Facts of the Case

The present batch of writ petitions involved multiple assessees challenging reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016–17 and 2017–18.

The core issue arose from notices issued under Section 148 of the Income Tax Act after the amendment introduced by the Finance Act, 2021. The assessees contended that the reassessment notices were issued beyond the permissible limitation period under Section 149(1)(a), i.e., three years, since the alleged escaped income in all cases was below ₹50 lakhs.

The Revenue, however, relied on:

  • The Supreme Court judgment in Union of India vs Ashish Agarwal
  • CBDT Instruction dated 11.05.2022
  • TOLA (Taxation and Other Laws Relaxation Act, 2020)

to justify extending the limitation period.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by the amended limitation provisions under Section 149?
  2. Whether the Revenue can invoke the extended limitation period of up to 10 years under Section 149(1)(b) when escaped income is below ₹50 lakhs?
  3. Whether TOLA and CBDT Instructions allow “travel back in time” to validate otherwise time-barred notices?
  4. Whether the Supreme Court ruling in Ashish Agarwal permits revival of limitation periods?

Petitioner’s Arguments

  • Notices were time-barred under Section 149(1)(a), as they were issued beyond 3 years from the end of relevant AYs.
  • Since escaped income was below ₹50 lakhs, the extended limitation under Section 149(1)(b) was not applicable.
  • The “travel back in time” theory adopted by Revenue has no legal basis.
  • TOLA does not override amendments brought by Finance Act, 2021.
  • CBDT Instructions cannot override statutory provisions or Supreme Court rulings.
  • The Supreme Court in Ashish Agarwal only converted notices procedurally, not substantively extending limitation.
  • Tax statutes must be strictly interpreted in favour of the assessee.

Respondent’s (Revenue) Arguments

  • Notices issued between 01.04.2021 to 30.06.2021 were validated by the Supreme Court in Ashish Agarwal.
  • TOLA extended limitation timelines up to 30.06.2021.
  • The reassessment notices should be treated as issued within time due to legal fiction and exclusion of time periods.
  • CBDT Instruction dated 11.05.2022 is valid and binding.
  • Limitation must be computed by considering the extended timeline and procedural adjustments.

Court Findings / Judgment

  • The amended provisions of Section 149 (post Finance Act, 2021) apply to all notices issued after 01.04.2021.
  • Where escaped income is less than ₹50 lakhs, only 3-year limitation under Section 149(1)(a) applies.
  • The Revenue cannot invoke extended 10-year limitation without satisfying statutory conditions.
  • The concept of “travel back in time” is legally unsustainable.
  • TOLA does not permit revival of time-barred reassessment notices.
  • CBDT Instructions cannot override statutory provisions or judicial precedents.
  • Supreme Court judgment in Ashish Agarwal does not extend limitation, but only provides procedural relief.

Court Order

  • Reassessment notices issued under Section 148 were quashed.
  • Orders passed under Section 148A(d) were set aside.
  • CBDT Instruction dated 11.05.2022 was held to be inapplicable to extend limitation unlawfully.

Important Clarifications by Court

  • Finance Act, 2021 brought a complete overhaul of reassessment provisions.
  • The law clearly distinguishes:
    • Below ₹50 lakhs → 3 years limitation
    • Above ₹50 lakhs → Up to 10 years
  • No retrospective extension of limitation is permissible unless expressly provided.
  • Legal fiction cannot override clear statutory mandates.
  • Taxing statutes must be strictly construed.

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

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