FACTS OF THE CASE

  • Multiple assessees were issued reassessment notices under Section 148.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • Notices were issued after 01.04.2021, post amendment by Finance Act, 2021.
  • The Revenue relied on:
    • Union of India vs Ashish Agarwal
    • CBDT Instruction dated 11.05.2022
    • TOLA (COVID relaxation law)
  • Assessees challenged notices as time-barred under Section 149(1)(a).

 ISSUES INVOLVED

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by amended Section 149?
  2. Whether limitation of 3 years under Section 149(1)(a) applies when escaped income is below ₹50 lakhs?
  3. Whether Revenue can invoke extended limitation (10 years) under Section 149(1)(b) without satisfying statutory conditions?
  4. Whether TOLA and CBDT Instructions can override statutory limitation provisions?

 PETITIONER’S ARGUMENTS

  • Notices are barred by limitation as 3-year period expired (31.03.2020 / 31.03.2021).
  • Extended limitation under Section 149(1)(b) is inapplicable since escaped income is below ₹50 lakhs.
  • “Travel back in time” theory of Revenue is unsupported by law.
  • TOLA does not create legal fiction to extend limitation beyond statute.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statute.
  • After Finance Act 2021, new regime mandatorily applies to all notices issued after 01.04.2021.

 RESPONDENT’S ARGUMENTS (REVENUE)

  • Notices are valid based on interpretation of:
    • Union of India vs Ashish Agarwal
    • TOLA extensions
  • Notices issued between 01.04.2021 to 30.06.2021 should be treated as valid under Section 148A(b).
  • Limitation should be computed by excluding certain periods.
  • CBDT Instruction is valid and binding.
  • Extended limitation not necessary due to computation mechanism.

COURT FINDINGS / ORDER

    • Amended provisions (Finance Act 2021) apply to all notices issued after 01.04.2021.
    • Section 149(1)(a) prescribes 3-year limitation, which had expired.
    • Section 149(1)(b) (10-year limit) cannot apply unless ₹50 lakh threshold is met.
    • TOLA cannot override or extend statutory limitation under amended law.
    • CBDT Instruction dated 11.05.2022 is not binding if contrary to statute.

Consequently, reassessment notices were held invalid and time-barred.

IMPORTANT CLARIFICATIONS BY COURT

  • Finance Act 2021 brought a complete substitution of reassessment provisions.
  • Limitation provisions must be strictly interpreted in tax law.
  • Supreme Court judgment in Ashish Agarwal did not permit revival of limitation.
  • Executive instructions cannot override statutory provisions.

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

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