Facts of the Case

The present batch of writ petitions involved multiple assessees challenging reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961 for Assessment Years 2016–17 and 2017–18.

  • Notices were issued by the Income Tax Department alleging escaped income.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • The reassessment notices were issued after the expiry of three years from the end of the relevant assessment year.
  • The Revenue relied upon:
    • Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)
    • CBDT Instruction dated 11.05.2022
    • Supreme Court ruling in Union of India vs Ashish Agarwal

The petitioners contended that such notices were time-barred under the amended provisions of the Income Tax Act.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after three years are valid when escaped income is less than ₹50 lakhs?
  2. Whether the Revenue can invoke extended limitation of up to 10 years under Section 149(1)(b) without fulfilling statutory conditions?
  3. Whether TOLA, CBDT instructions, and Ashish Agarwal judgment allow reopening beyond statutory limitation?
  4. Whether notices can “travel back in time” to earlier dates to save limitation?

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) is 3 years, which had expired.
  • Since escaped income is below ₹50 lakhs, extended limitation under Section 149(1)(b) is not applicable.
  • The concept of “travel back in time” has no basis in law.
  • TOLA does not override amended provisions introduced by Finance Act, 2021.
  • Supreme Court in Ashish Agarwal only converted notices procedurally; it did not extend limitation.
  • CBDT instructions cannot override statutory provisions.

Respondent’s Arguments (Revenue)

  • Notices are valid due to:
    • Extension of limitation under TOLA
    • Supreme Court ruling in Ashish Agarwal
  • Old notices should be treated as valid under the new regime.
  • Limitation should be calculated considering:
    • Extended timelines
    • Exclusion of certain periods
  • CBDT Instruction dated 11.05.2022 is legally valid.

Court Findings / Analysis

  • Finance Act, 2021 amendments
  • Sections 147, 148, 149, 148A
  • TOLA and Notifications
  • Supreme Court ruling in Ashish Agarwal
  1. Clear statutory distinction in limitation
    • 3 years → Section 149(1)(a)
    • Up to 10 years → Section 149(1)(b) (only if escaped income ≥ ₹50 lakhs)
  2. Condition for extended limitation not satisfied
    • In all cases, escaped income was below ₹50 lakhs
  3. No “travel back in time” concept
    • Neither statute nor Supreme Court supports this theory
  4. TOLA cannot override Finance Act, 2021
    • Amendments effective from 01.04.2021 must apply
  5. CBDT Instructions cannot override law
    • Administrative instructions cannot change statutory limitation
  6. Ashish Agarwal judgment limited in scope
    • Only procedural conversion of notices
    • Does not extend limitation period

Court Order / Final Judgment

  • Reassessment notices issued under Section 148 beyond 3 years were held invalid.
  • Since escaped income was below ₹50 lakhs, extended limitation was not applicable.
  • Orders under Section 148A(d) and consequential notices were quashed.

Important Clarifications by Court

  • Limitation provisions under tax law must be strictly interpreted.
  • Substitution of law (Finance Act 2021) completely replaces earlier provisions.
  • Executive instructions (CBDT) cannot override statutory provisions.
  • TOLA does not create legal fiction to extend limitation indefinitely.
  • Rights available to assessees under amended law cannot be taken away.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice
  • Section 148A – Procedure before reassessment
  • Section 149 – Time limit for notice
  • Section 151 – Sanction for issue of notice
  • Section 119 – CBDT powers
  • TOLA (2020)

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

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