1. Assessee argued notice under section 148 was time-barred; Revenue contended otherwise. (Para 7 , 8 , 9 )
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2026 Supreme(Online)(ITAT) 11248
INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
Ravish Sood, JM
Praveen Nagh Yerramsetti – Appellant
Versus
Income Tax Officer – Respondent
ITA No. [Not specified]
Important Points
A notice under Section 148 of the Income Tax Act must be issued within the time limit under the pre-amended Section 149(1)(b) if the first proviso to the amended Section 149(1) applies, and the fifth and sixth provisos cannot extend this period.
Subject
Tax - Income Tax - Reassessment and Limitation
Act Referred
Income Tax Act, 1961: S.147, S.144, S.148, S.149, S.148A, S.69A, S.195, S.251, S.154, S.151
Finance Act, 2021
Finance Act, 2024
Finance Act, 2021
Finance Act, 2024
Headnote
(A) Income Tax Act, 1961 - Sections 69A, 144, 147, 148, 148A, 149, 195, 251, 153A, 153C, 163, 151, 154 and 2(24) - Finance Act, 2021 - Reassessment of income - Limitation for notice under Section 148 - Unamended Section 149(1)(b) provided a six-year time limit from the end of the assessment year for issuing notice under Section 148 of the Act - The first proviso to Section 149(1) of the post-Finance Act, 2021 regime stipulates that no notice under Section 148 shall be issued for any assessment year beginning on or before 1st April, 2021, if such notice could not have been issued under the pre-amended law due to expiry of the time limit prescribed under clause (b) of sub-section (1) of Section 149 as they stood immediately before the commencement of the Finance Act, 2021. (Paras 11, 12, 49, 53) The fifth and sixth provisos to Section 149(1) of the Act, which exclude certain periods for computing limitation (e.g., time granted to the assessee under Section 148A(b) or stay of proceedings under Section 148A), do not apply to extend the period of restriction imposed by the first proviso. These provisos qualify the substantive amended Section 149 and do not relate to the un-amended Section 149, which is exclusively covered by the first proviso. Therefore, time spent from issuance of notice under Section 148A(b) to passing of order under Section 148A(d) cannot be excluded to extend the limitation period for issuing notice under Section 148 of the Act. (Paras 12, 15 of judgment in Cyberabad Citizens Health Services Private Limited vs. DCIT)
(B) Reassessment - Validity of assumption of jurisdiction - If a notice under Section 148 is found to be barred by limitation as per the first proviso to Section 149(1) of the Act, the consequent assessment order passed under Section 147 r.w.s. 144 of the Act is also liable to be quashed. (Para 13)
Facts of the case:
The assessee, a Non-Resident Indian (NRI), had cash deposits of Rs.35,12,400/- in his bank accounts and interest income of Rs.4,433/- for the Assessment Year 2015-16 but did not file a return of income. The Assessing Officer initiated reassessment under Section 147 of the Act and issued a notice under Section 148 on 16/04/2022. The AO, by order dated 04/12/2024 under Section 147 r.w.s. 144 of the Act, added the cash deposits as unexplained money under Section 69A and the interest income as income from other sources, determining the total income at Rs.35,16,833/-. The CIT(A) set aside the assessment to the file of the AO for fresh assessment. Aggrieved, the assessee appealed to the Tribunal.
Findings of Court:
The Tribunal held that the notice under Section 148 of the Act dated 16/04/2022 for AY 2015-16 was issued beyond the time limit of 31/03/2022 prescribed under clause (b) of sub-section (1) of Section 149 of the pre-amended Act (six years from the end of the assessment year). As per the first proviso to Section 149(1) of the post-Finance Act, 2021 regime, such a notice could not be issued. The fifth and sixth provisos to Section 149(1) were held inapplicable to extend the limitation period for issuing the notice under Section 148. The Tribunal quashed the assessment order dated 04/12/2024 for want of valid assumption of jurisdiction. Reliance was placed on the judgment of the Hon’ble High Court of Telangana in Cyberabad Citizens Health Services Private Limited vs. DCIT.
Issues: The main issues were whether the notice under Section 148 issued on 16/04/2022 for AY 2015-16 was time-barred under the first proviso to Section 149(1) of the Act, and whether the fifth and sixth provisos to Section 149(1) could be used to extend the limitation period for issuing such a notice.
Ratio Decidendi: The Tribunal held that a notice under Section 148 issued beyond the time limit specified in the pre-amended Section 149(1)(b) (six years from the end of the assessment year) is invalid due to the first proviso to Section 149(1) of the Act. The fifth and sixth provisos to Section 149(1) cannot be invoked to extend the period of limitation for issuing notice under Section 148 when the first proviso applies. The consequential assessment order based on such an invalid notice is also liable to be quashed.
Result: Appeal allowed. The assessment order under Section 147 r.w.s. 144 of the Act dated 04/12/2024 was quashed.
(B) Reassessment - Validity of assumption of jurisdiction - If a notice under Section 148 is found to be barred by limitation as per the first proviso to Section 149(1) of the Act, the consequent assessment order passed under Section 147 r.w.s. 144 of the Act is also liable to be quashed. (Para 13)
Facts of the case:
The assessee, a Non-Resident Indian (NRI), had cash deposits of Rs.35,12,400/- in his bank accounts and interest income of Rs.4,433/- for the Assessment Year 2015-16 but did not file a return of income. The Assessing Officer initiated reassessment under Section 147 of the Act and issued a notice under Section 148 on 16/04/2022. The AO, by order dated 04/12/2024 under Section 147 r.w.s. 144 of the Act, added the cash deposits as unexplained money under Section 69A and the interest income as income from other sources, determining the total income at Rs.35,16,833/-. The CIT(A) set aside the assessment to the file of the AO for fresh assessment. Aggrieved, the assessee appealed to the Tribunal.
Findings of Court:
The Tribunal held that the notice under Section 148 of the Act dated 16/04/2022 for AY 2015-16 was issued beyond the time limit of 31/03/2022 prescribed under clause (b) of sub-section (1) of Section 149 of the pre-amended Act (six years from the end of the assessment year). As per the first proviso to Section 149(1) of the post-Finance Act, 2021 regime, such a notice could not be issued. The fifth and sixth provisos to Section 149(1) were held inapplicable to extend the limitation period for issuing the notice under Section 148. The Tribunal quashed the assessment order dated 04/12/2024 for want of valid assumption of jurisdiction. Reliance was placed on the judgment of the Hon’ble High Court of Telangana in Cyberabad Citizens Health Services Private Limited vs. DCIT.
Issues: The main issues were whether the notice under Section 148 issued on 16/04/2022 for AY 2015-16 was time-barred under the first proviso to Section 149(1) of the Act, and whether the fifth and sixth provisos to Section 149(1) could be used to extend the limitation period for issuing such a notice.
Ratio Decidendi: The Tribunal held that a notice under Section 148 issued beyond the time limit specified in the pre-amended Section 149(1)(b) (six years from the end of the assessment year) is invalid due to the first proviso to Section 149(1) of the Act. The fifth and sixth provisos to Section 149(1) cannot be invoked to extend the period of limitation for issuing notice under Section 148 when the first proviso applies. The consequential assessment order based on such an invalid notice is also liable to be quashed.
Result: Appeal allowed. The assessment order under Section 147 r.w.s. 144 of the Act dated 04/12/2024 was quashed.
Legal Category Hierarchy
-
tax law
-
income tax
-
reassessment and reopening
- limitation for notice under section 148
- jurisdiction of assessing officer (Para 14)
-
reassessment and reopening
-
income tax
Advocates:
For the Appellants/Petitioners: Pradeep Raj Kuna
For the Respondents: G V Pavan Kumar
For the Appellants/Petitioners: Pradeep Raj Kuna
For the Respondents: G V Pavan Kumar
Table of Contents
2. Assessment order quashed for want of valid assumption of jurisdiction; appeal allowed. (Para 14 , 16 )
3. Is a notice under section 148 of the Income Tax Act for an assessment year beginning on or before 1 April 2021 time-barred if issued after the six-year period under the pre-amended section 149(1)(b)?
Yes, under the first proviso to section 149(1), such a notice cannot be issued if the time limit under the old section 149(1)(b) has expired. (Para 11 , 12 , 13 )
4. Can the fifth and sixth provisos to section 149(1) extend the limitation period under the first proviso for issuing notice under section 148?
No, the fifth and sixth provisos only apply to the substantive time limits under section 149(1)(a) and (b), not to the restriction in the first proviso. (Para 12 , 13 )
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)-10, Hyderabad, dated 03/02/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 147 r.w.s 144 r.w.s of the Income Tax Act, 1961 (for short, “the Act”), dated04/12/2024 for the Assessment Year (AY) 2015-16. The assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:
“1. The Order of the Learned Commissioner of Income Tax (Appeals) is against the law, weight of evidence and probabilities of the case.
2. The assessment order dated 04.12.2024 passed by the Assessing Officer under section 147 r.w.s. 144 of the Act is barred by limitation and non-est in law, as the same is passed beyond the period of ONE YEAR from the end of the financial year in which the notice under section 148 of the Act was issued.
3. That the learned Assessing Officer erred in law in issuing the notice under section 148 of the Income tax Act, 1961, beyond the prescribed time limit as stipulated under section 149. The Impugned notice has been issued after the expiry of three years from the end of the relevant assessment year, whereas no conditions existed to justify an extended limitation of up to ten years under the amended provisions. Consequently, the said notice is time-barred, devoid of jurisdiction, and liable to be quashed.
4. The appellant carves leave to add to, amend OR modify the above grounds of appeal either before OR at the time of hearing of the appeal, if it is considered necessary.
5. That, the Ld. Assessing Officer has grossly erred in making addition on account of cash deposited in bank account by alleging the same as income chargeable to tax under section 69A of the Income Tax Act, 1961 without appreciating the fact that both the accounts in consideration are joint accounts.
6. That, the Ld. Assessing Officer has grossly erred in making addition on account of cash deposited in bank account by alleging the same as income chargeable to tax under section 69A of the Income Tax Act, 1961 without appreciating the fact that there are Rs. 10,06,400/- from Corporation Bank.”
2. Succinctly stated, the AO based on information flagged in accordance with Risk Management Strategy-Non-filing of Return-NMS category in the insight portal, observed that the assessee, a Non- Resident Indian (NRI) had during the subject year though made cash deposits in his Savings Bank accounts with, viz., (i) ICICI Bank; and (ii) Corporation Bank and also was in receipt of interest income on which tax was deducted at source under section 195 of the Act, but had not filed his return of income for the year under consideration, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 16/04/2022 was e-served upon the assessee. However, the assessee failed to comply with the aforesaid notice and did not file his return of income in compliance thereto.
3. During the course of the assessment proceedings, the AO observed that the assessee during the subject year had made cash deposits aggregating to Rs.35,12,400/- in his bank accounts, viz., NRO SB account with ICICI Bank: Rs.24,32,400/-; and (ii) NRO SB account with Corporation Bank: Rs.10,80,000/-. The AO in absence of explanation forthcoming regarding the source of the cash deposits of Rs.35.12 lakhs (approx.) held the same as having been sourced out of the unexplained money of the assessee under section 69A of the Act. Also, the AO made an addition of the interest income received from the aforementioned bank accounts amounting to Rs.4,433/- under the head “other sources”. Accordingly, the AO vide his order under section 147 r.w.s 144 of the Act, dated 04/12/2024 determined the income of the assessee at Rs.35,16,833/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A), who taking support of the amendment made available to section 251 of the Act vide Fin
