Reassessment for AY 2015-16 held time-barred post Rajeev Bansal: ITAT Kolkata in ITO Vs Perfect Wahers & Fasteners (P) Ltd.

Background and case overview

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has reaffirmed the legal position on reassessment time limits under the new regime following the judgment of the Hon’ble Supreme Court in Union of India & Others Vs. Rajeev Bansal.

In ITO Vs Perfect Wahers & Fasteners (P) Ltd., pertaining to Assessment Year (AY) 2015-16, the ITAT upheld the order of the National Faceless Appeal Centre (NFAC) / CIT(A) deleting the reassessment on the ground that the notice issued under Section 148 on 29.07.2022 was beyond the permissible period of limitation.

The Tribunal concluded that, once the ratio laid down in Union of India & Ors. Vs. Ashish Agarwal and subsequently clarified and structured in Union of India & Others Vs. Rajeev Bansal is applied, the “surviving” limitation period for issuing a valid notice under the new Section 148 for AY 2015-16 expired on 16.06.2022. Since the reassessment notice was actually issued on 29.07.2022, the entire reassessment was held to be void for want of jurisdiction.

As a result, all additions made on the merits—running into several crores—were rendered academic and the Revenue’s appeal was dismissed in full.

Facts of the case

Business and return filing

  • The assessee, Perfect Wahers & Fasteners (P) Ltd., is engaged in manufacturing and export of industrial fasteners.
  • For AY 2015-16, the assessee filed its return of income on 30.09.2015, declaring a total income of Rs. 1,34,100.

Basis for reopening

The case was reopened based on specific information received by the Assessing Officer (AO) alleging:

  • The assessee was a beneficiary of bogus sales during Financial Year 2014-15 (relevant to AY 2015-16).
  • The alleged bogus sales amounted to Rs. 4,68,40,576 shown to the concern M/s. TIF Castings Ltd., treated as a shell entity.

Separately, information also indicated that the assessee had obtained an accommodation entry of Rs. 10,00,000 from M/s. Juhi Advisory Pvt. Ltd., another alleged shell entity.

Original notice under old Section 148

  • A notice under Section 148 (old regime) was issued for AY 2015-16 on 18.06.2021.
  • This notice fell within the period 01.04.2021 to 30.06.2021, which later came to be governed by the decision of the Hon’ble Supreme Court in Union of India & Ors. Vs. Ashish Agarwal.

Under Ashish Agarwal, all such notices issued between 01.04.2021 and 30.06.2021 under the old Section 148 were deemed to be show cause notices under Section 148A(b) of the new regime.

Proceedings under Section 148A and fresh notice under new regime

In compliance with Ashish Agarwal and CBDT Instruction No. 01/2022 dated 11.05.2022, the jurisdictional AO:

  1. Treated the earlier notice dated 18.06.2021 as a deemed notice under Section 148A(b).
  2. Issued a show cause notice under Section 148A(b) on 20.05.2022, along with the information/material relied upon.
  3. Passed an order under Section 148A(d) on 29.07.2022, holding it to be a fit case for issuing a notice under Section 148.
  4. On the same date, 29.07.2022, issued a fresh notice under Section 148 (new regime).

In response, the assessee filed its return on 10.08.2022, declaring total income of Rs. 1,34,098.

Reassessment order

The assessment was then completed under Section 147 read with Section 144B via order dated 29.05.2023, determining total income at Rs. 5,50,74,674 by making, inter alia:

  • Addition on bogus sales of Rs. 4,68,40,576 under Section 68, and
  • Addition of unexplained cash credit of Rs. 81,00,000 under Section 68.

The assessee challenged the reassessment before the CIT(A) (NFAC), primarily on the additions made. During appellate proceedings, the assessee raised additional legal grounds, particularly after the decision of the Hon’ble Supreme Court in:

  • Union of India & Others Vs. Rajeev Bansal (W.P. (C) 8629/2024)

The assessee specifically sought: