Facts of the Case

The present batch of writ petitions concerns reassessment proceedings initiated against various assessees for Assessment Years (AY) 2016–17 and 2017–18.

  • The Income Tax Department issued notices under Section 148 alleging income escaping assessment.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • Notices were issued after 01.04.2021, i.e., after the new reassessment regime came into force via the Finance Act, 2021.
  • The Department relied on:
    • Union of India v. Ashish Agarwal
    • CBDT Instruction dated 11.05.2022
    • TOLA for extending limitation

Assessees challenged the validity of reassessment notices as being time-barred.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by new limitation provisions under Section 149 (Finance Act, 2021).
  2. Whether the Revenue can invoke extended limitation (up to 10 years) under Section 149(1)(b) when escaped income is below ₹50 lakhs.
  3. Whether TOLA and CBDT Instruction can override statutory limitation.
  4. Whether the concept of “travel back in time” for limitation is legally valid.

Petitioner’s Arguments (Assessees)

  • Notices are barred by limitation under Section 149(1)(a) (3-year limit).
  • Since escaped income is below ₹50 lakhs, extended limitation under Section 149(1)(b) is not applicable.
  • Finance Act, 2021 introduced a new regime, which must apply to all notices issued after 01.04.2021.
  • TOLA does not allow retrospective revival of time-barred cases.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statute.
  • The “travel back in time” theory has no legal basis in statute or case law.
  • Relied on precedents including:
    • Mon Mohan Kohli v. ACIT
    • Keenara Industries Pvt Ltd v ITO
    • Rajiv Bansal v Union of India

Respondent’s Arguments (Revenue)

  • Notices are valid due to:
    • Extension of limitation under TOLA
    • Supreme Court ruling in Union of India v. Ashish Agarwal
  • Notices issued between 01.04.2021–30.06.2021 should be treated as Section 148A(b) notices.
  • Limitation should be computed by excluding time as per statutory provisions.
  • CBDT Instruction is valid and consistent with Supreme Court directions.
  • The reassessment proceedings are within permissible time limits.

Court’s Findings / Analysis

1. Applicability of New Law

  • All notices issued after 01.04.2021 must comply with the new regime under Finance Act, 2021.

2. Limitation under Section 149

  • Section 149(1)(a): 3-year limitation applies where escaped income is below ₹50 lakhs.
  • Section 149(1)(b): 10-year limitation applies only if escaped income ≥ ₹50 lakhs.

3. Invalidity of “Travel Back in Time”

  • The Court rejected Revenue’s theory of retroactively treating notices as issued earlier.
  • No statutory provision supports such interpretation.

4. TOLA Interpretation

  • TOLA only extends timelines, it does not:
    • Override new law
    • Revive time-barred proceedings

5. CBDT Instruction

  • CBDT Instruction dated 11.05.2022 cannot override:
    • Statutory provisions
    • Judicial interpretation

6. Supreme Court Judgment Interpretation

  • Union of India v. Ashish Agarwal
    only converted notices into Section 148A(b) notices
  • It did not extend limitation or validate time-barred cases

Court Order / Final Decision

  • Reassessment notices issued beyond 3-year limitation (where income < ₹50 lakhs) are invalid and quashed.
  • Revenue cannot invoke extended limitation under Section 149(1)(b) without fulfilling statutory conditions.
  • CBDT Instruction dated 11.05.2022 cannot justify such notices.

Important Clarifications

  • Finance Act, 2021 regime applies prospectively but governs all notices issued after 01.04.2021.
  • Limitation provisions must be strictly interpreted in tax law.
  • Executive instructions cannot override statutory mandate.
  • “Travel back in time” theory is legally unsustainable.

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

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