ITAT Rajkot Holds AY 2015-16 Reopening Invalid: TOLA Cannot Revive Time-Barred Reassessment

1. Overview of the Dispute

The Rajkot Bench of the Income Tax Appellate Tribunal, in Pratik Bhut Vs ITO (ITAT Rajkot), ITA No. 1161/RJT/2026, has held that a reassessment initiated for AY 2015-16 on the basis of a notice issued under Section 148 on 29/07/2022 was barred by limitation. Applying the principles laid down by the Supreme Court in Union of India v. Rajeev Bansal, (2024) 469 ITR 46, as well as the subsequent ruling in Deepak Steel and Power Ltd., [2025] 174 taxmann.com 144 (Supreme Court) and the Gujarat High Court judgment in Sorathia Mahesh Veljibhai HUF, [2025] 179 taxmann.com 54, the Tribunal held that the notice could not be rescued by the relaxation provisions of TOLA (Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020).

With the jurisdictional foundation of the reassessment knocked out, the ITAT set aside both the Section 148 notice and the consequential Section 147 r.w.s. 144B order dated 19/05/2023. As a result, the Tribunal did not adjudicate on the disputes relating to profit estimation, turnover allocation or the evidentiary value of the Excise statement.

2. Brief Facts and Assessment Proceedings

2.1 Original Return and Subsequent Information

  • The assessee (an individual) originally filed the return of income for AY 2015-16 on 29/01/2016 declaring total income of Rs. 7,28,320.
  • Later, the Assessing Officer received a communication dated 01/01/2020 from ACIT, Circle-2(2), Jamnagar.
  • That letter conveyed information arising from a search conducted by the Central Excise Department at the premises of M/s Krupalu Metals Pvt Ltd.
  • During the Excise proceedings, the statement of the assessee (referred to in the order as Shri Rasiklal K. Bhutt) was recorded on 09/02/2015.
  • In that statement, the assessee is recorded as having admitted to purchasing goods without invoices from M/s Krupalu Metals Pvt Ltd and also to having effected total sales of Rs. 1,88,53,462 during F.Y. 2014-15.

2.2 Initiation of Reassessment

Relying on this information, the then jurisdictional Assessing Officer obtained statutory approval and initiated reassessment proceedings under Section 147. A notice under Section 148 dated 29/07/2022 was issued and served upon the assessee.

In response, the assessee filed a return on 21/11/2022 reiterating the same income of Rs. 7,28,320 that had been disclosed in the original return. The Assessing Officer thereafter issued a show-cause notice seeking an explanation in respect of the alleged unaccounted dealings with M/s Krupalu Metals Pvt Ltd.

2.3 Assessee’s Explanation on Merits

Before the Assessing Officer, the assessee submitted that:

  • Income had been declared on a presumptive basis under Section 44AD.
  • The declared turnover was Rs. 95,33,360, on which presumptive profit of 8% (Rs. 7,62,669) had been offered to tax.
  • Being covered by Section 44AD, the assessee asserted that he was not under obligation to maintain detailed books of account.
  • The assessee produced the return, computation of income and bank statements, and contended that once income had been declared under Section 44AD, further addition was unwarranted.

2.4 Estimation of Profit by the Assessing Officer

The Assessing Officer rejected the assessee’s explanation, observing in essence that:

  • The cash element in alleged off-the-books transactions represented unaccounted assets/transactions not recorded in the regular books.
  • The assessee had, according to the AO, indulged in purchase and sale outside the regular records, thereby escaping tax on such dealings.
  • Nevertheless, in line with judicial precedents, the AO considered that the entire turnover of Rs. 1,88,53,462 could not be assessed as income.

Instead, he estimated net profit at 20% of Rs. 1,88,53,462, which worked out to Rs. 37,70,692. From this figure, he reduced an amount of Rs. 13,16,805 (profit already included in the assessed computation as per his working), and added the net difference of Rs. 24,53,887 to the assessee’s income.

2.5 First Appeal Before CIT(A)/NFAC

The assessee carried the matter in appeal before the NFAC/Ld. CIT(A) under Section 250, challenging both:

  • The validity of the reassessment proceedings under Section 147 and Section 148; and
  • The estimated addition of Rs. 24,53,887 based on 20% profit on the alleged turnover.

The CIT(A) upheld the Assessing Officer’s action, both on jurisdiction and on merits.

3. Grounds Raised Before the ITAT

The legal heir of the original assessee filed an appeal before the ITAT, raising multiple grounds, of which the following were crucial:

1.