Time-Barred Income Tax Notice u/s 148 over Investment Scheme: ITAT quashes Reassessment [Read Order ]

The bench of the Income Tax Appellate Tribunal, Mumbai, has held that the reassessment notice issued under Section 148 of the Income Tax Act, 1961 beyond the permissible period of limitation was void ab-inito. The Tribunal quashed the notice and set aside the consequential reassessment proceedings, providing relief to the assessee in an income tax dispute linked to the Kartick Mohan Prasad investment scheme.

The Appellant, Yogesh Ashok Mundade, an individual, filed his return of income declaring ₹4,93,450 for Assessment Year (AY) 2014-15. Based on departmental information, the Assessing Officer alleged that the appellant had invested ₹11,05,00,000 through cheque and ₹1,04,00,000 in cash in the investment scheme of Shri Kartick Mohan Prasad during the relevant financial year 2013-14 relevant to AY 2014-15.

The Assessing Officer (AO) reopened the case by issuing a notice under Section 148 on 29 July 2022, pursuant to which the assessee again filed his return. The reassessment was completed under Section 147 read with Section 144B, making an addition of ₹1,04,00,000 under Section 69A of the Income Tax Act.

The National Faceless Appeal Centre,Delhi, (CIT(A)) upheld the reassessment order, prompting the appellant to approach the Tribunal.

Represented by Hitesh M. Shah, the Appellant contended that the reassessment notice issued under Section 148 dated 29 July 2022 was barred by limitation. It was argued that the Bombay High Court had earlier quashed similar notices in the assessee’s case, and reliance was placed on the judgment in Godrej Industries Ltd. v. ACIT (2024).

It was argued that as per Section 149 of the Income Tax Act, 1961, the maximum six-year period for reopening expired on 31 March 2021, and even with the relaxation under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), the extended period lapsed on 30 June 2021. Hence, any notice issued thereafter was invalid.

Represented by Pushkaraj Bhangepatil, defended the reassessment, submitting that the proceedings were validly initiated pursuant to directions of the Supreme Court in Union of India v. Ashish Agarwal (2023). It was argued that the extended timelines under TOLA applied to the appellant’s case and that the reassessment was within the permissible framework.

The Bench comprising Judicial Member, Sandeep Singh Karhail and Accountant Member, Narendra Kumar Billaiya observed that the time limit for reopening the assessment for AY 2014–15 expired on 31 March 2021, and under TOLA, the outer limit extended only till 30 June 2021. Any notice issued beyond this date was barred and relied on the recent Supreme Court ruling in Union of India v. Rajeev Bansal (2024).

The bench noted that the Revenue itself had conceded before the Supreme Court that reassessment notices issued for AY 2014-15 on or after 1 April 2021 would have to be dropped.

Accordingly, the notice dated 29 July 2022 was held to be beyond limitation and invalid.

Thus, the appeal of the assessee was allowed.

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