ITAT Surat Quashes Rs. 1.20 Crore Reassessment Order Over Expiry of Surviving Limitation Period

The legal landscape surrounding reassessment proceedings has witnessed significant turbulence following the transition from the old statutory regime to the new framework introduced by the Finance Act, 2021. A central point of litigation has been the computation of limitation periods for notices issued during the transitional phase, heavily influenced by the extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

In a recent judicial pronouncement, the Income Tax Appellate Tribunal (ITAT), Surat Bench, delivered a critical ruling in the case of Bhavarlal Mangilal Jat Vs ITO. The Tribunal invalidated a reassessment proceeding that resulted in an addition of Rs. 1,20,70,000, determining that the jurisdictional notice was issued beyond the permissible "surviving time." By strictly applying the principles laid down by the Supreme Court, the ITAT reinforced the doctrine that the preservation of an earlier notice does not grant the Revenue unrestricted time to conclude subsequent statutory actions.

Statutory Background and the Genesis of the Dispute

To fully comprehend the Tribunal's decision, it is essential to contextualize the statutory evolution of reassessment under the Income-tax Act, 1961. Prior to April 1, 2021, the Revenue could reopen assessments based on a "reason to believe" that income had escaped assessment. The Finance Act, 2021 overhauled this mechanism, introducing a structured preliminary inquiry phase under Section 148A before a formal notice under Section 148 could be issued.

Simultaneously, due to the global pandemic, the government enacted the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, which extended various statutory deadlines, including the time limits for issuing reassessment notices under Section 149. The intersection of the extended deadlines and the newly substituted reassessment regime led to widespread legal challenges, culminating in landmark Supreme Court interventions.

Factual Matrix of the Case

As per the order dated 08/10/2026, the procedural history of the dispute unfolded through a specific chronology of events: