ITAT Hyderabad Invalidates Reassessment: Notices Dispatched on 01.04.2021 Must Comply with Amended Section 148A Regime

The transition from the old reassessment regime to the new framework introduced by the Finance Act 2021 has been a subject of intense legal scrutiny. A critical point of contention often revolves around the exact date a notice is considered "issued" under the Income Tax Act 1961. In the landmark ruling of Mahender Merugu Vs ITO, the ITAT Hyderabad provided absolute clarity on this matter, determining that the date a notice leaves the control of the assessing authority dictates the applicable legal framework.

This comprehensive summary breaks down the tribunal's decision, exploring the factual timeline, the legal arguments presented, and the ultimate quashing of the reassessment proceedings due to procedural lapses under Section 148A and Section 151.

Background and Factual Matrix

The dispute pertains to the assessment year 2017-2018. The assessing authorities initiated reassessment proceedings against the assessee, culminating in an order passed under Section 147 read with Section 144B of the Income Tax Act 1961. Within this assessment, a substantial addition amounting to Rs. 1,36,76,435/- was made under Section 69A, citing unverified sources of bank deposits.

The assessee escalated the matter, challenging the addition before the CIT(A)-National Faceless Appeal Centre (NFAC), Delhi. However, the appellate authority upheld the addition via an order dated 26.03.2025. Consequently, the assessee approached the ITAT Hyderabad.

The Timeline of the Disputed Notice

The entire foundation of the legal challenge rested on the chronological sequence of the reassessment notice:

  1. Date on the Notice: The physical document was dated 31.03.2021.
  2. Internal Dispatch: The internal dispatch register of the revenue department indicated generation and dispatch on 31.03.2021.
  3. Postal Handover: The postal covers were physically handed over to the postal authorities at Mancherial on 01.04.2021 at 14:48 hours.
  4. Electronic Delivery: The notice was subsequently transmitted to the assessee's registered email address on 08.04.2021.
  5. Postal Return: The physical speed post envelope was returned unserved on 06.04.2021.

During the tribunal proceedings, the authorized representative for the assessee introduced critical additional legal grounds challenging the very jurisdiction of the reassessment.