CLAN LABORATORIES PVT. LTD.,CHENNAI V. DCIT, CORPORATE WARD-1(2), CHENNAI

ITA 2303/CHNY/2024

AI Insights

The case involves Clan Laboratories Private Limited appealing against the order of the Commissioner of Income Tax (Appeals) which upheld a reassessment notice issued under Section 148 of the Income Tax Act for the Assessment Year 2015-16. The primary legal contention was whether the notice, issued on 01.04.2021, was valid under the reassessment regime introduced by the Finance Act, 2021, specifically Section 148A. The assessee argued that the notice was invalid as it did not comply with the procedural requirements of the new regime, which were applicable from 01.04.2021. The Revenue contended that the notice was valid under the old regime. The tribunal, referencing the Supreme Court's decision in Rajeev Bansal, found in favor of the assessee, leading to the setting aside of the notice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717297 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 02-09-2024
• Other Referred Cases: Union of India and Ors. vs. Rajeev Bansal, ACIT Vs. Nihal Ashit Shah, Sridhar Lokesh Vs Income Tax Officer & Ors, Ibibo Group Private Limited Vs ACIT, Ramadoss Srikanthi Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: N. ARJUN RAJ
• Keywords: Set aside; Reassessment proceedings; Period of limitation; Block assessment
• Section: 148; 132; 11A

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ Ɋायपीठ, चेɄई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI ŵी मनु क ुमार िगįर, Ɋाियक सद˟ एवं ŵी एस. आर. रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2303/Chny/2024 िनधाŊरण वषŊ/Assessment Year: 2015-16 Clan Laboratories Private Limited, No. 5/A5, Third Cross Road, IT Park, Siruseri, Chennai 603 103. v. The Deputy Commissioner of Income Tax, Corporate Ward 1(2), Chennai. [PAN: AABCC0958K] (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/ Appellant by : Mr. N.Arjun Raj, Advocate ᮧ᭜यथᱮ कᳱ ओर से /Respondent by : Ms. Gouthami Manivasagam, JCIT सुनवाईकᳱतारीख/Date of Hearing : 03.06.2025 घोषणाकᳱतारीख /Date of Pronouncement : 11.08.2025 आदेश / O R D E R PER MANU KUMAR GIRI, JM: This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals) NFAC, Delhi [CIT(A)] dated 10.07.2024 for Assessment Year 2015-16. 2. The assessee seeks to question the invocation of Section 148 of the Income Tax Act, 1961 (the Act) by the revenue in relation to Assessment Year 2015-16. The challenge appears to have been the notice u/s.148 of the Act issued on 01.04.2021. 3. The assessee has contended that since the notice has been issued on 01.04.2021, it would be the reassessment regime as introduced by virtue of Finance Act, 2021 which would have been applicable. This Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 2 :: according to the assessee would have required the department to follow the procedure as prescribed u/s.148A of the Act which has been introduced by virtue of Finance Act, 2021. 4. The ld. counsel for the assessee submitted that the challenge raised in this present appeal would in any event be liable to be answered in favour of the assessee in light of the concession made on behalf of the department before the Supreme Court in Union of India and Ors. vs. Rajeev Bansal 2024 SCC OnLine SC 2693: 167 taxmann.com 70 and when it had been categorically stated that reassessment notices issued for AY 2015-16 would not sustain. 5. The Ld. Counsel further contended that the concession of the Additional Solicitor General as appearing in the judgment of the Supreme Court in Rajeev Bansal is liable to be appreciated bearing in mind the context in which that submission was addressed and the same being whether the period for reopening pertaining to AY 2015-16 would be impacted and regulated by the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). 6. According to ld. counsel even though the provisions of TOLA may not have been applicable for reopening an assessment pertaining to A.Y.2015- Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 3 :: 16, however, since the department in any case had the jurisdiction to reopen right upto 31.03.2022, the proceedings as initiated cannot be faulted. 7. Per contra, the ld. DR argued that the present case is covered in favour of revenue by the Hon’ble jurisdictional High Court in the case of Ramadoss Srikanthi Vs. ACIT [2025] 174 taxmann.com 150 (Madras) [03.04.2025] and hence the legal issue raised by the assessee devoid of merits and prayed for dismissing the same. 8. Having broadly noticed the rival submissions which were addressed, we proceed to examine the jurisdictional / legal challenge hereinafter. The dispute on the aforenoted issue again arose for the consideration of the Supreme Court in Rajeev Bansal’s case. The assessee seeks to draw support from the submissions advanced by the Additional Solicitor General of India that notices issued for AY 2015-16 on or after 01.04.2021 would have to be dropped as they would not fall within the protective umbrella of TOLA. 9. It becomes pertinent to note that the provisions of TOLA had saved the time limit for effecting compliance with statutory obligations which fell for completion within the period 20.03.2020 upto 31.03.2021. The date of Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 4 :: 31.03.2021 was thereafter extended upto 30.06.2021. In order to appreciate the submissions which were addressed on this score, it would be beneficial to reproduce paragraph 19 of the UOI Vs. Rajiv Bansal hereinbelow: - “19. Mr. N. Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: (a) Parliament enacted Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 as a free-standing legislation to provide relief and relaxation to both the assessees and the Revenue during the time of covid-19. Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income-tax Act; (b) Section 149 of the new regime provides three crucial benefits to the assessees : (i) the four-year time limit for all situations has been reduced to three years; (ii) the first proviso to section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years; and (iii) the monetary threshold of Rupees fifty lakhs will apply to the reassessment for the previous assessment years; (c) The relaxations provided under section 3(1) of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 apply “notwithstanding anything contained in the specified Act”. Section 3(1), therefore, overrides the time limits for issuing a notice under section 148 read with section 149 of the Income-tax Act; (d) Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime; (e) The Finance Act, 2021 ((2021) 432 ITR (Stat) 52) substituted the old regime for reassessment with a new regime. The first proviso to section 149 does not expressly bar the application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 3 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-tax Act, including sections 149 and 151 of the new regime. Once the first proviso to section 149(1)(b) is Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 5 :: read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016- 2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: Assessment year Within Years Expiry of Limitation read with TOLA for (2)(3) Within six years (4) Expiry of Limitation read with TOLA for (4)(5) 2013-2014 31.03.2017 TOLA not applicable 31.03.2020 30.06.2021 2014-2015 31.03.2018 TOLA not applicable 31.03.2021 30.06.2021 2015-2016 31.03.2019 TOLA not applicable 31.03.2022 TOLA not applicable 2016-2017 31.03.2020 TOLA not applicable 31.03.2023 TOLA not applicable 2017-2018 31.03.2021 TOLA not applicable 31.03.2024 TOLA not applicable (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020; (g) Section 2 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 defines “specified Act” to mean and include the Income-tax Act. The new regime, which came into effect on April 1, 2021, is now part of the Incometax Act. Therefore, Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 continues to apply to the Income-tax Act even after April 1, 2021; and (h) Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] treated section 148 notices issued by the Revenue between April 1, 2021 and June 30, 2021 as show-cause notices in terms of section 148A(b). Thereafter, the Revenue issued notices under section 148 of the new regime between July and August 2022. Invalidation of the section 148 notices issued under the new regime on the ground that they were issued beyond the time limit specified under the Income-tax Act read with the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will completely frustrate the judicial exercise undertaken by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.].” 10. As is manifest from the above, the Additional Solicitor General appears to have made that submission bearing in mind the time limits ordinarily applicable to AY 2015-16 conditioned by the prescription of time Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 6 :: as applicable in light of Section 149 as well as the Proviso thereto. The argument of the learned Additional Solicitor General which stands recorded specifically in Para 19(f) of Rajeev Bansal is liable to be appreciated bearing in mind the completion of the three and six year period for AY 2015-16 which would have come to an end on 31.03.2019 and 31.03.2022, respectively. Since both those terminal dates did not fall within the period 20.03.2020 to 30.06.2021 (the period contemplated under Section 3 of TOLA), it appears to have been urged that the provisions of that statute would not apply. 11. The question which, however, still survives is whether the impugned notice issued on 01.04.2021 can be said to be barred by time or lacking in jurisdiction. Undisputedly, AY 2015-16 pertains to a period prior to 01.04.2021 and would thus be governed by the First Proviso to Section 149. Section 149 as amended by Finance Act, 2021 reads as under: - “149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 7 :: (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021: Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.—For the purposes of clause (b) of this sub-section, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. ” 12. The validity of the impugned notice would thus have to be evaluated on the anvil of whether the department could have validly initiated reassessment on 01.04.2021. Since the reassessment notice pertained to AY 2015-16 and thus prior to 01.04.2021 as per the unamended Section 149, the notice could have been issued within a maximum period of six years from the end of the relevant AY. Tested on that basis, it is apparent that the terminal date for issuance of notice would be 31.03.2022. Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 8 :: 13. As was noticed, the decision of the Supreme Court in Ashish Agarwal which came to be pronounced in May 2022 had introduced a legal fiction in terms of which all notices u/s.148 were liable to be viewed and treated as being referable to Section 148A(b) of the Act. The formulation of this legal fiction in Ashish Agarwal stands lucidly explained by the Supreme Court in Rajeev Bansal the relevant extracts whereof are reproduced hereinbelow: - “94. Before we proceed, we need to bear in mind three important periods: (i) The period up to June 30, 2021 - this period is covered by the provisions of the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020; (ii) The period from July 1, 2021 to May 3, 2022 - the period before the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] ; and (iii) The period after May 4, 2022 - the period after the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] . This period is covered by the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] and the provisions of the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. 95. The third proviso to section 149 reads thus: “Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded.” 96. The third proviso excludes the following periods to calculate the period of limitation : (i) the time allowed to the assessee under section 148A(b); and (ii) the period during which the proceedings under section 148A are “stayed by an order or injunction of any court”. 97. A legal fiction is a supposition of law that a thing or event exists even though, in reality, it does not exist. (Gajraj Singh v. State Transport Appellate Tribunal [(1997) 1 SCC 650.] ) The word “deemed” is used to treat a thing or event as something, which otherwise it may not have been, with all the attendant consequences. (CIT v. Calcutta Stock Exchange Association Ltd. [(1959) 36 ITR 222 (SC); 1959 SCC OnLine SC 126.] ; Smt. Sudha Rani Garg v. Jagdish Kumar [(2004) 8 SCC 329.] ) The effect of a legal fiction is Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 9 :: that “a position which otherwise would not obtain is deemed to obtain under the circumstances”.(Gajraj Singh v. State Transport Appellate Tribunal [(1997) 1 SCC 650.] ) In K. Prabhakaran v. P. Jayarajan [(2005) 1 SCC 754; 2005 SCC (Cri) 451.] , Chief Justice R.C. Lahoti, speaking for the majority, observed that: “39…. While pressing into service a legal fiction it should not be forgotten that legal fictions are created only for some definite purpose and the fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field. A legal fiction presupposes the existence of the state of facts which may not exist and then works out the consequences which flow from that state of facts. Such consequences have got to be worked out only to their logical extent having due regard to the purpose for which the legal fiction has been created. Stretching the consequences beyond what logically flows amounts to an illegitimate extension of the purpose of the legal fiction.” 98. A legal fiction is created for a definite purpose and it should be limited to the purpose for which it is enacted or applied. It is a well established principle of interpretation that the courts must give full effect to a legal fiction by having due regard to the purpose for which the legal fiction is created. (State of Maharashtra v. Laljit Rajshi Shah [(2000) 2 SCC 699; 2000 SCC (Cri) 533.] The consequences that follow the creation of the legal fiction “have got to be worked out to their logical extent”. (Bengal Immunity Company Ltd. v. State of Bihar [(1955) 6 STC 446 (SC); 1955 SCC OnLine SC 2.]. The court has to assume all the facts and consequences that are incidental or inevitable corollaries to giving effect to the fiction. (Industrial Supplies Pvt. Ltd. v. Union of India [(1980) 4 SCC 341.]) 99. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , this court created a legal fiction by deeming the section 148 notices issued under the old regime as show-cause notices under section 148A(b) of the new regime. The purpose of the legal fiction was to enable the Revenue “to proceed further with the reassessment proceedings as per the substituted provisions” of the Income-tax Act. Accordingly, all the reassessment notices issued under the old regime were deemed to always have been show-cause notices issued under section 148A(b) of the new regime. The fiction replaced section 148 notices with section 148A(b) notices with effect from the date when the notices under section 148 of the old regime were issued between April 1, 2021 and June 30, 2021, as the case may be. This ensured the continuance of the reassessment process initiated by the Revenue from April 1, 2021 to June 30, 2021 under the old regime. Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 10 :: 100. Importantly, this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] did not quash the reassessment notices issued under section 148 of the old regime. In Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association [(1992) 75 Comp Cas 440 (SC); (1992) 3 SCC 1.] , a three-judge Bench of this court explained the distinction between quashing an order and staying the operation of an order thus (page 448 of 75 Comp Cas): “10…. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence.” The reassessment proceedings erroneously initiated by the Revenue under the old regime were not wiped out from existence. Consequently, the Revenue was not required to start the procedure of reassessment afresh after the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] 101. Under section 148A(b), the Assessing Officer has to comply with two requirements: (i) issuance of a show-cause notice; and (ii) supply of all the relevant information which forms the basis of the show-cause notice. The supply of the relevant material and information allows the assessee to respond to the show-cause notice. The deemed notices were effectively incomplete because the other requirement of supplying the relevant material or information to the assessees was not fulfilled. The second requirement could only have been fulfilled by the Revenue by an actual supply of the relevant material or information that formed the basis of the deemed notice. 102. While creating the legal fiction in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , this court was cognizant of the fact that the Assessing Officers were effectively inhibited from performing their responsibility under section 148A until the requirement of supply of relevant material and information to the assessees was fulfilled. This court lifted the inhibition by directing the Assessing Officers to supply the assessees with the relevant material and information relied upon by the Revenue within thirty days from the date of the judgment. Thus, during the period between the issuance of the deemed notices and the date of judgment in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], the Assessing Officers were deemed to have been prohibited from proceeding with the reassessment proceedings. Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 11 :: 103. In VLS Finance Ltd. v. CIT [(2016) 384 ITR 1 (SC); (2016) 12 SCC 32.] a two-judge Bench of this court was called upon to interpret Explanation 1 to section 158BE of the Income-tax Act. Section 158BE provides the time limit for completion of block assessments. Explanation 1 to the provision excludes “period during which the assessment proceedings is stayed by an order or injunction of any court” from the period of limitation. This court held that the exclusion of the period of limitation has to be computed “rationally and practically” in the following terms (page 9 of 384 ITR): “As a general rule, therefore, when there is no stay of the assessment proceedings passed by the court, Explanation 1 to section 158BE of the Act may not be attracted. However, this general statement of legal principle has to be read subject to an exception in order to interpret it rationally and practically. In those cases where stay of some other nature is granted than the stay of the assessment proceedings but the effect of such stay is to prevent the Assessing Officer from effectively passing assessment order, even that kind of stay order may be treated as stay of the assessment proceedings because of the reason that such stay order becomes an obstacle for the Assessing Officer to pass an assessment order thereby preventing the Assessing Officer to proceed with the assessment proceedings and carry out appropriate assessment.” (emphasis supplied) 104. Section 11A of the Land Acquisition Act, 1894 mandated the Collector to make an award under section 11 within two years from the date of publication of the declaration. The Explanation to the provision allowed exclusion of “the period during which any action or proceeding to be taken in pursuance of the said declaration is stayed by an order of a court”. This court has consistently interpreted the phrase “stay of action or proceedings” to mean any type of order passed by a court, which, in one way or another, prohibits or prevents the authorities from passing an award. (Abhey Ram v. Union of India [(1997) 5 SCC 421.] ; Indore Development Authority v. Manoharlal [(2020) 8 SCC 129; (2020) 4 SCC (Civ) 496.] ; Executive Engineer, Gosikhurd Project Ambadi, Bhandara, Maharashtra Vidarbha Irrigation Development Corporation v. Mahesh [(2022) 2 SCC 772.] ) Therefore, any order of a court that prevents or prohibits an authority from passing an order can be treated as a stay order. 105. A direction issued by this court in exercise of its jurisdiction under article 142 is an order of a court. The third proviso to section 149 of the new regime provides that the period during which the proceedings under section 148A are stayed by an order or injunction of any court shall be excluded for computation of limitation. During the period from the date of issuance of the deemed notice under section 148A(b) and the date of the decision of this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 12 :: SCC 617.] , the Assessing Officers were deemed to have been prohibited from passing a reassessment order. Resultantly, the show-cause notices were deemed to have been stayed by order of this court from the date of their issuance (somewhere from April 1, 2021 till June 30, 2021) till the date of decision in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , that is, May 4, 2022. 106. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , this court directed the Assessing Officers to provide relevant information and materials relied upon by the Revenue to the assessees within thirty days from the date of the judgment. A show-cause notice is effectively issued in terms of section 148A(b) only if it is supplied along with the relevant information and material by the Assessing Officer. Due to the legal fiction, the Assessing Officers were deemed to have been inhibited from acting in pursuance of the section 148A(b) notice till the relevant material was supplied to the assessees. Therefore, the show cause notices were deemed to have been stayed until the Assessing Officers provided the relevant information or material to the assessees in terms of the direction issued in Union of India v. Ashish Agarwal[(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] . To summarize, the combined effect of the legal fiction and the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] is that the show-cause notices that were deemed to have been issued during the period between April 1, 2021 and June 30, 2021 were stayed till the date of supply of the relevant information and material by the Assessing Officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assessees to respond to the show-cause notices. 107. The third proviso to section 149 allows the exclusion of time allowed for the assessees to respond to the show-cause notice under section 149A(b) to compute the period of limitation. The third proviso excludes “the time or extended time allowed to the assessee”. Resultantly, the entire time allowed to the assessee to respond to the show-cause notice has to be excluded for computing the period of limitation. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] , this court provided two weeks to the assessees to reply to the show-cause notices. This period of two weeks is also liable to be excluded from the computation of limitation given the third proviso to section 149. Hence, the total time that is excluded for computation of limitation for the deemed notices is : (i) the time during which the show- cause notices were effectively stayed, that is, from the date of issuance of the deemed notice between April 1, 2021 and June 30, 2021 till the supply of relevant information or material by the Assessing Officers to the assessees in terms of the directions in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] ; and (ii) two weeks allowed to the assessees to respond to the show-cause notices. (b) Interplay of Union of India v. Ashish Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 13 :: Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. 108. The Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extended the time limit for issuing reassessment notices under section 148, which fell for completion from March 20, 2020 to March 31, 2021, till June 30, 2021. All the reassessment notices under challenge in the present appeals were issued from April 1, 2021 to June 30, 2021 under the old regime. Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] deemed these reassessment notices under the old regime as show-cause notices under the new regime with effect from the date of issuance of the reassessment notices. The effect of creating the legal fiction is that this court has to imagine as real all the consequences and incidents that will inevitably flow from the fiction. (East End Dwellings Co. Ltd. v. Finsbury Borough Council [[1952] A.C. 109. (Lord Asquith, in his concurring opinion, observed:“If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.”)] ) Therefore, the logical effect of the creation of the legal fiction by Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] is that the time surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 will be available to the Revenue to complete the remaining proceedings in furtherance of the deemed notices, including issuance of reassessment notices under section 148 of the new regime. The surviving or balance time limit can be calculated by computing the number of days between the date of issuance of the deemed notice and June 30, 2021. 109. If this court had not created the legal fiction and the original reassessment notices were validly issued according to the provisions of the new regime, the notices under section 148 of the new regime would have to be issued within the time limits extended by Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. As a corollary, the reassessment notices to be issued in pursuance of the deemed notices must also be within the time limit surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. This construction gives full effect to the legal fiction created in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] and enables both the assessees and the Revenue to obtain the benefit of all consequences flowing from the fiction. (See State of A.P. v. A.P. Pensioners’ Association [(2005) 13 SCC 161; 2006 SCC (L&S) 666. (This court observed that the “legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit such legal fiction has been created, to obtain all consequences flowing therefrom”.) Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 14 :: 110. The effect of the creation of the legal fiction in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] was that it stopped the clock of limitation with effect from the date of issuance of section 148 notices under the old regime [which is also the date of issuance of the deemed notices]. As discussed in the preceding segments of this judgment, the period from the date of the issuance of the deemed notices till the supply of relevant information and material by the Assessing Officers to the assessees in terms of the directions issued by this court in Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.] has to be excluded from the computation of the period of limitation. Moreover, the period of two weeks granted to the assessees to reply to the show-cause notices must also be excluded in terms of the third proviso to section 149. 111. The clock started ticking for the Revenue only after it received the response of the assessees to the show-causes notices. After the receipt of the reply, the Assessing Officer had to perform the following responsibilities: (i) consider the reply of the assessee under section 149A(c); (ii) take a decision under section 149A(d) based on the available material and the reply of the assessee; and (iii) issue a notice under section 148 if it was a fit case for reassessment. Once the clock started ticking, the Assessing Officer was required to complete these procedures within the surviving time limit. The surviving time limit, as prescribed under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, was available to the Assessing Officers to issue the reassessment notices under section 148 of the new regime. 112. Let us take the instance of a notice issued on May 1, 2021 under the old regime for a relevant assessment year. Because of the legal fiction, the deemed show-cause notices will also come into effect from May 1, 2021. After accounting for all the exclusions, the Assessing Officer will have sixty- one days (days between May 1, 2021 and June 30, 2021) to issue a notice under section 148 of the new regime. This time starts ticking for the Assessing Officer after receiving the response of the assessee. In this instance, if the assessee submits the response on June 18, 2022, the Assessing Officer will have sixty-one days from June 18, 2022 to issue a reassessment notice under section 148 of the new regime. Thus, in this illustration, the time limit for issuance of a notice under section 148 of the new regime will end on August 18, 2022. 113. In Union of India v. Ashish Agarwal [(2022) 444 ITR 1 (SC); (2023) 1 SCC 617.], this court allowed the assessees to avail of all the defences, including the defence of expiry of the time limit specified under section 149(1). In the instant appeals, the reassessment notices pertain to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017- Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 15 :: 2018. To assume jurisdiction to issue notices under section 148 with respect to the relevant assessment years, an Assessing Officer has to : (i) issue the notices within the period prescribed under section 149(1) of the new regime read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020; and (ii) obtain the previous approval of the authority specified under section 151. A notice issued without complying with the preconditions is invalid as it affects the jurisdiction of the Assessing Officer. Therefore, the reassessment notices issued under section 148 of the new regime, which are in pursuance of the deemed notices, ought to be issued within the time limit surviving under the Income-tax Act read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. A reassessment notice issued beyond the surviving time limit will be time-barred.” 14. The Hon’ble Supreme Court in the case of ACIT Vs. Nihal Ashit Shah SLP (Civil) Diary No.57209 / 2024 dated 04.04.2025 has held as under: “UPON hearing the counsel the Court made the following: O R D E R Delay condoned. 2. We have heard learned senior counsel for the petitioner and learned senior counsel for the respondent(s) who has appeared on caveat. 3. It has been submitted at the bar that this Special Leave Petition could be disposed of by following the order dated 17.01.2025 passed in the case of the Income Tax Officer Ward 1(2) Jaipur vs. R.K.Build Creations Private Limited (Special Leave Petition (Civil) Diary No(s).59625 of 2024). For ease of reference the aforesaid order reads as under: “Delay condoned Having regard to the concession made by the petitioner-Department in the case of Union of India vs. Rajeev Bansal, Civil Appeal No.8629 of 2024 on 03.10.2024 (2024 SCC ONLINE 754), this Special Leave Petition would not survive for further consideration. Hence, the Special Leave Petition is dismissed. Pending application(s), if any, shall stand disposed of.” 4. Consequently, following the aforesaid order, this Special Leave Petition is dismissed as it does not survive for further consideration. Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 16 :: 5. In this regard, reference could also be made to paragraph 19(e) and (f) in the case of Union of India vs. Rajeev Bansal, Civil Appeal No.8629 of 2024 on 03.10.2024 (2024 SCC ONLINE 754) under which the learned Additional Solicitor General for India has made a concession insofar as the assessment year 2015-16 is concerned. Pending application(s), if any, shall stand disposed of.” 15. In similar circumstances, the jurisdictional High Court in case of Sridhar Lokesh Vs Income Tax Officer & Ors dated 28.11.2024 in W.P.No.16526 of 2022 and W.M.P.Nos.15816 and 15817 of 2022 has held quashed the notice dated 04.04.2022 issued u/s 148 of the Act for AY 2015-16 as under: ORDER Heard Mr.N.V.Lakshmi, the learned counsel for the petitioner and Mr.V.Mahalingam, the learned Sr. Standing Counsel for the respondents. 2.The issue, as on date is covered by a decision of the Division Bench of the Bombay High Court in Hexaware Technologies Ltd. Vs. Assistant Commissioner of Income Tax [(2024) 162 taxmann.com 225 (Bombay)]. In paras 29 and 30, the Court has examined the issue in the light of the 1st and 3 rd proviso to Section 149 of the Income Tax Act, 1961 as in force with effect from 01.04.2021. The 3 rd proviso to Section 149 (1) is now the 5th proviso to Section 149 (1) with effect from 01.04.2023. 3. Although, the submissions made by the learned counsel for the respondents appears to be more attractive, I am bound by the decision of the Division Bench of the Bombay High Court in the above case, which had followed an earlier decision rendered in Godrej Industries Vs. The Assistant Commissioner of Income Tax and Ors. rendered on 28.02.2024. 4. In view of the above, this writ petition stands allowed. No costs. Connected Miscellaneous Petitions are closed. 16. The Hon’ble Delhi High Court in the case of Ibibo Group Private Limited Vs ACIT [W.P.(C).17639/2022 dated 13.12.2024] has held quashed Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 17 :: the notice dated 23.07.2022 issued u/s 148 of the Act for AY 2015-16 as under: O R D E R 13.12.2024 1. The instant writ petition assails the reassessment action initiated under Section 148 of the Income Tax Act, 1961 [“Act”] for Assessment Year [“AY”] 2015-2016. The petitioner has impugned the order referable to Section 148A(d) of the Act dated 23 July 2022 and the consequential notice under Section 148 of the Act which came to be issued on the same date. 2. We bear in mind the following concession which came to be recorded on behalf of the respondent before the Supreme Court in Union of India and Others vs. Rajeev Bansal [2024 SCC OnLine SC 2693] and relevant parts whereof are reproduced hereinbelow:- “(e) The Finance Act, 2021 ((2021) 432 ITR (Stat) 52) substituted the old regime for reassessment with a new regime. The first proviso to section 149 does not expressly bar the application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 3 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-tax Act, including sections 149 and 151 of the new regime. Once the first proviso to section 149(1)(b) is read with Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below: Assessment year Within Years Expiry of Limitation read with TOLA for (2)(3) Within six years (4) Expiry of Limitation read with TOLA for (4)(5) 2013-2014 31.03.2017 TOLA not applicable 31.03.2020 30.06.2021 2014-2015 31.03.2018 TOLA not applicable 31.03.2021 30.06.2021 2015-2016 31.03.2019 TOLA not applicable 31.03.2022 TOLA not applicable 2016-2017 31.03.2020 TOLA not applicable 31.03.2023 TOLA not applicable 2017-2018 31.03.2021 TOLA not applicable 31.03.2024 TOLA not applicable (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 18 :: for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.” 3. In view of the aforesaid, it is evident that the impugned reassessment action for AY 2015-16 would not sustain. 4. The writ petition is accordingly allowed. The impugned order under Section 148A(d) of the Act dated 23 July 2022 and consequential notice referable to Section 148 of even date are hereby quashed and set aside. 17. In the case on hand, we find that the notice u/s.148 was issued on 01.04.2021 for A.Y.2015-16, which is directly in conflict with the judgement of the Hon’ble Supreme Court in the case of UOI Vs. Rajeev Bansal 2024 SCC Online 754. Therefore, the all consequential proceedings pursuant to notice u/s 148 of the Act cannot be held as valid, once the foundation fails. 18. In respect of case law cited by the revenue, we find that Hon’ble jurisdictional High Court in the case of Ramadoss Srikanthi Vs. ACIT [2025] 174 taxmann.com 150 (Madras) [03.04.2025] decided the issue in favour of the revenue, where the notice u/s.148 of the Act was issued on 31.03.2021, when Finance Act, 2021 was not even introduced. 19. In view of the above reasoning and respectfully following the decision of the Hon’ble Supreme Court (referred supra), we are of the considered view that the notice issued u/s.148 of the Act is clearly barred by limitation and consequently the order of the ld.CIT(A) and the AO are set aside. Printed from counselvise.com ITA No.2303/Chny/24 (AY -2015-16) Clan Laboratories :: 19 :: Since, the appeal is decided on legal grounds and hence, we are refraining from adjudicating the appeal on merits. 20. In the result the appeal of the assessee is allowed. Order pronounced on the 11th day of August, 2025, in Chennai. Sd/- (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखा सद᭭य/ACCOUNTANT MEMBER Sd/- (मनु क ुमार िगįर) (MANU KUMAR GIRI) ᭠याियक सद᭭य/JUDICIAL MEMBER चेɄई/Chennai, िदनांक/Dated: 11th August, 2025. Vm/- 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF Printed from counselvise.com "