ITAT Mumbai on Time-Barred Reassessment: Impact of TOLA, Ashish Agarwal and Rajeev Bansal

Background of the Dispute

In ACIT Vs Vinay Kumar Gupta (ITAT Mumbai), the Mumbai Bench of the Income Tax Appellate Tribunal examined whether a reassessment notice dated 31.07.2022 could survive in law in view of the limitation framework laid down in the Income Tax Act 1961, read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the subsequent directions of the Hon’ble Supreme Court in:

  • Union of India vs Ashish Agarwal [2022] 444 ITR 1 (SC), and
  • Union of India v/s Rajeev Bansal (2024) 469 ITR 46 (SC)

The Revenue’s appeal challenged the decision of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)], who had quashed the reassessment on the ground that the Section 148 notice was time-barred. The assessee, on the other hand, filed a cross-objection raising jurisdictional as well as merit-based challenges, including additions under Section 68 and levy of interest under Section 234B.

The core controversy revolved around how to compute the remaining (surviving) period of limitation available to the Assessing Officer (AO) after the Supreme Court’s directions in Ashish Agarwal and the methodology of computation clarified in Rajeev Bansal.

Parties Before the Tribunal

  • Appellant: Revenue (ACIT)
  • Respondent / Cross-objector: Assessee – an individual, Mr. Vinay Kumar Gupta
  • Assessment Year: 2013-14
  • Impugned Order: Dated 13/11/2025 passed under Section 250 by the CIT(A), NFAC, Delhi

Revenue’s Grounds of Appeal – Key Contentions

The Revenue’s appeal raised multiple grounds, broadly contending that:

  1. The CIT(A) erred in treating the notice under Section 148 issued on 21.06.2021 as barred by limitation, allegedly ignoring the extensions granted by TOLA in the backdrop of the COVID-19 pandemic.

  2. The CIT(A) wrongly interpreted Union of India v. Ashish Agarwal, contending that the Supreme Court had preserved the old Section 148 notices as show-cause notices under Section 148A(b), and hence those notices could not be regarded as invalid.

  3. The extended ten-year time limit under the amended Section 149(1)(b)—applicable where escaped income exceeding Rs. 50 lakhs is represented in the form of an asset—was allegedly not properly considered, especially when the Revenue claimed that unaccounted credits crossing this threshold existed in the assessee’s case.

  4. The CIT(A) erred in treating the reassessment initiated under Section 147 read with Section 144B as invalid and without jurisdiction, despite the AO’s alleged compliance with procedural timelines under Section 148A(d).

  5. The Revenue argued that the assessee’s computation of limitation under Section 148A(d) was incorrect, and that quashing the assessment on limitation grounds unfairly deprived the Department of an opportunity to bring escaped income to tax.

  6. It was further contended that the legal fiction created in Ashish Agarwal provided the Department with sufficient time to complete reassessment proceedings, and that the CIT(A)’s narrow reading undermined the purpose of the reassessment regime.

  7. The Revenue also pressed that limitation provisions in such matters should be construed liberally in favour of the Revenue, particularly where procedural safeguards were asserted to have been followed.

  8. Finally, it was alleged that the CIT(A)’s view conflicted with precedents favouring substantive justice over strict adherence to timelines in reassessment matters.

Assessee’s Cross-Objections – Main Issues Raised

The assessee’s cross-objection comprised three broad sets of contentions:

1. Limitation and Section 149(1)(b)

  • The assessee contended that the notice under Section 148 was invalid as there was no escaped income represented in the form of an “asset” as required under Section 149(1)(b) for reopening beyond three years.
  • It was argued that any Section 148 notice issued after the initial three-year period without satisfying the “asset” condition under Section 149(1)(b) was void ab initio and liable to be quashed.

2. Addition Under Section 68 – Rs. 2,20,85,843/-

  • The assessee objected to the addition of Rs. 2,20,85,843/- as unexplained cash credits under Section 68, asserting that the AO had made the addition purely on conjectures and assumptions.
  • Deletion of the entire addition was sought.

3. Interest Under Section 234B