ITAT Delhi Quashes Reassessment as Time-Barred Despite Ashish Agarwal Transition Regime

Background

The Delhi Bench of the Income Tax Appellate Tribunal has struck down reassessment proceedings against K&S Fincon Pvt. Ltd. for Assessment Year 2013–14, holding that the notice issued under Section 148 of the Income Tax Act was barred by limitation, even after accounting for the special transition mechanism evolved by the Supreme Court in Union of India v. Ashish Agarwal. The assessee had originally filed its return in October 2013, which was scrutinised and culminated in a completed assessment in March 2016. Several years later, based on investigation inputs alleging routing of funds through alleged shell entities, the Assessing Officer issued a reopening notice under the old regime on 7 June 2021, relying on pandemic-related extensions under TOLA. Following the Supreme Court’s directions in Ashish Agarwal, the old notice was deemed a show cause under Section 148A(b), culminating in a fresh notice under Section 148 on 20 July 2022.

Outcome

Before the Tribunal, the assessee challenged the very jurisdiction to reopen, contending that the surviving limitation period expired on 25 June 2022. Placing reliance on the Constitution Bench ruling in Union of India v. Rajeev Bansal, it was argued that while the Supreme Court had “stopped the clock” during the transition, the Revenue was still bound to act within the residual time available after exclusions. Accepting the contention, the Tribunal held that once the permissible extended period lapsed, the reassessment notice issued on 20 July 2022 was legally unsustainable. It rejected the Revenue’s objection that the issue had not been decided by NFAC, reiterating that a pure question of jurisdictional limitation could be examined at the appellate stage.

Consequently, the reassessment proceedings were quashed as void ab initio, rendering all other additions academic.