Reassessment Notice for AY 2013-14 Time-Barred; SC's Ashish Agarwal Ruling Cannot Rescue Cases Where Limitation Expired Pre-31.03.2021: ITAT Jaipur - 2025-09-02

ITAT Quashes Rs. 55 Lakh Addition, Rules Reassessment Notice Time-Barred and Inconsistent

Jaipur: The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has set aside a reassessment order against Mr. Vinod Kumar Jangir, quashing an addition of Rs. 55 lakh. The tribunal ruled that the reassessment notice was barred by limitation and that the tax department's action violated the principle of consistency by treating co-investors in the same property transaction differently.

The bench, comprising Accountant Member Gagan Goyal and Judicial Member Narinder Kumar, delivered a decisive verdict in favor of the taxpayer for the Assessment Year 2013-14.

Case Background

The case originated when the Income Tax Department received information that Mr. Vinod Kumar Jangir, a non-resident, had invested Rs. 55 lakh as his 1/4th share in an immovable property worth Rs. 2.2 crore in 2012. Alleging that this investment was unexplained, the department initiated reassessment proceedings by issuing a notice under Section 148 of the Income Tax Act, 1961, on July 25, 2022.

Following the procedure, a draft assessment order proposing an addition of Rs. 55 lakh under Section 69 (unexplained investment) was passed. Mr. Jangir's objections were dismissed by the Dispute Resolution Panel (DRP), leading to a final assessment order confirming the addition. Aggrieved, the assessee appealed to the ITAT.

Arguments of the Assessee

The appellant challenged the entire reassessment proceeding on several legal grounds, primarily arguing that:

1. Notice is Barred by Limitation: The notice issued in July 2022 for the Assessment Year 2013-14 was well beyond the prescribed time limit, which expired on March 31, 2021.

2. Improper Jurisdiction: The notice was issued by a non-jurisdictional and non-faceless Assessing Officer (AO), violating procedural norms.

3. Lack of Sanction: The AO failed to provide a copy of the sanction/approval required to issue the notice.

Tribunal's Analysis and Ruling

The ITAT allowed the appeal on two significant grounds: the bar of limitation and the violation of the principle of consistency.

On the Issue of Limitation

The Accountant Member, Gagan Goyal, authored the primary order, focusing on the limitation aspect. The department had justified the delayed notice by relying on the Supreme Court's landmark decision in Union of India vs. Ashish Agarwal and the subsequent CBDT Instruction No. 1/2022. These were intended to save reassessment notices issued under the old law after the new reassessment regime came into force on April 1, 2021.

However, the tribunal found this reliance to be misplaced. It observed:

"The judicial pronouncement of Hon’ble Apex Court and Board’s instruction deals with the issue only in case limitation is beyond 31.03.2021 but inadvertently instead following the new law the department has followed the old law; in that case the case of Ashish Agarwal (supra) is there to rescue the department..."

The bench clarified that the Ashish Agarwal ruling was an extraordinary measure under Article 142 of the Constitution to salvage notices that could have been validly issued after April 1, 2021, but were erroneously issued under the old provisions. It did not grant a new lease of life to cases that were already time-barred before this date.

For AY 2013-14, the limitation period had expired on March 31, 2021. Therefore, the Ashish Agarwal judgment could not be applied to revive a proceeding that was already dead in the eyes of the law. The tribunal held that the notice was "clearly time barred," rendering the entire assessment proceeding "bad in law."

On the Principle of Consistency

The Judicial Member, Narinder Kumar, added a supplementary ground for allowing the appeal. He noted that Smt. Mali, one of the other three co-owners of the same property, had also been subjected to reassessment for her Rs. 55 lakh investment.

In Smt. Mali's case, she explained that the entire purchase consideration of Rs. 2.2 crore was paid from the bank account of a partnership firm, "Golden Tower," in which she and the appellant were partners. The Assessing Officer, after verification, accepted this explanation and dropped the proceedings against her in an order dated May 29, 2023.

The tribunal highlighted the stark contradiction:

"Keeping in view the principle of consistency, it can safely be said that the Assessing Officer (International Taxation) fell in error in passing the draft order and the assessment order as regards the assessee..."

It was held that the department could not accept the source of funds for one co-owner and reject the very same source for another co-owner in the same transaction. This inconsistent approach was deemed unjust and legally untenable.

Final Decision

In a combined order, the ITAT allowed Mr. Jangir's appeal and set aside the assessment order dated March 24, 2024. The ruling reinforces two critical legal principles: first, that the Supreme Court's relief in the Ashish Agarwal case does not apply to assessments that were already time-barred before the new law's implementation, and second, that the tax authorities must maintain consistency when dealing with identical facts and circumstances involving different taxpayers.