ITAT Quashes Reassessment Orders against Assessee Due to Time-Barred Notice under New Regime [Read Order]

The Raipur Bench of the Income Tax Appellate Tribunal (ITAT) has quashed two reassessment proceedings against the assessee Vinay Agrawal for Assessment Years 2014–15 and 2015–16, holding that the reassessment notices issued under section 148 of the Income Tax Act were barred by limitation. The Tribunal allowed both cross objections filed by the assessee and dismissed the appeals filed by the Revenue, rendering the entire reassessment invalid in law.

The case originated from reassessment orders issued by the Assessing Officer (AO) under Section 147, read with Section 144B of the Act. The original additions in dispute related to alleged bogus purchases were ₹91.37 lakhs in AY 2014–15 and ₹1.60 crore in AY 2015–16. In both years, the AO treated these purchases as accommodation entries and added the full amount back to income, which the Commissioner of Income Tax (Appeals) [CIT(A)] partially deleted by estimating profit at 8%.

The Revenue challenged this relief, while the assessee countered with cross-objections on jurisdictional grounds, specifically regarding the validity of the notices issued under the newly substituted reassessment scheme following the Finance Act, 2021.

The core issue was the timeliness of the notices issued under section 148 after the enactment of the new reassessment regime. The assessee relied on recent rulings by the Apex Court, including Union of India v. Ashish Agrawal and Union of India v. Rajeev Bansal, to argue that the AO had exceeded the permissible time limit for issuing the notice under the new regime.

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The assessee demonstrated through a tabulated timeline that, even after accounting for the relaxations provided under the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA), the notice dated 29.06.2022 was still issued beyond the extended deadlines of 23.06.2022 for AY 2014–15 and 26.06.2022 for AY 2015–16.

The Division Bench comprising  Ravish Sood (Judicial Member) andArun Khodpia (Accountant Member) accepted the assessee’s plea and found that both notices under section 148 were time-barred. The Bench held that the assessment framed based on a notice under Section 148, dated June 29, 2022, is barred by limitation; thus, it is rendered inadequate in law and stands quashed.

Similarly, it was held that the reassessments were void ab initio as they were based on jurisdictionally defective notices. It refrained from adjudicating on the merits of the additions, holding that once the very foundation of the proceedings (i.e., the notice) was invalid, the assessments could not be sustained. As a result, the appeals by the revenue were dismissed, while the cross-objections by the assessee were allowed.

To Read the full text of the Order CLICK HERE

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