Facts of the Case

  • The petitions relate to Assessment Years (AY) 2016–17 and 2017–18.
  • Notices under Section 148 were issued after the introduction of the new reassessment regime (Finance Act, 2021).
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • The Revenue relied on:
    • TOLA extensions,
    • CBDT Instruction dated 11.05.2022,
    • Supreme Court judgment in Union of India vs Ashish Agarwal.
  • Assessees challenged reassessment notices as time-barred under the amended law.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by the amended Section 149.
  2. Whether the extended limitation (up to 10 years) under Section 149(1)(b) applies when escaped income is below ₹50 lakhs.
  3. Whether Revenue can apply the “travel back in time” theory based on TOLA and CBDT instructions.
  4. Validity of reassessment notices issued beyond 3 years limitation.

Petitioner’s Arguments

  • Notices are barred by limitation under Section 149(1)(a) (3 years).
  • Extended limitation under Section 149(1)(b) is not applicable as escaped income is below ₹50 lakhs.
  • TOLA does not permit retrospective extension beyond statutory limits.
  • CBDT Instruction dated 11.05.2022 is ultra vires the Act.
  • Supreme Court in Ashish Agarwal did not authorize “travel back in time”.
  • New reassessment regime applies fully post 01.04.2021.

Respondent’s Arguments (Revenue)

  • Notices are valid due to:
    • TOLA extensions,
    • Supreme Court directions in Ashish Agarwal,
    • CBDT Instruction.
  • Old notices (April–June 2021) deemed as Section 148A(b) notices.
  • Limitation should be calculated by excluding certain periods.
  • Notices fall within permissible time after adjustments.

Court Findings / Analysis

  • Finance Act, 2021 introduced a completely new reassessment regime.
  • Section 149 clearly distinguishes:
    • 3 years limitation (normal cases)
    • Up to 10 years only if escaped income ≥ ₹50 lakhs
  • The Court rejected:
    • Revenue’s “travel back in time” theory
    • Over-reliance on CBDT Instruction
  • Held that:
    • TOLA cannot override substantive statutory provisions
    • Executive instructions cannot extend limitation beyond statute
  • Supreme Court judgment in Ashish Agarwal:
    • Only converted notices procedurally
    • Did not extend limitation

Court Order / Decision

  • Reassessment notices issued beyond 3 years held invalid where escaped income is below ₹50 lakhs.
  • Extended limitation under Section 149(1)(b) not applicable in such cases.
  • CBDT Instruction dated 11.05.2022 cannot override statutory limitation.
  • Writ petitions allowed in favour of assessees.

 

Important Clarifications by Court

  • Strict interpretation of limitation provisions in tax law.
  • No retrospective extension unless explicitly provided by statute.
  • Substitution of law (Finance Act 2021) means old provisions cease entirely.
  • TOLA only provides procedural relaxation, not substantive extension of limitation.

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


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