Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices issued under Section 148.
  • The notices pertained to AY 2016–17 and 2017–18.
  • Alleged escaped income in all cases was below ₹50 lakhs.
  • Notices were issued after the amendment brought by the Finance Act, 2021, which substituted Sections 147–151 and introduced Section 148A.
  • Revenue relied on:
    • TOLA (COVID-related extensions)
    • CBDT Instruction dated 11.05.2022
    • Supreme Court judgment in Union of India vs Ashish Agarwal
  • Assessees challenged notices as time-barred under amended Section 149.

Issues Involved

  1. Whether limitation for issuing notice under Section 148 is governed by:
    • Section 149(1)(a) (3 years), or
    • Section 149(1)(b) (up to 10 years)?
  2. Whether revenue can invoke extended limitation (10 years) when escaped income is below ₹50 lakhs?
  3. Whether TOLA and CBDT instructions allow notices to “travel back in time” to extend limitation?
  4. Applicability of Supreme Court ruling in Ashish Agarwal case on limitation.

Petitioner’s Arguments

  • Notices are barred by limitation of 3 years under Section 149(1)(a).
  • Extended limitation under Section 149(1)(b) is not applicable as escaped income is below ₹50 lakhs.
  • TOLA does not create legal fiction allowing retrospective extension.
  • CBDT Instruction (11.05.2022) is ultra vires and cannot override statute.
  • Supreme Court in Ashish Agarwal did not permit “travel back in time” theory.
  • After 01.04.2021, only new regime applies, including amended Section 149.
  • Taxing statutes must be strictly interpreted; benefit goes to assessee.

Respondent’s Arguments

  • Notices are valid due to:
    • Extension under TOLA
    • Supreme Court judgment in Ashish Agarwal
  • Old notices (April–June 2021) deemed as Section 148A(b) notices.
  • Limitation should be computed by:
    • Excluding time under TOLA
    • Applying “revival” principle
  • CBDT Instruction is valid and binding.
  • Notices fall within limitation when read with extended timelines.

Court Findings / Analysis

  • The issue is purely a question of law relating to limitation.
  • Finance Act, 2021 introduced a new reassessment regime, replacing earlier provisions.
  • Section 149 clearly bifurcates limitation:
    • 3 years (normal cases)
    • Up to 10 years only when income ≥ ₹50 lakhs
  • In present cases:
    • Escaped income < ₹50 lakhs
    • Hence extended period not available
  • TOLA only extended timelines temporarily, not permanently altered limitation scheme.
  • Supreme Court in Ashish Agarwal:
    • Only converted notices into Section 148A(b) notices
    • Did not extend limitation or allow retrospective fiction
  • CBDT Instruction cannot override statutory provisions.

Court Order / Decision

  • Reassessment notices issued under Section 148 are unsustainable in law where:
    • Escaped income is below ₹50 lakhs, and
    • Notices are beyond 3-year limitation period.
  • Such notices are liable to be quashed as time-barred.

Important Clarifications by Court

  • No “travel back in time” concept exists in tax law.
  • CBDT instructions cannot override the Act.
  • Post 01.04.2021, new reassessment regime must be strictly followed.
  • Limitation provisions must be strictly construed in favour of assessee.
  • TOLA does not extend limitation beyond statutory framework.

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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.