Facts of the Case

  • The batch of writ petitions concerned reassessment notices issued under Section 148 for AYs 2016-17 and 2017-18.
  • The core issue arose due to amendments introduced by the Finance Act, 2021 altering reassessment provisions.
  • Petitioners challenged notices issued after 01.04.2021, arguing they were time-barred under Section 149(1)(a).
  • The alleged escaped income in all cases was below ₹50 lakhs, which is crucial for limitation applicability.
  • Revenue relied on:
    • TOLA extensions
    • CBDT Instruction dated 11.05.2022
    • Supreme Court judgment in Ashish Agarwal

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by amended Section 149?
  2. Whether extended limitation of 10 years under Section 149(1)(b) applies when escaped income is below ₹50 lakhs?
  3. Whether TOLA and CBDT instructions can extend limitation beyond statutory provisions?
  4. Whether the “travel back in time” theory propounded by revenue is legally sustainable?

Petitioner’s Arguments

  • Notices were barred by limitation under Section 149(1)(a) (3-year limit).
  • Extended limitation under Section 149(1)(b) is applicable only if escaped income ≥ ₹50 lakhs, which was not satisfied.
  • Supreme Court in Ashish Agarwal did not allow retrospective validation of limitation.
  • TOLA does not create a legal fiction to “revive” expired limitation.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statute.
  • Finance Act, 2021 substituted the law completely, hence old provisions ceased to exist.

Respondent’s Arguments

  • Notices were valid due to:
    • TOLA extensions
    • Supreme Court ruling in Union of India vs Ashish Agarwal
  • Notices issued between 01.04.2021–30.06.2021 should be treated as valid under Section 148A(b).
  • Limitation should be computed considering extended timelines and exclusions.
  • CBDT Instruction is binding and valid.

Court Findings / Order

    • Amended provisions under Finance Act, 2021 apply to all notices issued after 01.04.2021.
    • For cases where escaped income is below ₹50 lakhs, only 3-year limitation under Section 149(1)(a) applies.
    • Revenue cannot invoke extended 10-year limitation under Section 149(1)(b) without satisfying threshold conditions.
    • The “travel back in time” theory is legally unsustainable.
    • TOLA and CBDT instructions cannot override statutory limitation provisions.

Important Clarifications

  • Finance Act, 2021 brought a complete substitution of reassessment law.
  • Limitation must be strictly interpreted in tax laws.
  • CBDT instructions cannot override statutory provisions.
  • Supreme Court’s Ashish Agarwal judgment does not extend limitation.
  • TOLA only extended timelines for specific periods—not indefinitely.

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

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