Facts of the Case

  • Multiple assessees were issued reassessment notices for AYs 2016-17 and 2017-18.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • Notices were issued after expiry of 3 years from the end of relevant assessment years.
  • Revenue relied on:
    • TOLA extensions
    • CBDT Instruction dated 11.05.2022
    • Supreme Court ruling in Union of India vs Ashish Agarwal
  • Assessees challenged:
    • Notices under Section 148
    • Orders under Section 148A(d)
    • CBDT Instruction dated 11.05.2022

Issues Involved

  1. Whether reassessment notices issued beyond 3 years are valid when escaped income is below ₹50 lakhs.
  2. Whether extended limitation (up to 10 years) under Section 149(1)(b) applies without satisfying statutory conditions.
  3. Whether TOLA and CBDT Instructions can override statutory limitation under amended law.
  4. Whether notices can “travel back in time” as argued by the Revenue.

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) (3 years) had already expired.
  • Extended limitation under Section 149(1)(b) is not applicable as income is below ₹50 lakhs.
  • The “travel back in time” theory:
    • Has no statutory basis
    • Not supported by Union of India vs Ashish Agarwal
  • TOLA does not create any legal fiction to revive time-barred notices.
  • CBDT Instruction dated 11.05.2022 is ultra vires the Act.
  • Finance Act 2021 introduced a new regime, reducing limitation to 3 years for smaller cases.
  • Delegated legislation cannot override parent statute.

Respondent’s Arguments

  • Notices are valid when read with:
    • TOLA
    • CBDT Instruction
    • Supreme Court judgment in Ashish Agarwal case
  • Old notices should be treated as Section 148A(b) notices under new regime.
  • Time limits stood extended till 30.06.2021.
  • Period between notice and reply should be excluded while computing limitation.
  • Relied on Delhi High Court judgments like:
    • Touchstone Holdings Pvt Ltd vs ITO
    • Mon Mohan Kohli vs ACIT

Court Findings / Order

    • Section 149(1)(a) applies where escaped income is below ₹50 lakhs.
    • Limitation of 3 years is strict and mandatory.
    • Revenue cannot invoke extended limitation without fulfilling statutory conditions.
    • The “travel back in time” theory is legally unsustainable.
    • TOLA and CBDT instructions cannot override statutory provisions.
    • Supreme Court judgment in Ashish Agarwal did not permit revival of time-barred notices.

Important Clarifications by Court

  • Finance Act 2021 introduced a complete substitution of reassessment provisions.
  • Substitution means:
    • Old provisions cease to exist
    • New provisions apply fully
  • No retrospective revival of limitation is permissible.
  • CBDT circulars cannot:
    • Override statute
    • Curtail assessee rights
  • Limitation provisions must be strictly interpreted in taxation law.

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

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