Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices issued under Section 148 for AYs 2016-17 and 2017-18.
  • The alleged escaped income in all cases was less than ₹50 lakhs.
  • Notices were issued after 01.04.2021, i.e., after the new reassessment regime introduced by Finance Act, 2021.
  • The Revenue relied on:
    • TOLA extensions
    • CBDT Instruction dated 11.05.2022
    • Supreme Court judgment in Union of India vs Ashish Agarwal
  • Assessees challenged the notices as time-barred under Section 149(1)(a).

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 are governed by new Section 149 (post Finance Act, 2021).
  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 override statutory limitation.
  4. Whether the “travel back in time” theory is legally sustainable.

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) is 3 years, which had already expired.
  • Extended limitation under Section 149(1)(b) is not applicable as escaped income is below ₹50 lakhs.
  • Finance Act, 2021 substituted the law; hence new regime applies to all notices issued after 01.04.2021.
  • TOLA does not create any legal fiction to revive time-barred notices.
  • CBDT Instruction cannot override the statute.
  • Supreme Court in Ashish Agarwal case did not permit “travel back in time”.

Respondent’s Arguments

  • Notices are valid due to:
    • TOLA extensions
    • Supreme Court judgment in Ashish Agarwal
  • Notices issued between 01.04.2021 to 30.06.2021 should be treated as valid.
  • Limitation should be computed considering:
    • Extended timelines
    • Exclusion of certain periods
  • CBDT Instruction is valid and binding.

Court’s Findings / Analysis

  • Finance Act, 2021 brought a complete substitution of reassessment provisions, not mere amendment.
  • Notices issued after 01.04.2021 must comply with new law, including Section 149.
  • Section 149(1)(a) provides a 3-year limitation, applicable where escaped income is below ₹50 lakhs.
  • Section 149(1)(b) (10-year period) applies only if escaped income ≥ ₹50 lakhs, which was not satisfied.
  • TOLA:
    • Only extended timelines
    • Did not override or amend the substituted provisions
  • CBDT Instruction:
    • Cannot override statutory provisions
    • “Travel back in time” theory has no legal basis
  • Supreme Court in Ashish Agarwal:
    • Only saved procedural defects
    • Did not extend limitation or revive time-barred notices

Court Order / Decision

  • Reassessment notices issued under Section 148 were quashed as time-barred.
  • Revenue cannot invoke extended limitation when escaped income is below ₹50 lakhs.
  • CBDT Instruction dated 11.05.2022 cannot override statutory limitation provisions.

Important Clarifications by Court

  • Substitution of law = old law ceases to exist entirely
  • Limitation must be strictly interpreted in taxation statutes
  • Executive instructions cannot defeat legislative intent
  • “Travel back in time” doctrine is legally unsustainable

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

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