Facts of the Case

  • Multiple assessees were issued reassessment notices for AYs 2016–17 and 2017–18.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • Notices were issued after 01.04.2021, following the amendment brought by the Finance Act, 2021.
  • Earlier notices issued under the old regime were treated as notices under Section 148A(b) pursuant to the Supreme Court decision in Ashish Agarwal.
  • The Assessing Officers rejected objections regarding limitation and proceeded with reassessment.

Issues Involved

  1. Whether reassessment notices issued under Section 148 are valid when issued beyond 3 years where escaped income is less than ₹50 lakhs?
  2. Whether the Revenue can invoke the extended limitation period under Section 149(1)(b) without fulfilling statutory conditions?
  3. Whether TOLA and CBDT Instructions can override the amended provisions introduced by the Finance Act, 2021?
  4. Whether the “travel back in time” theory adopted by the Revenue is legally sustainable?

Petitioner’s Arguments

  • The limitation under Section 149(1)(a) (3 years) had expired.
  • Since escaped income was below ₹50 lakhs, extended limitation under Section 149(1)(b) is not applicable.
  • TOLA does not create any legal fiction allowing notices to “relate back” in time.
  • The Supreme Court in Ashish Agarwal did not approve retrospective validation of time-barred notices.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statutory provisions.
  • The amended law (Finance Act, 2021) must apply to all notices issued after 01.04.2021.

Respondent’s Arguments (Revenue)

  • Notices are valid based on:
    • Ashish Agarwal judgment
    • TOLA extensions
    • CBDT Instruction dated 11.05.2022
  • Earlier notices should be treated as valid under the new regime.
  • Limitation should be computed by excluding time periods as per statutory provisions.
  • The extended limitation period is available when read harmoniously with TOLA and Supreme Court directions.

Court Findings / Analysis

  • The Court held that Section 149(1)(a) clearly applies where escaped income is below ₹50 lakhs.
  • The extended limitation under Section 149(1)(b) can only be invoked when statutory conditions are satisfied.
  • The “travel back in time” theory propounded by the Revenue is not supported by law.
  • TOLA does not override or amend the provisions introduced by the Finance Act, 2021.
  • CBDT Instructions cannot supersede statutory provisions or judicial pronouncements.
  • The Supreme Court in Ashish Agarwal only converted notices procedurally, and did not extend limitation periods.

Court Order / Final Decision

  • Reassessment notices issued beyond the 3-year limitation period were held invalid and time-barred.
  • The Revenue cannot invoke extended limitation where escaped income is below ₹50 lakhs.
  • Impugned notices and consequential proceedings were quashed.

Important Clarifications by the Court

  • The amended provisions introduced by the Finance Act, 2021 apply to all notices issued after 01.04.2021.
  • The ₹50 lakh threshold is mandatory for invoking extended limitation.
  • Administrative instructions (CBDT) cannot override the parent statute.
  • Judicial directions under Article 142 cannot be interpreted to defeat statutory safeguards.

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

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