Facts of the Case

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

The central issue arose due to notices issued after 01.04.2021 under the amended reassessment regime introduced by the Finance Act, 2021.

  • The alleged escaped income in all cases was below ₹50 lakhs.
  • Notices were issued beyond three years from the end of the relevant AY.
  • The Revenue relied on:
    • The Supreme Court judgment in Union of India vs Ashish Agarwal
    • CBDT Instruction dated 11.05.2022
    • TOLA extensions

The assessees contended that such notices were time-barred under Section 149(1)(a).

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are valid when:
    • Escaped income is below ₹50 lakhs, and
    • Notices are issued beyond 3 years from the relevant AY?
  2. Whether the Revenue can invoke:
    • Extended limitation of 10 years under Section 149(1)(b) without satisfying ₹50 lakh threshold?
  3. Whether CBDT Instructions and TOLA can override statutory limitation under amended law?
  4. Whether the “travel back in time” theory is legally sustainable?

Petitioner’s Arguments

  • Notices are barred by limitation under Section 149(1)(a) (3-year rule).
  • Escaped income being less than ₹50 lakhs, extended period under Section 149(1)(b) cannot apply.
  • Finance Act, 2021 introduced a new regime, replacing earlier provisions completely.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statute.
  • The Supreme Court in Ashish Agarwal did not permit retrospective validation of time-barred notices.
  • “Travel back in time” concept has no legal basis in the Act or judicial precedent.

Respondent’s Arguments (Revenue)

  • Notices should be treated as valid under the Supreme Court ruling in Ashish Agarwal.
  • TOLA extended limitation timelines up to 30.06.2021.
  • Old notices were converted into Section 148A(b) notices, thus saving them from invalidity.
  • Time exclusion provisions under Section 149 should apply.
  • CBDT Instruction is consistent with statutory framework.

Court Findings / Judgment

The Delhi High Court held:

1. Limitation under Section 149 is Mandatory

  • For escaped income below ₹50 lakhs, only 3-year limitation applies.
  • Notices issued beyond this period are invalid and without jurisdiction.

2. Extended Limitation Not Applicable

  • Section 149(1)(b) applies only when escaped income ≥ ₹50 lakhs.
  • Since the threshold was not met, Revenue cannot invoke extended 10-year period.

3. Rejection of “Travel Back in Time” Theory

  • The Court clearly held that:
    • No such legal fiction exists in law
    • Neither TOLA nor Supreme Court judgment supports this concept

4. CBDT Instruction Cannot Override Law

  • Instruction dated 11.05.2022 cannot:
    • Override statutory provisions
    • Curtail rights of assessees

5. Effect of Finance Act, 2021

  • Substituted provisions apply prospectively from 01.04.2021
  • Old regime cannot be applied post substitution

6. Supreme Court Judgment Interpretation

  • Ashish Agarwal judgment:
    • Only validated procedural defects
    • Did not extend limitation periods

Final Order

  • All reassessment notices issued under Section 148 beyond 3 years (where escaped income < ₹50 lakhs) were quashed.
  • Orders passed under Section 148A(d) and consequential notices were set aside.

Important Clarifications

  • Threshold of ₹50 lakhs is mandatory for extended limitation.
  • TOLA does not override amended Section 149.
  • CBDT Instructions cannot create legal fiction contrary to statute.
  • Finance Act, 2021 substitution completely replaces old law.
  • Reassessment must strictly comply with new regime post 01.04.2021.

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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.