Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices issued under Section 148 for AYs 2016–17 and 2017–18.
  • The central issue across all petitions was identical:
    Whether notices issued beyond 3 years are valid when alleged escaped income is below ₹50 lakhs.
  • Petitioners (assessees) contended:
    • Escaped income in all cases was below ₹50 lakhs.
    • Therefore, only Section 149(1)(a) (3-year limitation) applies.
  • Revenue relied on:
    • TOLA extensions,
    • CBDT Instruction dated 11.05.2022,
    • Supreme Court judgment in Union of India vs Ashish Agarwal.
  • Notices were originally issued under old law (pre-2021) and later treated under new regime post Finance Act, 2021.

Issues Involved

  1. Whether reassessment notices issued beyond 3 years are valid when escaped income is below ₹50 lakhs?
  2. Whether extended limitation under Section 149(1)(b) (up to 10 years) can apply without fulfilling ₹50 lakh threshold?
  3. Whether TOLA and CBDT Instructions can override statutory limitation under amended Section 149?
  4. Whether notices can “travel back in time” to save limitation?

Petitioner’s Arguments

  • Limitation expired:
    • AY 2016–17 → expired on 31.03.2020
    • AY 2017–18 → expired on 31.03.2021
  • Since escaped income is below ₹50 lakhs, only:
    • Section 149(1)(a) (3 years) applies
  • Extended limitation (10 years) under Section 149(1)(b):
    • Cannot apply without satisfying ₹50 lakh threshold
  • Travel back theory invalid:
    • No legal basis in statute, TOLA, or Supreme Court ruling
  • Finance Act 2021 overrides old law:
    • New regime must apply for notices issued after 01.04.2021
  • CBDT Instruction invalid:
    • Cannot override statute or Supreme Court ruling

Respondent’s Arguments

  • Notices are valid due to:
    • TOLA extension up to 30.06.2021
    • Supreme Court ruling in Ashish Agarwal case
  • Old notices (01.04.2021–30.06.2021):
    • Deemed as notices under Section 148A(b)
  • Limitation should be computed by:
    • Excluding time as per Supreme Court directions
  • CBDT Instruction:
    • Clarifies applicability and is legally valid
  • Notices fall within extended limitation period

Court Findings / Order

  • The Court held that:

1. Strict interpretation of Section 149

  • Section 149(1)(a) applies where:
    • Escaped income is below ₹50 lakhs
  • Section 149(1)(b) applies only if:
    • Escaped income ≥ ₹50 lakhs

2. Extended limitation cannot be applied mechanically

  • Revenue must satisfy statutory conditions
  • Mere reliance on TOLA or instructions is insufficient

3. “Travel back in time” theory rejected

  • No provision in:
    • Income Tax Act
    • TOLA
    • Supreme Court judgment
  • Notices cannot be artificially backdated

4. Finance Act, 2021 governs all post-01.04.2021 notices

  • New regime applies mandatorily
  • Old provisions cannot be revived indirectly

5. CBDT Instructions cannot override statute

  • Administrative instructions cannot:
    • Modify limitation
    • Override statutory provisions

6. Supreme Court ruling (Ashish Agarwal) limited scope

  • Only converted notices into Section 148A(b)
  • Did NOT extend limitation beyond statute

Important Clarification by Court

  • Limitation depends strictly on Section 149
  • If income < ₹50 lakhs:
    • Maximum time = 3 years only
  • TOLA:
    • Cannot extend limitation beyond statutory scheme
  • Finance Act 2021:
    • Fully applicable to reassessment notices issued after 01.04.2021

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

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