Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices for AY 2016-17 and 2017-18.
  • Notices were issued under Section 148 after amendments introduced by Finance Act, 2021.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • The Revenue relied on:
    • Union of India vs Ashish Agarwal
    • CBDT Instruction dated 11.05.2022
    • TOLA provisions
  • Assessees contended that notices were barred by limitation under Section 149(1)(a).

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) can apply when escaped income is below ₹50 lakhs.
  3. Whether TOLA and CBDT Instruction can override statutory limitation.
  4. Whether notices can “travel back in time” to fall within limitation.

Petitioner’s Arguments (Assessee)

  • Limitation under Section 149(1)(a) is 3 years, which had expired.
  • Extended limitation under Section 149(1)(b) not applicable since income < ₹50 lakhs.
  • TOLA does not permit retrospective extension or “travel back in time” theory.
  • CBDT Instruction cannot override statute or Supreme Court ruling.
  • After Finance Act, 2021, new regime applies mandatorily.
  • Reliance placed on:
    • Mon Mohan Kohli vs ACIT
    • Keenara Industries Pvt Ltd vs ITO
    • Rajiv Bansal vs Union of India

Respondent’s Arguments (Revenue)

  • Notices saved by reading:
    • Union of India vs Ashish Agarwal
    • TOLA
    • CBDT Instruction
  • Notices issued between 01.04.2021–30.06.2021 deemed valid.
  • Limitation extended till 30.06.2021.
  • “Deemed fiction” allows notices to relate back to earlier period.

Court Findings / Order

1. Applicability of New Law

  • Post 01.04.2021, amended provisions of Section 149 apply mandatorily.

2. Limitation Principle

  • If escaped income is below ₹50 lakhs, only 3-year limitation under Section 149(1)(a) applies.

3. Rejection of “Travel Back in Time” Theory

  • Court rejected Revenue’s argument that notices can relate back to earlier dates.

4. TOLA Interpretation

  • TOLA cannot override substantive provisions of amended Income Tax Act.

5. CBDT Instruction Invalid to Extent

  • CBDT Instruction dated 11.05.2022 cannot extend limitation contrary to statute.

6. Final Outcome

  • Reassessment notices issued beyond 3 years where income < ₹50 lakhs were held:
    Time-barred and invalid in law

Important Clarifications by Court

  • Finance Act, 2021 introduced a new reassessment regime which must be strictly followed.
  • No artificial extension of limitation through executive instructions.
  • Supreme Court judgment in Union of India vs Ashish Agarwal
    does not permit bypassing limitation provisions.
  • Strict interpretation applies in tax statutes

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

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