ITAT Delhi Sets Aside Section 148 Notice as Time-Barred Following Supreme Court's Rajeev Bansal Precedent in Hisar Leading Bank Case

Overview of the Tribunal Decision

The Income Tax Appellate Tribunal (ITAT), Delhi Bench 'E', delivered a significant ruling in The Hisar Leading Bank Co-op Non-Agri Thrift & Credit Society v. ITO for Assessment Year 2014-15, striking down reassessment proceedings on grounds of limitation. The Tribunal concluded that the notice issued under Section 148 dated 27.07.2022 exceeded the statutory time limit prescribed under law.

The assessee in question operates as a co-operative credit society and had not submitted an original return for AY 2014-15. The reassessment was triggered based on alleged cash deposits amounting to Rs. 7.68 crore. The proceedings culminated in an ex-parte assessment under Section 147 read with Section 144B, wherein the entire cash deposits were treated as unexplained credits under Section 68 and subjected to tax under Section 115BBE.

The Commissioner of Income Tax (Appeals) initially sustained both the reassessment action and the additions made. However, before the Tribunal, the assessee challenged the proceedings solely on the legal ground of limitation, placing substantial reliance on the Supreme Court's landmark judgment in Union of India v. Rajeev Bansal.

Background Facts of the Case

The factual matrix, as extracted from the appellate order, reveals the following chronology:

The assessee is a Non-Agricultural Thrift and Credit Co-operative Society. No income tax return under Section 139(1) was filed for Assessment Year 2014-15. A notice under Section 148 was initially issued on 21.06.2021. Subsequently, following the directions of the Supreme Court in its judgment dated 04.05.2022 in Union of India vs. Ashish Aggarwal, all notices issued under Section 148 between 01.04.2021 and 30.06.2021 were deemed to be show cause notices issued under clause (b) of Section 148A.

Without formally closing the proceedings relating to the notice dated 21.06.2021, a fresh notice under Section 148A(b) was issued on 28.05.2022. Thereafter, an order under Section 148A(d) was passed on 27.07.2022, followed by a notice under Section 148 on 27.07.2022.

The assessee raised multiple procedural and substantive objections, including non-supply of material and information, absence of Document Identification Number (DIN) on the notice, lack of digital signature, and non-compliance with faceless assessment procedures. The assessee filed a return on 28.11.2022 in response to the Section 148 notice, declaring income of Rs. 4,660.

Despite submitting replies to notices issued under Section 142(1) along with statutory audit reports, balance sheets, profit and loss accounts, annexures, cash books, and computation of income, the Assessing Officer proceeded to frame the assessment order on 19.05.2023. The addition of Rs. 7,68,03,950 was made on account of cash deposited in bank account no. 0337030100000071 maintained with J&K Bank.

Assessment Proceedings and Additions

The assessment order was passed under Section 144B of the Act. The Assessing Officer noted in para 4.2 of the assessment order that a show cause notice dated 17.04.2023 had been issued during the assessment proceedings. The assessee failed to comply with this notice, which the Assessing Officer interpreted as an admission that the assessee had nothing to explain regarding the issues under consideration.

Consequently, the Assessing Officer made an addition of Rs. 7,68,03,950 as unexplained cash credit under Section 68 read with Section 115BBE of the Act. This addition treated the entire cash deposits as income from undisclosed sources, attracting the higher rate of taxation and restrictions on set-off and carry forward of losses under Section 115BBE.

Appellate Proceedings Before CIT(A)

Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). Ground No. 8 of the appeal specifically challenged that the notice issued under Section 148 was time-barred and had not been issued in a faceless manner as required under law.

The CIT(A) disposed of this ground along with nine other grounds in para No. 7 of the appellate order. However, upon careful examination of the CIT(A)'s order, it becomes evident that no specific finding was recorded on the critical plea that the notice under Section 148 was barred by limitation.

Instead, the CIT(A) presumed that all notices had been received by the assessee merely because one notice dated 02.02.2023 was allegedly received. The CIT(A) further observed that there existed a presumption in favour of the department that earlier notices were served upon the appellant. Based on this reasoning, the ground relating to the reopening of assessment under Section 148 was rejected and dismissed.

Grounds of Appeal Before ITAT

Dissatisfied with the order of the CIT(A), the assessee approached the Tribunal raising thirteen detailed grounds of appeal, including:

  1. The order under Section 147 read with Section 144B dated 19.05.2023 was without jurisdiction
  2. Confirmation of the addition of Rs. 7,68,03,950 under Section 68 was erroneous
  3. Adequate opportunity was not afforded
  4. Proceedings under Section 147 were initiated without there being any valid reason to believe that income had escaped assessment
  5. Copy of reasons and approval granted by the Specified Authority were not provided
  6. Notices under various sections were not properly served
  7. Notice under Section 148 dated 27.07.2022 was not issued as per prescribed notification
  8. Notice under Section 148 dated 27.07.2022 uploaded on the portal was without digital signature
  9. Notice under Section 148 dated 27.07.2022 was time-barred
  10. Application of Section 115BBE was unjustified
  11. Procedure as per Section 144B was not followed
  12. Earlier notice under Section 148 dated 21.06.2021 was not properly closed before issuing fresh notice on 27.07.2022

Submissions Before the Tribunal

Arguments by the Assessee

At the outset of the hearing, the learned Authorized Representative for the assessee drew the Tribunal's attention to page No. 1 of the paper book, which contained a detailed tabular calculation demonstrating that the notice under Section 148 was time-barred.

The learned counsel submitted that the case was squarely covered by the authoritative judgment of the Supreme Court in Union of India & Ors. vs. Rajeev Bansal (Civil Appeal No. 8629/2024 etc.) [(2024) 469 ITR 46 (SC)]. It was contended that neither the Assessing Officer nor the CIT(A) had properly considered the aspect of limitation while examining the validity of the notice under Section 148.

The assessee pressed Ground No. 10, which specifically challenged the jurisdiction of the Assessing Officer to initiate reassessment proceedings on the ground that the notice under Section 148 was barred by limitation. It was submitted that in view of the Supreme Court's judgment in Union of India v. Rajeev Bansal [(2024) 167 taxmann.com 70 (SC)], reassessment proceedings initiated under the old or unamended provisions of Section 148, read with the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ("TOLA"), were without authority of law.

The counsel contended that for Assessment Year 2014-15, the limitation for issuance of notice under the amended provisions of Section 148, as saved by the first proviso to Section 149, expired on 31.03.2021. Therefore, the Assessing Officer could not have resorted to the old provisions by invoking TOLA. Since the notice under Section 148 pursuant to Section 148A(d) was issued on 27.07.2022, it was well beyond the permissible limitation.

The assessee also relied on the decision of the Coordinate Bench of the Tribunal in the case of Shivani Tayal in ITA No. 5833/Del/2024, which dealt with identical issues and quashed time-barred notices following the Rajeev Bansal decision.

Submissions by the Revenue

The learned Senior Departmental Representative, after being supplied with the paper book and examining page No. 1 containing the tabular calculation for determining whether the notice was time-barred, submitted that the Bench may consider the submissions regarding applicability of the Supreme Court's judgment in Rajeev Bansal at its own discretion.

The learned Senior DR prayed for restoring the file to the Assessing Officer for deciding the matter afresh. Per contra, the learned DR relied on the orders of the lower authorities sustaining the reassessment proceedings.

Detailed Timeline Analysis

The Tribunal examined the detailed timeline provided in the paper book to determine whether the notice dated 27.07.2022 under Section 148 was within the prescribed limitation period. The key dates and periods relevant for computation were: