposited Rs. 18,72,500 in cash in Punjab National Bank, Aligarh branch, during the demonetization period, with no verifiable source. The Assessing Officer sought to reopen the assessment for Assessment Year 2017-18 on this ground.
Key Facts
- The original return of income for AY 2017-18 was filed on 24.10.2017 declaring nil income.
- The notice under Section 148 was generated on the Income Tax Business Application portal on 31.03.2021.
- The notice was dispatched via email to the assessee on 01.04.2021 at 07:20:48 AM, as evidenced by the portal screenshot (Page 51 of the paper book).
- The reassessment order was passed on 30.03.2022 under the pre-amendment provisions of Sections 147 and 148.
- The appellant challenged the validity of the notice and reassessment on the ground that the new regime under Section 148A, effective from 01.04.2021, was not followed.
Procedural History
- 24.10.2017: Original return filed for AY 2017-18 declaring nil income.
- 31.03.2021: Notice under Section 148 generated on the IT portal.
- 01.04.2021: Notice dispatched via email to the assessee.
- 30.03.2022: Reassessment order passed by the Assessing Officer under old provisions.
- 10.11.2025: Order of the National Faceless Appeal Centre (CIT(A)) upholding the reassessment.
- 17.03.2026: Appeal heard before ITAT Agra Bench.
- 17.03.2026: Judgment pronounced.
- 24.03.2026: Order signed and dated.
Relief Sought
The appellant sought quashing of the reassessment order dated 30.03.2022 on the ground that the notice under Section 148 was issued after 01.04.2021 and the mandatory procedures under Section 148A were not followed. The appellant further sought setting aside of the CIT(A) order and restoration of the original assessment.
The Legal Issue
The central question was whether a notice under Section 148 of the Income-tax Act, issued via email on 01.04.2021, can validly initiate reassessment proceedings under the pre-amendment provisions of Sections 147 and 148, or whether it must be treated as a show-cause notice under Section 148A and processed under the new procedural regime.
Arguments Presented
For the Appellant
The appellant’s representative, Shri Ayush Garg, CA, relied on the Supreme Court’s decision in Union of India v. Ashish Agarwal (138 taxmann.com 64) and the Delhi High Court’s ruling in Rajesh Chopra v. ITO (2025 (6) TMI 83). He argued that the date of issuance of a notice under Section 148 is determined by the date of dispatch, not generation. Since the notice was dispatched on 01.04.2021, the amended provisions of Section 148A and Section 151 were triggered. The AO’s failure to follow the mandatory steps under Section 148A - including issue of a show-cause notice, opportunity to be heard, and recording of reasons - rendered the reassessment void ab initio. The Delhi Tribunal’s decision in Aseem Sehgal v. ITO was cited as directly on point.
For the Respondent
The Revenue, represented by Shri Anil Kumar, Sr. DR, contended that the notice was generated on 31.03.2021 and therefore fell under the old regime. It was argued that the date of generation on the portal should be treated as the date of issuance, and that the delay in dispatch was a technicality that should not invalidate the proceedings. The Revenue also relied on the CIT(A)’s reasoning that the substance of the notice was sufficient to initiate reassessment.
The Court's Analysis
The Accountant Member, Shri M. Balaganesh, undertook a detailed analysis of the statutory framework and judicial precedents. He emphasized that the Supreme Court in Union of India v. Ashish Agarwal had unequivocally held that any notice issued under Section 148 on or after 01.04.2021, even if generated earlier, must be treated as a show-cause notice under Section 148A(b). The Court further held that the old provisions could not be applied to notices issued after the amendment’s effective date.
"The Hon'ble Supreme Court in the case of Union of India vs Ashish Agarwal... held that any notice served post 1-4-2021 under the old law is non-est and unenforceable..."
The Tribunal also relied on the Delhi High Court’s reasoning in Suman Jeet Agarwal v. ITO, which clarified that "issue" in Section 149 means the act of dispatch, not mere generation. The Court noted that the Income Tax Business Application instructions distinguish between "generation" and "issuance," and that the Central Board of Direct Taxes Circular No. 19 of 2019 mandates an audit trail for all communications, further reinforcing that dispatch is the operative act.
The Tribunal rejected the Revenue’s argument that the date of generation controls. It held that the electronic dispatch timestamp of 01.04.2021 was conclusive and binding. Since the AO proceeded to pass the reassessment order under the old law without following Section 148A, the entire proceeding was legally defective. The Court observed:
"If the notice under Section 148 is found to be invalid, it would vitiate the proceedings commenced pursuant thereto."
The Tribunal further noted that the reassessment order dated 30.03.2022 was framed under the repealed provisions, making it void ab initio. The fact that the Revenue had acted in good faith did not cure the jurisdictional defect.
The Verdict
The appeal was allowed. The reassessment order dated 30.03.2022 was quashed as void ab initio for non-compliance with Section 148A. The proceedings initiated under Section 147 were set aside. The other grounds of appeal were left open as academic, given the invalidity of the notice. The appellant’s original assessment for AY 2017-18 stands restored.
What This Means For Similar Cases
Notice Issuance Date Is Determined by Dispatch, Not Generation
- Practitioners must now verify the exact timestamp of email dispatch or postal dispatch for all Section 148 notices issued around 01.04.2021.
- Any notice dispatched on or after 01.04.2021, even if generated on 31.03.2021, triggers Section 148A.
- Relying on portal generation dates to justify reassessment under old law is legally untenable.
Reassessment Under Old Law After 1-4-2021 Is Void
- All reassessments initiated via Section 148 notices issued after 01.04.2021 under the pre-amendment regime are vulnerable to challenge.
- Revenue authorities must now issue show-cause notices under Section 148A(b), provide opportunity of hearing, and record reasons before passing reassessment orders.
- Failure to comply with Section 148A renders the entire proceeding void, not merely irregular.
Procedural Compliance Is Non-Negotiable in Tax Reassessment
- The doctrine of substantial compliance does not apply to jurisdictional notices under Section 148.
- Courts and Tribunals will not overlook statutory mandates even if the underlying suspicion of tax evasion is strong.
- Tax professionals must audit their reassessment files for compliance with Section 148A procedures, especially for notices issued between 31.03.2021 and 30.06.2021.
