Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices issued under Section 148 for AYs 2016–17 and 2017–18.
  • The petitioners contended that the alleged escaped income in all cases was below ₹50 lakhs.
  • Notices were issued after 01.04.2021 following amendments introduced by the Finance Act, 2021.
  • The Revenue relied on:
    • The decision of the Supreme Court in Union of India vs Ashish Agarwal
    • CBDT Instruction dated 11.05.2022
    • TOLA provisions extending limitation due to COVID-19
  • Petitioners argued that notices were barred by limitation under the amended Section 149.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are barred by limitation under Section 149(1)(a) where escaped income is below ₹50 lakhs.
  2. Whether the Revenue can invoke extended limitation under Section 149(1)(b) without satisfying statutory conditions.
  3. Whether TOLA and CBDT Instructions can override amended statutory provisions.
  4. Whether reassessment notices can “travel back in time” to earlier dates for computing limitation.

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) is 3 years, which had already expired for AY 2016–17 and 2017–18.
  • Extended limitation of 10 years under Section 149(1)(b) applies only if escaped income ≥ ₹50 lakhs, which was not satisfied.
  • CBDT Instruction dated 11.05.2022 introducing “travel back in time” theory is illegal and unsupported by law.
  • Finance Act, 2021 substituted earlier provisions; hence old regime cannot apply post 01.04.2021.
  • TOLA cannot override statutory amendments introduced later.
  • Supreme Court in Ashish Agarwal did not permit retrospective validation of limitation.

Respondent’s Arguments (Revenue)

  • Notices issued between 01.04.2021 and 30.06.2021 are valid as per Supreme Court directions in Ashish Agarwal.
  • TOLA extended limitation up to 30.06.2021.
  • Such notices are deemed to be issued under Section 148A(b).
  • Time spent during compliance process must be excluded while computing limitation.
  • CBDT Instruction is valid and clarifies implementation of Supreme Court judgment.

Court Findings / Analysis

  • The Court examined interplay between:
    • Finance Act, 2021 amendments
    • TOLA extensions
    • Supreme Court ruling in Ashish Agarwal
  • It held that:
    • The new regime under Finance Act, 2021 applies to all notices issued after 01.04.2021.
    • Limitation must be tested strictly under amended Section 149.
    • Extended limitation under Section 149(1)(b) cannot be invoked unless ₹50 lakh threshold is satisfied.
  • The Court rejected the “travel back in time” theory advanced by Revenue.
  • CBDT Instructions cannot override statutory provisions.
  • TOLA does not create any legal fiction to extend limitation beyond statutory framework.

Court Order / Decision

  • Reassessment notices issued under Section 148 were held time-barred where escaped income was below ₹50 lakhs.
  • Orders passed under Section 148A(d) and consequential notices were quashed.
  • Relief granted in favour of assessees across connected matters.

Important Clarifications by Court

  • Finance Act, 2021 amendments apply retrospectively to pending reassessment actions initiated after 01.04.2021.
  • CBDT circulars/instructions cannot override the Act.
  • Limitation provisions in tax law must be strictly interpreted.
  • No artificial extension of limitation is permissible without statutory backing.

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

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