Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices for AY 2016-17 and 2017-18.
  • Notices under Section 148 were issued after the Finance Act, 2021 came into force.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • The Revenue relied on:
    • TOLA extensions
    • CBDT Instruction dated 11.05.2022
    • Supreme Court ruling in Ashish Agarwal
  • Petitioners argued that limitation had expired under the amended Section 149(1)(a).

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 are governed by the new regime under Finance Act, 2021.
  2. Whether Revenue can invoke extended limitation up to 10 years under Section 149(1)(b) when escaped income is less than ₹50 lakhs.
  3. Whether TOLA and CBDT Instructions can extend limitation beyond statutory provisions.
  4. Whether the concept of “travel back in time” for reassessment notices is legally sustainable.

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) is 3 years, which had already expired.
  • Section 149(1)(b) (extended 10 years) applies only if escaped income ≥ ₹50 lakhs, which is not satisfied.
  • TOLA does not create any legal fiction to extend limitation retrospectively.
  • CBDT Instruction dated 11.05.2022 is ultra vires and contrary to law.
  • The Supreme Court in Union of India vs Ashish Agarwal did not permit revival of time-barred cases.
  • The new regime applies to all notices issued after 01.04.2021.

Respondent’s Arguments (Revenue)

  • Notices are valid based on:
    • TOLA extensions
    • CBDT Instruction
    • Supreme Court judgment in Ashish Agarwal
  • The reassessment notices should be treated as issued within time by applying the concept of “revival/travel back”.
  • Time between original notice and reply should be excluded under Section 149.
  • Limitation stands extended till 30.06.2021 under TOLA.

Court Findings / Analysis

  • The Court rejected the “travel back in time” theory as legally unsustainable.
  • Held that:
    • After 01.04.2021, only the amended provisions (Finance Act, 2021) apply.
    • Section 149(1)(a) (3-year limitation) is applicable where escaped income is below ₹50 lakhs.
    • Section 149(1)(b) cannot be invoked unless the ₹50 lakh threshold is satisfied.
  • TOLA cannot override substantive statutory provisions introduced by Parliament.
  • CBDT instructions cannot override the Act or Supreme Court rulings.
  • Supreme Court judgment in Ashish Agarwal only converted notices procedurally, not substantively extended limitation.

Court Order / Decision

  • Reassessment notices issued beyond 3 years (where escaped income < ₹50 lakhs) are time-barred and invalid.
  • Orders under Section 148A(d) and consequential notices under Section 148 were quashed.
  • CBDT Instruction dated 11.05.2022 cannot be used to bypass statutory limitation.

Important Clarifications

  • Finance Act, 2021 introduced a new reassessment regime, replacing old provisions entirely.
  • Limitation provisions must be strictly interpreted in taxation law.
  • Executive instructions cannot create legal fictions beyond statute.
  • Supreme Court’s directions in Ashish Agarwal do not extend limitation periods.
  • Threshold of ₹50 lakhs is a jurisdictional requirement for extended limitation.

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

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