Facts of the Case

The present batch of writ petitions concerned reassessment notices issued for Assessment Years 2016–17 and 2017–18.

The central issue arose due to notices issued under Section 148 of the Income Tax Act, 1961, where the alleged escaped income in all cases was below ₹50 lakhs.

The petitioners (assessees) challenged:

  • Notices issued under Section 148,
  • Orders passed under Section 148A(d), and
  • CBDT Instruction dated 11.05.2022.

The reassessment proceedings were initiated after amendments introduced by the Finance Act, 2021, which substituted the earlier reassessment framework.

The Revenue relied upon:

  • Supreme Court judgment in Union of India vs Ashish Agarwal,
  • TOLA (2020), and
  • CBDT Instruction No. 01/2022.

The dispute revolved around whether reassessment notices were within limitation under the amended Section 149.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are valid in light of amended Section 149.
  2. Whether the extended limitation period of up to 10 years under Section 149(1)(b) can be invoked when escaped income is below ₹50 lakhs.
  3. Whether TOLA and CBDT Instruction permit reassessment notices to “travel back in time”.
  4. Whether notices issued after expiry of 3-year limitation under Section 149(1)(a) are time-barred.

Petitioner’s Arguments

  • The limitation period under Section 149(1)(a) is 3 years, which had already expired for AY 2016–17 and 2017–18.
  • Since escaped income is below ₹50 lakhs, extended limitation under Section 149(1)(b) (up to 10 years) is not applicable.
  • The “travel back in time” theory relied upon by Revenue is:
    • Not supported by law,
    • Not recognized in Ashish Agarwal judgment,
    • Not provided under TOLA.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statutory provisions.
  • After Finance Act, 2021, the new regime applies to all notices issued post 01.04.2021.
  • Substitution of law means old provisions cease to exist completely.
  • Tax statutes must be strictly interpreted; ambiguity benefits the assessee.

Respondent’s Arguments

  • Notices issued between 01.04.2021 to 30.06.2021 are valid as per Supreme Court ruling in Ashish Agarwal.
  • Such notices are deemed to be issued under Section 148A(b).
  • TOLA extended limitation period up to 30.06.2021.
  • Time taken for compliance under Supreme Court directions must be excluded.
  • CBDT Instruction is valid and aligns with Supreme Court directions.
  • Limitation must be interpreted considering TOLA extensions and judicial directions.

Court Findings / Order

  • The Court examined the interplay between:
    • Finance Act, 2021 (new regime),
    • TOLA extensions, and
    • Supreme Court judgment in Ashish Agarwal.

Important Clarification

    • Amended provisions (post Finance Act, 2021) apply to all reassessment notices issued after 01.04.2021.
    • Extended limitation of 10 years applies only if escaped income ≥ ₹50 lakhs.
    • Administrative instructions (CBDT) cannot override statutory law.
    • Supreme Court directions in Ashish Agarwal do not permit revival of time-barred cases.

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

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