Pune ITAT on Time Limitation for Reassessment: Section 148 Notice for AY 2015-16 Held Invalid

Background of the Dispute

The Pune Bench of the ITAT in the case of Vishal Shankar Chavan Vs ITO (ITAT Pune) examined the validity of a reassessment notice issued under Section 148 for Assessment Year 2015-16 on 05.04.2022. The core controversy was whether such notice was within the permissible limitation period under the amended Section 149(1) read with its first proviso.

The Tribunal ultimately concluded that the notice was barred by limitation, quashed the reassessment, and allowed the assessee’s appeal, relying heavily on the legal position clarified by the Supreme Court and the Bombay High Court in a series of decisions, particularly focusing on reassessments for AY 2015-16.

Procedural History

Assessment and Reassessment Proceedings

1. Information through Risk Management Systems (NMS)

   • The income-tax department, using data from the Risk Management Strategy (NMS) portal, noted that the assessee had:
     • Invested Rs. 62,84,337/- in time deposits, and
     • Deposited cash aggregating to Rs. 11,66,500/- in a bank account
       during Financial Year 2014-15, relevant to AY 2015-16.
   • The department also recorded that the assessee had not filed a return of income for AY 2015-16.

2. Proceedings under Section 148A

   • With appropriate approval from the specified authority, the Assessing Officer (AO) issued a show cause notice under Section 148A(b).
   • The assessee did not submit any reply or explanation in response to the notice.
   • Based on the information and non-compliance, the AO concluded that income had escaped assessment in the case of a non-filer and passed an order under Section 148A(d), holding it to be a fit case for issue of notice under Section 148.

3. Issue of Section 148 Notice and Ex-Parte Assessment

   • Pursuant to the order under Section 148A(d), a notice under Section 148 was issued on 05.04.2022.
   • The AO also issued a notice under Section 142(1) calling for details and evidences regarding the source of the cash deposits and time deposits.
   • Despite the opportunities provided, the assessee did not file submissions or comply with the notices.
   • The AO, proceeding ex parte under Section 144, invoked Section 69A and made an addition of Rs. 74,50,837/- treating the deposits as unexplained money.
   • The reassessment order was passed under Section 147 read with Section 144 and Section 144B on 19.03.2024.

First Appeal Before CIT(A)

The assessee challenged the reassessment order before the NFAC/CIT(A) under Section 250, raising multiple grounds, including jurisdictional issues, limitation, and absence of escapement of income meeting the conditions of the amended reassessment regime.

The CIT(A), after considering:

• The grounds of appeal,
• Statement of facts,
• Written submissions of the assessee, and
• The AO’s findings,

chose to restore the issues to the file of the AO for fresh verification, and allowed the appeal for statistical purposes only, effectively keeping the reassessment proceedings alive.

Dissatisfied, the assessee approached the ITAT Pune.

Grounds Raised Before the Tribunal

Among several grounds, the assessee principally urged that:

• The notice under Section 148 dated 05.04.2022 for AY 2015-16 was beyond the time limit of six years as per the law applicable for the relevant period.
• In light of the amended Section 149 and its first proviso, the notice ought to have been issued on or before 31.03.2022 and any notice thereafter was time-barred.
• Consequently, the entire reassessment proceedings and the resultant order under Section 147 read with Section 144/144B were void and liable to be quashed.

At the hearing, the assessee’s authorised representative did not press Ground No. 1 relating to the challenge on the basis of Section 151A, and that ground was treated as withdrawn. The submissions were confined to the legal challenge on limitation under Section 149.