ITAT Quashes Reassessment Proceedings And Deletes Rs 94.77 Lakh Addition as Notice Issued Beyond Limitation

The Income Tax Appellate Tribunal (ITAT), Delhi, while allowing the appeal filed by Auvjan Holidays Private Limited, has observed that reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, were invalid in law as the notice was issued beyond the limitation period prescribed by law.

The assessee did not file its return of income for assessment year 2015-16. Based on information received by the AO, it was alleged that the assessee was a beneficiary of accommodation entries amounting to Rs 1.03 crore from Shri Joginder Pal Gupta, and hence proceedings under Section 148A were initiated. A notice under Section 148 was issued on 27 July 2022, in response to which the assessee filed its return and declared a loss of Rs 14.6 thousand. During the reassessment proceedings, the AO made an addition of Rs 94.77 lakh under Section 68, alleging amounts received from three parties.

The CIT(A) dismissed the appeal filed by the assessee. The issue was the continuance of reassessment proceedings, as the notice under Section 148 had been issued after 1 April 2021, in view of the limitation provisions and the law laid down by the Supreme Court.

The assessee argued that the notice issued under Section 148 was barred by limitation and therefore void ab initio, relying on the Supreme Court’s decision in Union of India v. Rajeev Bansal and Deepak Steel & Power Limited, where the court reiterated that notices issued after 1 April 2021 for assessment year 2015-16 could not survive in view of the revenue’s concession recorded in Rajeev Bansal.

After due examination, the Tribunal held that reassessment notices pertaining to assessment year 2015-16 issued on or after 1 April 2021 are not legally sustainable, and therefore the reassessment proceedings have fault in the assumption of jurisdiction. Allowing the appeal of the assessee, the ITAT Delhi held that the notice issued under Section 148 after 1 April 2021 was invalid, and consequently, the entire reassessment proceedings were liable to be quashed.