Reassessment Held Time-Barred: Analysis of ACIT Vs Bhageria Industries Limited (ITAT Mumbai)

Background of the Dispute

The decision in ACIT Vs Bhageria Industries Limited (ITAT Mumbai) revolves around whether a reassessment for Assessment Year 2014-15 could lawfully be sustained when the notice under Section 148 was issued after the expiry of the residual limitation period, as interpreted by the Hon’ble Supreme Court in Union of India v. Rajeev Bansal, 469 ITR 46 (SC).

The reassessment originated from a notice issued under the old reassessment regime just a week before the extended limitation ended under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Following the Supreme Court ruling in Union of India v. Ashish Agarwal, [2022] 444 ITR 1 (SC), the proceedings were migrated to the new scheme under Section 148A. However, the subsequent steps taken by the Revenue overshot the balance time that was still available to them, rendering the proceedings time-barred.

The Revenue’s appeal before the Mumbai Bench of the ITAT and the cross-objection filed by the assessee both stemmed from the order passed by the CIT(A)-NFAC, Delhi dated 24.11.2025 for AY 2014-15. The assessee, Bhageria Industries Limited, specifically assailed the legality of the reassessment on the ground of limitation.

Core Issue: Validity of Reassessment in Light of Limitation

The central controversy was straightforward:

  • Whether the notice issued under Section 148 and the consequential reassessment order for AY 2014-15 were within the permissible time limit prescribed under the law, considering:
    • The extended limitation under TOLA,
    • The validation and conversion of old notices as per Union of India v. Ashish Agarwal, and
    • The computation of “surviving time” as laid down in Union of India v. Rajeev Bansal.

The assessee’s cross-objection contended that, when the timelines are correctly computed following these Supreme Court decisions, the final notice and order were issued after the expiry of the balance limitation period and therefore had no legal foundation.

Assessee’s Arguments in the Cross-Objection

Challenge to Limitation

The assessee’s counsel highlighted the chronology of events and anchored the challenge on the Supreme Court’s ruling in Union of India v. Rajeev Bansal. The essence of the argument was:

  1. Original notice under old regime

    • A notice under Section 148 (pre-amended law) was issued on 23.06.2021.
    • The limitation for issuing such notice had been extended by TOLA up to 30.06.2021.
    • Consequently, as of 23.06.2021, only 7 days of the extended limitation period remained.

  2. Effect of Ashish Agarwal decision

    • The Supreme Court in Union of India v. Ashish Agarwal validated the old Section 148 notices and directed that they be treated as Section 148A(b) notices under the new regime.
    • Pursuant to this, the Assessing Officer issued a fresh Section 148A(b) notice on 25.05.2022, allowing two weeks to respond.

  3. Reply and surviving time

    • The assessee furnished its reply on 07.06.2022.
    • In line with the principle set out in Union of India v. Rajeev Bansal, the period granted to the assessee for filing a response is to be excluded when calculating limitation.
    • After such exclusion, the Revenue was left only with the surviving 7 days that existed as on 30.06.2021.