ITAT Raipur Confirms Reassessment Quashing for AY 2015-16: Section 148 Notices Post 01-04-2021 Held Invalid Under TOLA Framework

Background of the Dispute

The Raipur Bench of the Income Tax Appellate Tribunal addressed a critical jurisdictional matter concerning the validity of reassessment proceedings initiated for Assessment Year 2015-16. The case ITO vs. Kanha Grain Process [ITA No.260/RPR/2025, AY 2015-16, order dt. 01-01-2026] centered on whether notices issued under Section 148 after April 1, 2021, could sustain the reassessment process, particularly in light of the Supreme Court's binding directions in Union of India vs. Rajeev Bansal.

The assessee entity operates as a partnership concern dealing in rice milling operations along with paddy and rice trading activities. For the relevant assessment year, the firm had submitted its income declaration on September 29, 2015, reporting taxable income amounting to Rs. 8,01,710.

Original Assessment and Subsequent Scrutiny

The assessment underwent scrutiny selection through the Computer Assisted Scrutiny Selection (CASS) mechanism. The Assessing Officer concluded the original assessment proceedings under Section 143(3) of the Income Tax Act, 1961 on December 16, 2017, computing the total taxable income at Rs. 37,39,870 after incorporating adjustments totaling Rs. 29,38,157.

The matter took a different turn when intelligence inputs reached the tax department suggesting that the assessee had indulged in obtaining bogus purchase invoices. Specifically, the information indicated alleged fictitious purchases aggregating Rs. 44,87,500 from M/s. Maa Sharda Process and Rs. 74,12,500 from M/s. Shri Vaishno Devi Exim, totaling Rs. 1,19,00,000.

Timeline of Reassessment Initiation

First Notice Under Old Regime

Based on the suspicious transaction details, the Assessing Officer initiated reassessment proceedings by issuing a notice under Section 148 dated June 30, 2021, following the pre-amendment procedural framework. This notice received necessary approval from PCIT-1, Raipur before issuance.

Impact of Supreme Court Intervention

Following the Supreme Court's judgment in Union of India vs. Ashish Agarwal and subsequent CBDT Instruction No.01/2022 dated May 11, 2022, the revenue authorities undertook fresh procedural steps. The Assessing Officer issued a show-cause notice under Section 148A(b) on May 24, 2022, followed by an order under Section 148A(d) dated July 21, 2022.

Second Notice Under New Framework

Consequent to these procedural compliances, a fresh notice under Section 148 was dispatched on July 23, 2022, this time under the amended reassessment provisions, after securing approval from the Chief Commissioner of Income Tax.

Completion of Reassessment

The Assessing Officer finalized the reassessment under Section 147 read with Section 144B on May 23, 2023, determining the total income at Rs. 1,27,01,710. This involved treating Rs. 1,19,00,000 as unexplained expenditure under Section 69C of the Act on grounds of bogus purchase transactions.

Proceedings Before CIT(A)/NFAC

The assessee challenged both the jurisdictional validity of the reassessment initiation and the merits of additions before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre.

CIT(A)'s Jurisdictional Analysis

The appellate authority focused on the fundamental jurisdictional question regarding the validity of reassessment notices issued for Assessment Year 2015-16 after April 1, 2021. The CIT(A)/NFAC extensively relied on the concession recorded before the Supreme Court where the Additional Solicitor General of India, representing the Revenue, had categorically stated that:

For Assessment Year 2015-16, all notices issued under Section 148 on or after April 1, 2021, would have to be dropped as they would not fall for completion during the period prescribed under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

Reasoning Adopted by First Appellate Authority

The CIT(A)/NFAC observed that the Revenue had admitted that notices issued under Section 148 after April 1, 2021, following the old reassessment regime were legally infirm for Assessment Year 2015-16. Consequently, the reassessment proceedings initiated through the notice dated June 30, 2021, under the pre-amendment provisions, lacked valid jurisdiction.

The appellate authority further noted that since the initial notice itself was jurisdictionally defective, the subsequent notice dated July 23, 2022, issued under the new regime could not cure this fundamental defect. The entire reassessment process therefore collapsed due to absence of valid jurisdiction at its inception.

Following binding precedents from the Supreme Court and adhering to the categorical stand of the Revenue as articulated by the Additional Solicitor General, the CIT(A)/NFAC held that:

  • The assumption of jurisdiction for initiating reassessment was legally unsustainable
  • The impugned assessment order suffered from jurisdictional invalidity
  • The appeal deserved to be allowed without examining merits

Revenue's Appeal Before ITAT

Aggrieved by the complete relief granted to the assessee, the Income Tax Department approached the Tribunal raising multiple grounds challenging the CIT(A)'s decision.

Grounds Raised by Revenue

The Department contended through four substantive grounds:

  1. Validity of Fresh Notice: The Revenue argued that the notice issued on July 23, 2022, under Section 148 was legally valid as it was issued after obtaining approval from the Chief Commissioner of Income Tax in compliance with the Supreme Court's directions in Union of India vs. Ashish Agrawal dated May 4, 2022.

  2. Timeliness Argument: The Department emphasized that the reassessment notice dated July 23, 2022, fell within the timeframe prescribed by the Supreme Court in Union of India vs. Ashish Agrawal, making it procedurally sound.

  3. Reliance on Wrong Precedent: The Revenue contended that the CIT(A)/NFAC erred in relying on Union of India vs. Rajeev Bansal without considering the facts demonstrating valid issuance of the second notice.

  4. Merit Examination: The Department argued that the first appellate authority should have examined the substantive issues involving alleged bogus purchases instead of striking down reassessment on technical grounds.

Arguments Before the Tribunal

Revenue's Position

The Departmental Representative submitted that since the reassessment proceedings culminated with a notice on July 23, 2022, which was within the timeframe prescribed by the Supreme Court in Union of India vs. Ashish Agarwal, the CIT(A)/NFAC should not have relied on Union of India vs. Rajeev Bansal (2024) 167 com 70 (SC). The learned DR emphasized that the merits of additions should have been adjudicated rather than quashing proceedings on limitation grounds.

Assessee's Submissions

The authorized representative for the assessee relied extensively on recent High Court pronouncements dealing with identical situations.

Reliance on Delhi High Court Precedent

The counsel referred to Veena Jain vs. ITO reported in (2025) 175 com 101 (Del), wherein the Delhi High Court categorically held:

For Assessment Year 2015-16, notices issued under Section 148 on or after April 1, 2021, would have to be dropped as they would not fall for completion during the period prescribed under TOLA.

Citation of Bombay High Court Decision

Further reference was made to Cherian Nallathu Abraham Annamma vs. ITO reported in (2025) 179 com 433 (Bom), where the Bombay High Court ruled:

Where the Assessing Officer issued reopening notice to assessee for Assessment Year 2015-16 on April 5, 2022, since Revenue had categorically made a concession before Supreme Court in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70/ 301 Taxman 238/ 469 ITR 46 (SC) that for Assessment Year 2015-16 it would drop all notices issued under Section 148 after April 1, 2021, impugned notice dated April 5, 2022, and all consequential orders/notices would not survive.

The assessee's counsel argued that given the undisputed fact pattern—initial notice under old regime on June 30, 2021, followed by fresh notice under new framework on July 23, 2022—both the Delhi and Bombay High Court decisions squarely covered the situation, necessitating quashing of reassessment proceedings.

Tribunal's Analysis and Findings

Factual Matrix Examination

The Tribunal began by recording the admitted facts: