Old v/s New Limitation: ITAT Quashes AY 2013‑14 Reopening as Old Regime Bars Reassessment Despite New 10‑Year Rule u/s 149 [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal ( ITAT ), Chennai, has struck down reassessment proceedings against the respondent for Assessment Year (AY) 2013‑14, holding that the notice issued under Section 148 of the Income TaxAct, 1961 was time‑barred.

The case arose from a search conducted on the assessee, Southern Agrifurane Industries Pvt. Ltd., under Section 132 on 15 June 2022, during which the Revenue claimed to have found evidence of suppression of income through bogus purchases and inflated logistics expenses.

Based on the seized material, the Assessing Officer issued notices under Section 148 dated 30 March 2023 for AYs 2013‑14 to 2016‑17, reopening assessments under Section 147.

While reassessments for AYs 2014‑15 to 2016‑17 were completed with substantial additions, the assessee challenged the validity of the notice for AY 2013‑14 before the Commissioner of Income Tax (Appeals), who held the reopening to be barred by limitation.

The Revenue appealed against this finding, while the assessee also contested the merits of the additions.

The assessee argued that the reassessment notice issued under Section 148 for AY 2013‑14 was barred by limitation. It contended that the Finance Act, 2021, introduced a 10‑year reopening window under Section 149(1)(b), but the first proviso to that section makes clear that the extended limit applies prospectively and cannot revive assessments already time‑barred under the old regime.

Since the search was conducted in June 2022, the relevant year was AY 2023‑24, and the permissible block of ten years extended only up to AY 2014‑15. AY 2013‑14, therefore, fell outside the statutory window, rendering the notice void ab initio.

The assessee contended that jurisdictional facts must exist before an Assessing Officer can assume power, and in their absence, any notice issued is invalid. The assesse depended on precedents such as A.R. Saifullah v. ACIT (Madras High Court), Ojjus Medicare Pvt. Ltd. (Delhi High Court), and Union of India v. Rajeev Bansal (Supreme Court), all of which affirmed that reassessment notices must be judged by the law in force on the date of issuance. In addition, also mentioned KAD Housing Pvt Ltd v DCIT and Dinesh Jindal V DCIT.

The Revenue, on the other hand, maintained that the notice dated 30 March 2023 was well within the permissible 10‑year limit under Section 149(1)(b). It argued that since the escaped income exceeded ₹50 lakh, the Assessing Officer was empowered to reopen AY 2013‑14.

The Department contended that the CIT(A) erred in holding the notice barred by limitation and insisted that the amended Section 149 regime allowed reopening up to ten years, even for years before AY 2021‑22. It further submitted that because the case arose out of a search under Section 132, the Assessing Officer had jurisdiction to reopen past years under Section 153A/153C read with Section 148, and therefore the reassessment was validly initiated.

The Tribunal focused first on the jurisdictional issue, noting that the Finance Act, 2021 had amended Section 149 to extend the reopening period to ten years where escaped income exceeded ₹50 lakh. However, the first proviso to Section 149(1)(b) makes clear that this extended limit applies prospectively and cannot revive assessments already barred under the old regime.

Under the pre‑2021 law, search‑related cases were governed by Section 153A, which permitted reopening up to ten years from the relevant search year. In Southern Agrifurane’s case, the search year was AY 2023‑24, meaning the permissible block extended back only to AY 2014‑15. AY 2013‑14 thus fell outside the statutory window.

Quoting established precedents, including the Madras High Court’s decision in A.R. Saifullah v. ACIT and the Supreme Court’s ruling in Union of India v. Rajeev Bansal, the Tribunal reiterated that notices must be judged according to the law existing on the date of issuance.

The two-member bench comprising Aby T. Varkey (Judicial Member) and Amitabh Shukla (Accountant Member) held that since AY 2013‑14 was already barred under the old regime, the Assessing Officer lacked jurisdiction to issue a notice under Section 148 in 2023. The Tribunal highlighted that “the existence of a jurisdictional fact is the sine qua non for the exercise of power,” and that in its absence, any notice issued is void ab initio.

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