ITAT Panaji Quashes Time-Barred Section 148 Notice: Only 14 Days of Limitation Remained, AO Acted 38 Days Too Late

Background and Overview

The Income Tax Appellate Tribunal (ITAT), Panaji Bench, in the case of Venkagouda Krishnagouda Patil Vs Assessment Unit (Assessment Year 2017-18), delivered a significant ruling on the outer limits of reassessment jurisdiction. The Tribunal held that the notice issued under Section 148 of the Income Tax Act, 1961 on 30.07.2022 was barred by limitation, as the Assessing Officer (AO) had exhausted the entire surviving statutory time available under the framework laid down by the Hon'ble Supreme Court. With the notice rendered void, the entire reassessment edifice—including the addition of Rs. 22,71,792/- treated as unexplained investment under Section 69—collapsed.

Factual Matrix

The Assessee's Return and the Survey

The assessee, an individual earning income under multiple heads, filed his return of income on 16.03.2022 declaring a total income of Rs. 14,90,870/-. Separately, a survey operation was conducted under Section 133A of the Income Tax Act, 1961 at the premises of M/s. Lotus Landmarks Pvt. Ltd. During this survey, loose sheets were found and impounded. Revenue authorities examined these documents and concluded that they evidenced receipt of unaccounted cash of Rs. 22,71,792/- by M/s. Lotus Landmarks Pvt. Ltd. from the assessee in connection with his purchase of a flat.

Initiation of Reassessment

On the basis of the above material, the case of the assessee was reopened under Section 147 of the Income Tax Act, 1961 and an original notice under Section 148 was issued on 16.06.2021 under the pre-amendment (old) reassessment regime.

Thereafter, following the Hon'ble Supreme Court's direction in Union of India v. Ashish Agarwal, (2023) 1 SCC 617, that original notice was treated as a deemed show-cause notice under the substituted Section 148A(b). In pursuance of this direction, a fresh notice under Section 148A(b) was issued on 23.05.2022, granting the assessee 15 days, i.e., until 08.06.2022, to file a reply.

Following consideration of the assessee's response, the AO passed an order under Section 148A(d) on 29.07.2022 and issued a fresh notice under Section 148 on 30.07.2022.

Completion of Assessment

The assessee categorically denied having made any unaccounted cash payment of Rs. 22,71,792/-. The AO, however, rejected this explanation and completed the assessment under Section 147 read with Section 144B vide order dated 15.05.2023, determining the total income at Rs. 37,62,662/- as against the declared income of Rs. 14,90,870/-. The disputed cash amount was brought to tax as unexplained investment under Section 69.

First Appellate Stage: CIT(A)/NFAC

The assessee challenged the assessment order before the CIT(A)/NFAC. However, the first appellate authority dismissed the appeal without adequately addressing the submissions placed before it and also declined to entertain the additional ground raised by the assessee. This dismissal prompted the assessee to approach the ITAT, Panaji Bench.

Core Issue Before the ITAT

The Limitation Challenge

Before the Tribunal, the primary contention advanced on behalf of the assessee was that the notice under Section 148 dated 30.07.2022 was issued well beyond the surviving limitation period as determined by the Hon'ble Supreme Court in Union of India vs. Rajeev Bansal, (2024) 469 ITR 46 (SC). It was argued that this jurisdictional defect rendered the notice void ab initio and the entire reassessment proceedings without legal foundation.

The Surviving Time Calculation

The ITAT examined the limitation arithmetic in detail. The following sequence of events was central to the determination:

The analysis revealed that: