Reassessment Fails if Notice Beyond Surviving Limitation: ITAT Rajkot Applies Supreme Court Rule on Time-Barred Proceedings
In a significant ruling for reassessment litigation, the ITAT Rajkot has reaffirmed that limitation provisions in reassessment cases are not procedural formalities but jurisdictional conditions. If the notice itself is issued beyond the legally surviving time period, the entire reassessment collapses irrespective of the merits of additions.
In the case of M/s Shreedhar Construction for AY 2014-15, the Tribunal held that since the final reassessment notice was issued beyond the permissible surviving limitation period, the proceedings were void ab-initio and all additions automatically became unsustainable.
The ruling reinforces the continuing impact of the Supreme Court’s decisions governing reassessment transitions and timelines.
Background of the Case
The reassessment proceedings were initiated on the allegation that certain rental income from plant and machinery had escaped assessment.
However, the case fell into a complicated transition period involving:
• The old reassessment regime under Sections 147/148
• Extensions of limitation granted under TOLA
• The Supreme Court’s ruling in Ashish Agarwalvalidating certain notices
• Subsequent interpretation by the Supreme Court in UOI vs Rajeev Bansalclarifying how limitation should be computed
The key dispute before the Tribunal therefore was not about the income itself but about the legality of the reassessment notice.
Core Issue Before the Tribunal
The fundamental question examined was:
Whether the final notice in the reassessment proceedings was issued within the legally permissible “surviving time” as recognised by the Supreme Court.
The concept of surviving limitation means that when laws change or extensions are granted, only the balance period actually remaining under the original limitation survives. Authorities cannot assume a fresh limitation period unless the statute clearly allows it.
Tribunal’s Findings
After analysing the chronology of events, the Tribunal observed that:
• Only a limited balance time period survived for issuing the reassessment notice
• The department issued the final notice after expiry of that permissible window
• Jurisdiction to reassess therefore did not exist at the time of notice
• Once jurisdiction fails, the entire proceedings become void from inception
Accordingly, the reassessment order was quashed as time-barred, and all additions and related disputes were held to be academic.
Legal Principle Reaffirmed by the Tribunal
This decision reinforces a crucial doctrine in reassessment law:
Limitation is not a procedural formality – it is a jurisdictional requirement.
If the notice itself is invalid due to expiry of limitation:
• The reassessment cannot be saved by arguments on merits
• Additions cannot be examined independently
• Participation by the assessee does not cure the defect
• The entire proceeding collapses at its foundation
In tax litigation, this principle often determines the outcome even before substantive issues are discussed.
Impact of Supreme Court Decisions on Legacy Reassessment Cases
The ruling also highlights the continuing ripple effects of major Supreme Court judgments on reassessment law.
The Ashish Agarwal decision reshaped how old notices were to be treated under the new regime. Subsequently, the Rajeev Bansal ruling clarified that limitation must be computed strictly and only the remaining time survives.
The Rajkot Tribunal’s decision shows that these rulings are not merely theoretical. They are now actively determining the fate of pending reassessment cases across the country.
Why This Ruling Is Important for Tax Practitioners
This judgment serves as an important practical reminder that reassessment defence must begin with examining jurisdiction.
Too often, taxpayers and professionals focus first on explaining income or disputing additions. However, if limitation itself fails, the case may be resolved without entering factual controversy.
For practitioners, the ruling emphasises the importance of:
• Preparing a precise reassessment timeline chart
• Checking original limitation under old law
• Analysing effect of TOLA extensions carefully
• Verifying whether any balance time actually survived
• Raising jurisdictional objections at the earliest stage
A correct limitation analysis can sometimes achieve what lengthy litigation on merits cannot.1770722769-SAz4uA-1-TO
Conclusion
The ITAT Rajkot decision underscores a fundamental truth of tax litigation – legality of proceedings precedes correctness of additions.
Where reassessment notices are issued beyond the legally surviving limitation period, the proceedings are void regardless of the alleged escaped income.
In reassessment disputes, strategy should not begin with defending additions. It should begin with questioning whether the department had the power to issue the notice at all.
Because once limitation fails, the structure of litigation collapses on its own.
The copy of the order is as under:
