Facts of the Case

The present batch of writ petitions concerned reassessment proceedings initiated under Section 148 of the Income Tax Act for Assessment Years 2016–17 and 2017–18.

  • Amendments introduced by the Finance Act, 2021
  • Limitation prescribed under Section 149
  • Extensions granted under TOLA during the COVID-19 period
  • The alleged escaped income in all cases was below ₹50 lakhs
  • Therefore, only 3-year limitation under Section 149(1)(a) applied
  • Notices issued beyond this period were time-barred
  • TOLA extensions
  • CBDT Instruction dated 11.05.2022
  • Supreme Court judgment in Union of India vs Ashish Agarwal

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by amended Section 149?
  2. Whether extended limitation of 10 years under Section 149(1)(b) applies when escaped income is below ₹50 lakhs?
  3. Whether TOLA and CBDT instructions can extend limitation beyond statutory provisions?
  4. Whether the “travel back in time” theory is legally sustainable?

Petitioner’s Arguments

  • Notices were barred by limitation as per Section 149(1)(a) (3 years).
  • Escaped income being less than ₹50 lakhs, extended limitation under Section 149(1)(b) was not applicable.
  • TOLA does not permit retrospective revival of limitation.
  • CBDT Instruction dated 11.05.2022 is ultra vires the Act.
  • Supreme Court in Ashish Agarwal did not approve any “travel back” concept.
  • After 01.04.2021, only new reassessment regime applies.

Respondent’s Arguments

  • Notices are valid due to:
    • TOLA extensions
    • Supreme Court ruling in Ashish Agarwal
  • Old notices should be treated as issued under Section 148A(b).
  • Limitation should be computed by excluding certain periods.
  • CBDT instructions are binding and valid.
  • Extended limitation applies through a combined reading of provisions.

Court’s Findings / Analysis

1. Applicability of Amended Law

  • After 01.04.2021, reassessment must strictly comply with amended provisions under Finance Act, 2021.

2. Limitation under Section 149

  • Section 149(1)(a): 3 years limitation applies where escaped income is below ₹50 lakhs
  • Section 149(1)(b): 10 years limitation applies only if escaped income is ₹50 lakhs or more

 In present cases, income was below ₹50 lakhs, hence extended limitation not available.

3. Rejection of “Travel Back in Time” Theory

  • Court held that such theory:
    • Has no statutory basis
    • Is not supported by TOLA or Supreme Court judgment

4. CBDT Instruction Invalid to Override Law

  • CBDT circulars cannot:
    • Override statute
    • Curtail rights of assessees

5. Interpretation of Ashish Agarwal Judgment

  • Supreme Court only:
    • Saved notices procedurally
    • Did NOT extend limitation
  • Assessees retain all legal defences including limitation

Court Order / Final Decision

  • Reassessment notices issued under Section 148 were quashed
  • Held time-barred under Section 149(1)(a)
  • Extended limitation under Section 149(1)(b) not applicable
  • CBDT Instruction dated 11.05.2022 cannot override statutory provisions

Important Clarifications

  • Post Finance Act 2021:
    • New reassessment regime is mandatory
  • TOLA:
    • Cannot extend limitation beyond statutory framework
  • Escaped income threshold:
    • ₹50 lakhs is decisive for extended limitation
  • Supreme Court ruling:
    • Does not dilute limitation provisions

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS10112023CW115272022_212005.pdf

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