Facts of the Case

  • Multiple assessees were issued reassessment notices under Section 148.
  • The notices were issued after 01.04.2021, following the amendment introduced by the Finance Act, 2021.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • The Revenue relied upon:
    • TOLA (COVID-related relaxation)
    • CBDT Instruction dated 11.05.2022
    • Supreme Court ruling in reassessment-related matters
  • Assessees challenged:
    • Notices under Section 148
    • Orders under Section 148A(d)
    • CBDT Instruction

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by the new limitation regime under Section 149 (post Finance Act, 2021).
  2. Whether the extended limitation period (up to 10 years) under Section 149(1)(b) can be invoked where escaped income is less than ₹50 lakhs.
  3. Whether TOLA and CBDT Instructions can override statutory limitation provisions.
  4. Whether the “travel back in time” theory adopted by Revenue is legally sustainable.

Petitioner’s Arguments

  • Notices are time-barred under Section 149(1)(a), which prescribes 3 years limitation.
  • Since escaped income is below ₹50 lakhs, Section 149(1)(b) (extended 10 years) is not applicable.
  • Finance Act, 2021 introduced a new regime, which must apply to all notices issued after 01.04.2021.
  • TOLA does not permit retrospective extension of limitation beyond statutory provisions.
  • The “travel back in time” theory is:
    • Unsupported by statute
    • Not recognized by courts
  • CBDT Instructions cannot override the Act or judicial precedents.
  • Reassessment proceedings violate principles of strict interpretation of taxing statutes.

Respondent’s Arguments (Revenue)

  • Notices are valid due to:
    • Extension of limitation under TOLA
    • Supreme Court directions treating old notices as valid under new regime
  • Time period should be computed by excluding procedural delays.
  • The reassessment notices issued earlier should be treated as revived and valid.
  • CBDT Instruction is intra vires and clarifies applicability of limitation.
  • The limitation should be interpreted harmoniously with TOLA and judicial directions.

Court’s Findings

  • The new regime under Finance Act, 2021 applies to notices issued after 01.04.2021.
  • Section 149(1)(a) clearly provides 3-year limitation for reopening.
  • Section 149(1)(b) (10-year period) applies only when escaped income ≥ ₹50 lakhs.
  • In the present cases:
    • Escaped income was below ₹50 lakhs
    • Hence, extended limitation cannot be invoked
  • The “travel back in time” theory:
    • Has no statutory backing
    • Is legally unsustainable
  • TOLA:
    • Cannot override substantive limitation provisions introduced by Finance Act, 2021
  • CBDT Instruction:
    • Cannot curtail rights of assessees
    • Cannot override statutory law

Court Order / Final Decision

  • Reassessment notices issued under Section 148 were quashed.
  • Orders passed under Section 148A(d) were set aside.
  • Revenue was held not entitled to invoke extended limitation.
  • All writ petitions were allowed in favour of the assessees.

Important Clarifications by the Court

  • Finance Act, 2021 brought a complete substitution of reassessment provisions.
  • Limitation provisions must be interpreted strictly.
  • Executive instructions (CBDT) cannot override statutory provisions.
  • TOLA provides limited procedural relaxation, not substantive extension of limitation.
  • Reassessment beyond limitation violates legal certainty and taxpayer rights.

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

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