ITAT Chennai Quashes Reassessment for AY 2015-16 as Time-Barred; Rs 2.87 Crore Additions Deleted

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment order passed against an individual taxpayer for Assessment Year (AY) 2015-16, holding that the notice issued under Section 148 of the Income Tax Act after 31 March 2022 was barred by limitation. As a result, the Tribunal set aside the entire reassessment, including additions aggregating to Rs 2.87 crore.

The assessee, Shri Sundararaghavan, came under the scanner after information available on the Insight Portal indicated various financial transactions, including cash deposits, purchase of immovable properties, and share transactions. Based on this information, the department initiated proceedings under Section 148A and subsequently issued a notice under Section 148 on 7 April 2022.

During reassessment proceedings, the Assessing Officer alleged non-compliance by the assessee and completed the assessment ex parte under Sections 144 and 147. The officer made additions of Rs 59.25 lakh as unexplained money, Rs 1.82 crore towards unexplained investments in immovable properties, Rs 43.55 lakh as undisclosed capital gains from share transactions, and Rs 1.90 lakh towards unexplained investments in listed shares. Consequently, the assessee’s income was assessed at Rs.2.87 crore.

The Commissioner (Appeals) upheld the reassessment and all additions after observing that the assessee had failed to furnish evidence explaining the impugned transactions either before the Assessing Officer or during appellate proceedings.

Before the Tribunal, however, the assessee raised a legal challenge to the very validity of the reassessment proceedings. It was argued that for AY 2015-16, the limitation period under the erstwhile Section 149 expired on 31 March 2022, whereas the notice under Section 148 was issued only on 7 April 2022. Therefore, the reopening was without jurisdiction and liable to be quashed.

The Tribunal accepted the contention. It noted that the first proviso to Section 149, introduced by the Finance Act, 2021, expressly protects cases where the limitation had already expired under the old law. Once the Revenue’s right to issue a notice stood extinguished on 31 March 2022, it could not be revived under the amended reassessment regime.

The Bench further relied on the Supreme Court’s decision in The Income Tax Officer v. Sri Sai Kumar Mateti, where the Court recorded the Revenue’s concession that reassessment notices issued for AY 2015-16 beyond the prescribed period were time-barred in view of the ruling in Union of India v. Rajeev Bansal.

Following these rulings, the Tribunal held that the notice issued on 7 April 2022 for AY 2015-16 was invalid and void ab initio. Since the very assumption of jurisdiction under Sections 147 and 148 failed, the reassessment order dated 26 February 2024 was quashed in its entirety.

Having annulled the reassessment on the jurisdictional issue, the Tribunal observed that examining the merits of the additions would be merely academic and therefore unnecessary.

Thus, the appeal of the assessee was allowed.

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