A reassessment notice issued by the Income Tax Department can have serious consequences for a taxpayer. But the department also has to follow the time limits and procedures prescribed under the law.
In a recent case, the Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) quashed an entire reassessment against a US-based woman after finding that the Section 148 notice was not dispatched within the prescribed time limit. The tribunal held that the notice was barred by limitation.
The case involved Marri Usha, a non-resident living in the US, who had purchased a plot in Telangana for Rs 20 lakh in January 2016. The stamp duty value of the property, however, was determined at Rs 70 lakh. The Income Tax Department treated the Rs 50 lakh difference as taxable income under Section 56(2)(vii)(b).
What was the tax dispute?
Usha had not filed an income tax return for assessment year 2017-18. Based on information received by the department, her assessment was reopened under Section 147 and a notice under Section 148 was said to have been issued on March 29, 2021.
However, Usha said she had never received the Section 148 notice, either physically or by email. She also told the Assessing Officer that the notice was not available on the income tax portal and asked for a copy.
The department did not provide the copy of the notice at that stage. It instead proceeded with the reassessment and proposed a Rs 50 lakh addition, being the difference between the Rs 20 lakh purchase price and the Rs 70 lakh stamp duty value.
The Dispute Resolution Panel later upheld the addition, following which the Assessing Officer passed the final assessment order determining Usha’s total income at Rs 50 lakh.
The notice date became the key issue
Before the ITAT, Usha challenged the validity of the reassessment itself.
Her argument was simple: although the department claimed that the Section 148 notice was issued on March 29, 2021, records showed that it was actually dispatched after the deadline.
The department relied on its records and argued that the notice had been digitally signed on March 29 and dispatched on March 30. It also argued that subsequent delivery should not invalidate the notice.
But the tribunal examined the postal records.
The India Post tracking details showed that the article containing the notice was actually booked on April 5, 2021 at Begumpet post office. The department’s own ITBA records showed service on April 25, 2021.
This was important because March 31, 2021 was the last date for issuing the notice for the relevant assessment year.
The ITAT noted that the department’s claim that the notice had been dispatched on March 30 was not supported by contemporary evidence.
“the item containing the alleged notice u/s.148 of the Act was booked on 05.04.2021”
The tribunal also referred to the Telangana High Court’s ruling in Kalyan Chillara v. DCIT. That ruling had held that issuing a notice within the limitation period is not simply a matter of signing the document.
The ITAT observed: “the requirement of issuing notice u/s.148 of the Act as contemplated u/s.149 of the Act is not mere signing of notice”
In other words, the department cannot simply put an earlier date on a notice and treat it as having been issued within time. There has to be evidence showing that the notice was actually issued or dispatched as required by law.
Taxpayer had raised the objection early
The department also tried to rely on Section 292BB. It argued that since Usha had participated in the assessment proceedings, she could not later question the service of the notice.
The ITAT did not accept this argument.
The tribunal pointed out that Usha had already raised the issue of non-service of the Section 148 notice during the assessment proceedings, when she responded to the Section 142(1) notice in November 2022. Therefore, the department could not use Section 292BB to overcome the objection.
This part of the ruling is important for taxpayers. If a taxpayer believes that a reassessment notice was not properly issued or served, it is important to raise the objection at the earliest stage rather than waiting until later.
What did the ITAT finally decide?
After examining the postal and departmental records, the tribunal concluded that the Section 148 notice had not been dispatched within the prescribed time.
The ITAT said: “the above notice issued u/s.148 of the Act dated 29.03.2021 is barred by limitation and liable to be quashed.”
It then quashed the Section 148 notice and the reassessment order that followed it.
Since the assessment itself was quashed on a legal ground, the tribunal did not go into the merits of the Rs 50 lakh addition. The grounds challenging the addition under Section 56(2)(vii)(b) were treated as academic. The appeal was allowed.
What taxpayers should learn from the ruling
According to an tax expert the ruling highlights that taxpayers should look beyond the date printed on a reassessment notice.
“The ruling reinforces an important principle: the Income Tax Department cannot keep a reassessment proceeding alive merely because a notice carries a date falling within the limitation period if the statutory requirements for issuing that notice were not actually satisfied within time.”
He said the limitation period under Section 149 is not just a procedural requirement. It goes to the jurisdiction of the Assessing Officer.
At the same time, taxpayers should not assume that every notice received late is automatically invalid. The key question is when the notice was legally issued and whether the department has reliable evidence to establish that.
“However, delayed service by itself does not automatically make a notice invalid in every case.”
The taxpayer therefore needs to look at the complete chronology — when the notice was generated, when it was uploaded, when it was emailed or dispatched and when it was actually received.
What if the notice is missing from the tax portal?
He said taxpayers should not ignore a Section 148 notice simply because they cannot find it on the income tax portal.
The first step should be to preserve the notice exactly as received, including its Document Identification Number, assessment year and date. The taxpayer should also keep the email through which the notice was received and, where possible, the original email headers.
If the notice is not available on the portal, the taxpayer should take screenshots and make a written request to the department for a copy.
“If the notice cannot be found on the portal, that fact should also be documented through screenshots and a written communication to the Department seeking a copy of the notice.”
Taxpayers should also keep the complete reassessment trail, including the Section 148A(b) notice, their response, the Section 148A(d) order and the Section 148 notice, along with the material relied upon by the Assessing Officer, she said.
Keep a clear timeline
One of the most useful things a taxpayer can do is maintain a clear record of dates.
This should include the assessment year, the statutory deadline, the date on which the department claims to have issued the notice, the date and time of electronic generation or dispatch, the date it appeared on the portal and the date on which the taxpayer actually received or accessed it.
“The taxpayer should essentially maintain a clear chronological record showing the relevant Assessment Year, the statutory limitation date, the date on which the Department claims to have issued the notice, the date and time of its electronic generation or dispatch, the date on which it appeared on the portal and the date on which the taxpayer actually received or accessed it.”
Email records, portal acknowledgements, Document Identification Number verification, delivery records and correspondence with the department should also be preserved in their original form wherever possible.
For Usha, the postal tracking record proved crucial. It helped the ITAT establish that the notice, despite carrying a March 29 date, was actually booked only on April 5 — after the March 31 deadline.
The ruling therefore offers an important lesson for taxpayers facing reassessment: do not look only at the date printed on the notice. Check when it was actually issued, dispatched or made available, preserve the evidence and raise any objection to its validity at the earliest opportunity.
Disclaimer: This article is based on the ITAT Hyderabad order in Marri Usha vs ACIT, International Taxation-1, Hyderabad. It is intended for general informational purposes only and should not be treated as legal or tax advice. Taxpayers should consult a qualified tax professional for advice based on their individual circumstances.
