Facts of the Case

The petitioner challenged the reassessment proceedings initiated by the Income Tax Department for Assessment Year (AY) 2016-17 through notice dated 29 April 2024 issued under Section 148 of the Income Tax Act, 1961, along with the preceding notice under Section 148A(b) dated 31 March 2024 and order under Section 148A(d) dated 29 April 2024.

The petitioner had originally filed the return of income on 17 October 2016, which was processed under Section 143(1). Earlier reassessment attempts by the Revenue had been set aside in prior litigation, including proceedings affected by the shift in law introduced by the Finance Act, 2021. Despite earlier judicial decisions quashing similar notices, the Department issued fresh notices in 2024, prompting the present writ petition.

Issues Involved

  1. Whether reassessment proceedings initiated in April 2024 for AY 2016-17 were barred by limitation under Section 149 of the Income Tax Act, 1961.
  2. Whether the Revenue could rely on liberty granted in earlier judgments to reopen assessment despite expiry of statutory time limits.
  3. Whether the amended provisions introduced by the Finance Act, 2021 permitted reopening of assessments for periods where limitation had already expired under the pre-amendment regime.

Petitioner’s Arguments

The petitioner contended that the impugned reassessment proceedings were time-barred under the proviso to Section 149(1). For AY 2016-17, the maximum permissible period under the pre-Finance Act 2021 regime was six years from the end of the relevant assessment year, which expired on 31 March 2023. Therefore, initiation of proceedings in April 2024 was legally impermissible.

It was further argued that earlier liberty granted by courts to the Revenue to initiate proceedings “as per law” could not override statutory limitation provisions. Once the limitation period expired, the Revenue lacked jurisdiction to reopen the assessment.

Respondent’s Arguments

The Revenue relied on prior judicial orders that had granted liberty to initiate fresh reassessment proceedings following quashing of earlier notices. It sought to justify the impugned action as a continuation of permissible proceedings under the amended framework introduced by the Finance Act, 2021.

Court Order / Findings

The Delhi High Court held that the proviso to Section 149(1) mandates examination of limitation under the pre-amendment law for assessment years prior to 1 April 2021. The provision expressly prohibits issuance of notice if such notice could not have been issued under the earlier regime due to expiry of limitation.

Under the unamended Section 149(1)(b), reassessment notices could be issued only within six years from the end of the relevant assessment year. For AY 2016-17, this period expired on 31 March 2023. Consequently, the notice dated 29 April 2024 was beyond jurisdiction and unsustainable.

The Court further clarified that prior judgments granting liberty to initiate proceedings “as per law” did not authorize reopening contrary to statutory limitations.

Accordingly, the Court quashed:

  • The order under Section 148A(d) dated 29 April 2024, and
  • The consequential notice under Section 148 of the same date.

Important Clarification

The Court emphasized that reassessment proceedings commenced after 1 April 2021 must comply with both the procedural requirements introduced by the Finance Act, 2021 and the limitation provisions preserved by the proviso to Section 149. Where limitation had already expired under the pre-amendment framework, reopening is barred irrespective of earlier judicial liberty granted to the Revenue.

Link to download the order –  https://www.mytaxexpert.co.in/uploads/1772176174_MANJUSOMANIVsINCOMETAXOFFICERWARD701ORS..pdf  

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