ITAT Chennai Quashes Reassessments for AY 2014-15 and AY 2015-16: Surviving Limitation Period Governs, Not a Fresh Clock

Overview

A significant ruling delivered on 6 October 2026 by the Chennai Bench of the Income Tax Appellate Tribunal — comprising Aby T. Varkey, Judicial Member, and S. R. Raghunatha, Accountant Member — has brought renewed focus on how limitation must be computed for reassessment notices that were issued during the transitional period and subsequently saved by the Supreme Court's direction in Union of India v. Ashish Agarwal, [2022] 444 ITR 1 (SC).

In Jothirajan Sathiyamoorthy v. ACIT, ITA Nos. 4203 & 4204/Chny/2026, the Tribunal examined two separate reassessments — one for Assessment Year 2014-15 and another for Assessment Year 2015-16 — and quashed both, holding that the Section 148 notices dated 27 July 2022 were issued after the permissible limitation period had already elapsed. The appeals were consolidated and disposed of through a single order given the shared factual matrix and substantially common questions of law.

Background: The Assessee and the Impugned Reassessments

The assessee is an individual whose principal occupation was described as money-lending on a small scale, being a traditional family business carried across generations.

AY 2014-15

For Assessment Year 2014-15, the assessee had filed his return of income on 4 November 2014 declaring total income of ₹5,49,710. During reassessment proceedings, the Assessing Officer identified cash deposits of ₹1,59,74,050 and other bank credits of ₹1,66,50,000 in the assessee's bank accounts. Both amounts, aggregating to ₹3,26,24,050, were treated as unexplained money under Section 69A of the Income Tax Act, 1961, resulting in a total assessed income of ₹3,31,73,760. The reassessment order was passed on 29 May 2023.

AY 2015-16

For Assessment Year 2015-16, the assessee had filed his return of income on 1 August 2015 declaring total income of ₹6,37,112. During the reassessment for this year, the Assessing Officer noted aggregate credits of ₹6,60,29,000 in the assessee's bank account. Rather than treating the full amount as unexplained income, the Assessing Officer applied a rate of 8% on the total bank credits, arriving at ₹52,82,320 as estimated business income. This too was brought to tax through a reassessment order dated 29 May 2023.

In both cases, the CIT(A) (National Faceless Appeal Centre, Delhi) dismissed the assessee's challenges vide orders dated 15 July 2026, upholding both the validity of the reassessment proceedings and the additions made by the Assessing Officer. The assessee then preferred further appeals before the Tribunal.

The Notice Chronology: How the Limitation Question Arose

The starting point for the limitation controversy in both appeals was the same — the original notice under the erstwhile Section 148 of the Income Tax Act, 1961, was issued on 23 June 2021 in each case.

Following Union of India v. Ashish Agarwal, [2022] 444 ITR 1 (SC), such notices issued between 1 April 2021 and 30 June 2021 under the old reassessment regime were saved from invalidity and treated as deemed show-cause notices under Section 148A(b) of the substituted regime introduced by the Finance Act, 2021.

Pursuant to the directions in that judgment, the Assessing Officer supplied the relevant information and material to the assessee — on 25 May 2022 for AY 2014-15 and 26 May 2022 for AY 2015-16 — and allowed time to respond up to 8 June 2022. Despite this, the order under Section 148A(d) and the consequential fresh notice under Section 148 were both issued only on 27 July 2022, well after the response deadline.

The core question before the Tribunal was whether this July 2022 notice was validly within the limitation window available to the Revenue under Section 149 of the Income Tax Act, 1961, read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

The Tribunal held that the controversy was no longer res integra, having been comprehensively addressed by the Supreme Court in Union of India v. Rajeev Bansal, [2024] 469 ITR 46 (SC).

What Rajeev Bansal Established

The Supreme Court in Rajeev Bansal clarified the precise mechanism for computing limitation in cases where old Section 148 notices issued during the TOLA-extended window were subsequently treated as Section 148A(b) notices by virtue of Ashish Agarwal: