Facts of the Case

The present batch of writ petitions involved multiple assessees challenging reassessment notices issued under Section 148 of the Income Tax Act for Assessment Years 2016-17 and 2017-18.

  • Notices under the unamended Section 148 were issued between 01.04.2021 and 30.06.2021.
  • These notices were later treated as notices under Section 148A(b) pursuant to the Supreme Court judgment in Union of India vs Ashish Agarwal.
  • The Assessing Officers subsequently passed orders under Section 148A(d) and issued fresh notices under Section 148.
  • In all cases, the alleged escaped income was below ₹50 lakhs.

The assessees challenged the notices primarily on the ground of limitation under Section 149.

Issues Involved

  1. Whether reassessment notices issued under Section 148 are valid when the escaped income is below ₹50 lakhs.
  2. Whether the extended limitation period under Section 149(1)(b) (up to 10 years) can be invoked without fulfilling statutory conditions.
  3. Whether TOLA, CBDT Instructions, and the judgment in Ashish Agarwal permit “travel back in time” to validate otherwise time-barred notices.
  4. Whether notices issued after 01.04.2021 must comply strictly with the amended provisions introduced by the Finance Act, 2021.

Petitioner’s Arguments

  • The limitation period under Section 149(1)(a) is three years, which had expired for AY 2016-17 and 2017-18.
  • Since escaped income was below ₹50 lakhs, the extended period under Section 149(1)(b) was not applicable.
  • The “travel back in time” theory advanced by the Revenue is not supported by law, the Income Tax Act, or the Supreme Court judgment.
  • The Finance Act, 2021 introduced a new reassessment regime, which must apply to all notices issued after 01.04.2021.
  • CBDT Instruction dated 11.05.2022 cannot override statutory provisions or judicial decisions.
  • TOLA does not create any legal fiction allowing reassessment notices to be treated as issued prior to 31.03.2021.

Respondent’s Arguments

  • Notices issued between 01.04.2021 and 30.06.2021 were validated by the Supreme Court in Ashish Agarwal.
  • These notices should be treated as issued under Section 148A(b), and therefore remain within limitation.
  • TOLA extended limitation timelines up to 30.06.2021.
  • The period between issuance of notice and compliance should be excluded while computing limitation.
  • CBDT Instruction dated 11.05.2022 is valid and clarifies the implementation of the Supreme Court judgment.

Court Findings / Judgment

  • Section 149(1)(a) applies where escaped income is below ₹50 lakhs, limiting reassessment to 3 years.
  • The Revenue cannot invoke Section 149(1)(b) unless the condition of escaped income ≥ ₹50 lakhs is satisfied.
  • The “travel back in time” theory is legally unsustainable and not supported by statute or Supreme Court judgment.
  • TOLA and CBDT instructions cannot override the amended provisions introduced by the Finance Act, 2021.
  • Notices issued after 01.04.2021 must strictly comply with the new reassessment regime.
  • Consequently, reassessment notices in all such cases were held to be time-barred and invalid.

Important Clarifications by Court

  • The Supreme Court in Ashish Agarwal only converted old notices into Section 148A(b) notices; it did not extend limitation.
  • CBDT instructions cannot curtail statutory rights or override judicial interpretation.
  • The amended Section 149 applies retrospectively to pending reassessment actions issued after 01.04.2021.
  • Limitation provisions in tax law must be strictly interpreted.


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

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