Shobha Ashok Jain v DCIT: ITAT Mumbai Quashes Time-Barred Section 148 Notice

This case — Shobha Ashok Jain, Mumbai v. DCIT Circle 19(3), Mumbai — concerns a reassessment proceeding in which the Income Tax Appellate Tribunal, Mumbai allowed the taxpayer's appeal on a pure jurisdictional ground: the notice issued under Section 148 of the Income Tax Act, 1961 was held to be time-barred, rendering the entire assessment order void ab initio. The case is significant for its application of the Supreme Court's landmark ruling in Union of India v. Rajeev Bansal to compute the surviving limitation period available to the Assessing Officer after the TOLA-era transition to the new reassessment regime under Sections 147, 148, 148A, and 149. (Note: the source order is internally inconsistent on the assessment year — the ITA caption references AY 2015-16 while the body refers to AY 2013-14. Researchers should verify against the certified copy before citing this case for a specific AY.)

This page is a research summary of one specific Indian tax judgment, NOT legal advice. Always verify against the full judgment and consult a professional for case-specific guidance.

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The case at a glance

• Parties: Shobha Ashok Jain, Mumbai vs DCIT Circle 19(3), Mumbai
• Bench: Income Tax Appellate Tribunal - Mumbai
• Date: 25 March 2026
• Court level: Tribunal (ITAT)
• Sections engaged: 10(38), 69A, 69C, 115BBE, 144B, 147, 148, 148A, 149, 250
• Outcome: Taxpayer succeeded

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Facts of the case

The assessee, an individual, had filed a return declaring total income of Rs. 88,85,890/-. The Assessing Officer subsequently reopened the assessment under Section 147 of the Act on the ground that the assessee had entered into transactions involving alleged bogus penny stock shares of M/s. Mahavir Industries Ltd., amounting to Rs. 1,99,26,085/-. The AO's case was that the assessee had earned capital gains of Rs. 1,99,26,085/- and claimed exemption under Section 10(38) of the Act in respect of those gains.

The AO framed the reassessment under Section 147 read with Section 144B, rejected the Section 10(38) exemption claim, and treated the entire amount of Rs. 1,99,26,085/- as unexplained money under Section 69A read with Section 115BBE. The AO additionally calculated notional commission at 3% of the total transaction value, arriving at Rs. 5,97,783/-, and added that sum back as unexplained expenditure under Section 69C read with Section 115BBE. The total additions made came to Rs. 2,05,23,868/-. The assessee's appeal to the CIT(A)/NFAC, Delhi under Section 250 was dismissed, with the impugned order dated 06.10.2025 upholding the assessment. The assessee then appealed to the Tribunal.

Before the Tribunal, the assessee raised an additional ground challenging the very jurisdiction of the AO to issue the Section 148 notice, contending that it was issued after expiry of the prescribed limitation period under Section 149. The timeline of notices on record, as reproduced in the order, showed: (1) a notice under the old Section 148 regime issued on 25.06.2021; (2) a show cause notice under Section 148A(b) issued on 02.06.2022 in consequence of the Supreme Court's direction in Union of India v. Ashish Agarwal; (3) a reply-opportunity period ending 17.06.2022 (the order's tabular header labels this row as "148A(c)"; under the statute the show-cause/reply opportunity is properly under Section 148A(b) and clause (c) is the AO's duty to consider the reply); (4) an order under Section 148A(d) passed on 28.07.2022; and (5) a fresh Section 148 notice issued on 28.07.2022.

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Issues raised

• Whether the additional ground challenging the jurisdiction of the AO — raised for the first time before the Tribunal — was maintainable as a pure question of law.
• Whether the notice issued under Section 148, dated 28.07.2022, was within the limitation period prescribed under Section 149, read with the TOLA extensions and the Supreme Court's computation methodology in Union of India v. Rajeev Bansal.
• Whether, once the original Section 148 notice (issued under the old regime on 25.06.2021) was deemed a show cause notice under Section 148A(b) pursuant to Ashish Agarwal, the AO retained sufficient "surviving time" under the third proviso to Section 149 to validly issue a fresh Section 148 notice on 28.07.2022.
• Whether the assessment order passed under Section 147 read with Section 144B was void ab initio as a consequence of the jurisdictionally defective Section 148 notice.

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What the court held

The Tribunal allowed the appeal of the assessee on jurisdictional grounds, holding that the Section 148 notice was time-barred and liable to be quashed. As a corollary, the assessment order framed pursuant to that notice was held to be void ab initio. Having disposed of the matter at the threshold jurisdictional stage, the Tribunal did not proceed to examine the merits of the penny stock additions or the Section 10(38) exemption claim.

The Tribunal's reasoning was grounded in the Supreme Court's decision in Union of India v. Rajeev Bansal & Others (Civil Appeal No. 8629 of 2024, dated 03.10.2024). That ruling established a framework for computing the limitation period applicable to reassessment notices issued during the TOLA transition period. The key principle applied was that the "surviving period" available to the AO after the deemed conversion of the old-regime Section 148 notice into a Section 148A(b) show cause notice — calculated as the days remaining between the date of the original notice and the TOLA deadline of 30.06.2021 — must be the outer boundary within which the fresh Section 148 notice under the new regime could be issued, commencing from the date the assessee submitted a reply to the Section 148A(b) notice.

Applying that framework to the present facts, the order tabulates the arithmetic as follows: original old-regime Section 148 notice issued on 25.06.2021, leaving a 5-day surviving period to the TOLA deadline of 30.06.2021; assessee's reply to the Section 148A(b) notice filed on 11.07.2022; the 5-day surviving period therefore expired on 16.07.2022; the fresh Section 148 notice was in fact issued on 28.07.2022, i.e. 12 days beyond the permissible outer limit. On that arithmetic the Tribunal held the fresh notice time-barred.

The Tribunal admitted the jurisdictional ground (raised for the first time at the appellate stage) as a pure question of law, relying on the Supreme Court's ruling in CIT v. National Thermal Power Co. Ltd. [1998] 229 ITR 383 (commonly cited as the NTPC principle), which holds that pure questions of law — including limitation-based challenges to the validity of a Section 148 notice — can be raised for the first time before the Tribunal, even as an additional ground.

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Strategy observations

1. Jurisdictional additional ground admitted at the ITAT stage: An additional ground challenging the Section 149 limitation period was raised for the first time before the Tribunal, not having been agitated before the AO or the CIT(A). The Tribunal admitted it as a pure question of law on the authority of CIT v. National Thermal Power Co. Ltd. [1998] 229 ITR 383. The order does not record the assessee's broader litigation strategy or reasons for not raising this ground earlier; it simply notes the additional ground was filed and admitted.

2. Limitation argument structured around the Rajeev Bansal tabular framework: The Section 149 argument was structured using the tabular computation methodology endorsed by the Supreme Court in Union of India v. Rajeev Bansal (Civil Appeal No. 8629 of 2024), mapping each notice date in the present case against the surviving-period framework. The Tribunal adopted that tabular approach in its own reasoning.

3. Disposal on the threshold ground: Because the appeal was allowed on the jurisdictional ground, the Tribunal did not reach the Section 10(38), Section 69A, Section 69C, or Section 115BBE merits — the entire addition of Rs. 2,05,23,868/- fell with the quashing of the Section 148 notice. The order does not characterise this as a deliberate strategic election by the assessee; the merits simply became academic.

4. Source-verification notes for citation: Two source-side ambiguities researchers should verify against the certified copy before citing this case: (a) the assessment year — the ITA number caption references AY 2015-16 while the body refers to AY 2013-14 and a CIT(A) order dated 06.10.2025; (b) the order's tabular header labels the 17.06.2022 reply-opportunity row as "148A(c)" though the statutory show-cause/reply opportunity is properly under Section 148A(b). Also check for any departmental appeal or stay against this ITAT order before relying on it.

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Why this case matters

This ruling is part of a significant and growing body of ITAT decisions applying the Supreme Court's Rajeev Bansal framework (October 2024) to invalidate reassessment notices issued during the TOLA transition window where the AO failed to issue the fresh Section 148 notice within the computed surviving period. The Tribunal's willingness to entertain the jurisdictional ground as an additional ground raised for the first time before it — bypassing both the AO and the CIT(A) stages entirely — illustrates the principle, drawn from CIT v. National Thermal Power Co. Ltd. (NTPC), that pure questions of law are not subject to the usual estoppel considerations that apply to factual grounds. For researchers tracking post-Rajeev Bansal ITAT outcomes, this case provides a concrete illustration of how the para 112 computation (surviving days between original notice date and 30.06.2021 TOLA deadline; clock restarts on assessee's reply to the Section 148A(b) notice) is being operationalised at the tribunal level to quash notices and void assessments in limine.

The case is also notable in the penny-stock reassessment context: despite substantial additions (Rs. 2.05 crore) resting on detailed AO findings about alleged bogus transactions in M/s. Mahavir Industries Ltd. scrip — findings upheld by the NFAC — the entire assessment collapsed on a procedural-jurisdictional ground without a merits adjudication. This pattern underscores the analytical importance, for researchers and practitioners tracking reassessment litigation, of the limitation-period compliance checkpoint as a threshold issue independent of the substantive quality of the AO's reasons to believe.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/109830052/