Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices for AY 2016–17 and 2017–18.
  • The alleged escaped income in all cases was less than ₹50 lakh.
  • Notices were issued after 01.04.2021, i.e., after the Finance Act, 2021 came into force.
  • Petitioners argued that limitation under Section 149(1)(a) (3 years) had expired.
  • Revenue relied on:
    • TOLA extensions
    • CBDT Instruction (11.05.2022)
    • Supreme Court ruling in Ashish Agarwal

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 are governed by amended Section 149?
  2. Whether extended limitation (up to 10 years) under Section 149(1)(b) applies when escaped income is below ₹50 lakh?
  3. Whether TOLA and CBDT Instruction can override statutory limitation?
  4. Whether the concept of “travel back in time” is legally sustainable 

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) is 3 years, which had expired.
  • Extended period under Section 149(1)(b) is not applicable as income is below ₹50 lakh.
  • CBDT Instruction introducing “travel back in time” is ultra vires.
  • Union of India v. Ashish Agarwal does not permit retrospective revival of limitation.
  • Finance Act, 2021 substituted law entirely—old provisions cannot survive.
  • TOLA cannot override newly enacted statutory provisions.

Respondent’s Arguments

  • Notices issued between 01.04.2021–30.06.2021 are valid per Ashish Agarwal judgment.
  • TOLA extended limitation till 30.06.2021.
  • Time exclusion under provisos to Section 149 applies.
  • CBDT Instruction is valid and binding.
  • Reassessment notices should be treated as issued within limitation.

Court Findings / Order

  • Amended Section 149 applies to all notices issued after 01.04.2021.
  • Where escaped income is below ₹50 lakh, only 3-year limitation applies.
  • Revenue cannot invoke extended 10-year limitation without satisfying statutory conditions.
  • “Travel back in time” theory rejected as legally unsustainable.
  • CBDT Instruction dated 11.05.2022 cannot override statute.
  • Supreme Court judgment in Union of India v. Ashish Agarwal does not extend limitation. Result: Reassessment notices issued beyond 3 years held time-barred and invalid.

Important Clarifications

  • Substitution of law by Finance Act, 2021 means complete replacement, not continuation.
  • TOLA only extends timelines within its scope—it cannot revive expired limitation.
  • CBDT circulars cannot:
    • Override statute
    • Create new legal fiction
  • Limitation provisions in tax law must be strictly interpreted.

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

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