Facts of the Case

The present batch of writ petitions concerned reassessment notices issued under Section 148 for Assessment Years 2016–17 and 2017–18.

The core controversy revolved around the validity of reassessment notices issued after 01.04.2021, particularly where:

  • The alleged escaped income was below ₹50 lakhs, and
  • Notices were issued beyond the three-year limitation period under Section 149(1)(a).

The Revenue relied on:

  • Extension of timelines under TOLA,
  • CBDT Instruction dated 11.05.2022, and
  • The Supreme Court judgment in Union of India vs Ashish Agarwal

The assessees challenged the reassessment proceedings as time-barred and without jurisdiction.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are governed by the amended Section 149?
  2. Whether the Revenue can invoke the extended limitation period of 10 years under Section 149(1)(b) when escaped income is below ₹50 lakhs?
  3. Whether TOLA and CBDT Instructions allow notices to “travel back in time” to validate limitation?

Petitioner’s Arguments

  • The limitation under Section 149(1)(a) is three years, which expired on:
    • 31.03.2020 (AY 2016–17)
    • 31.03.2021 (AY 2017–18)
  • Since escaped income was below ₹50 lakhs, extended limitation under Section 149(1)(b) was not applicable.
  • The “travel back in time” theory has no legal basis under:
    • The Act
    • TOLA
    • Or Supreme Court judgment in Ashish Agarwal
  • Finance Act, 2021 substituted the reassessment regime entirely; hence, new law must apply post 01.04.2021.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statutory provisions.

Respondent’s Arguments

  • Notices issued between 01.04.2021 and 30.06.2021 were validated by the Supreme Court in Ashish Agarwal case.
  • TOLA extended limitation timelines up to 30.06.2021, making notices valid.
  • The Supreme Court exercised powers under Article 142, making directions binding.
  • The period between notice and reply should be excluded while computing limitation.
  • CBDT Instruction is valid and consistent with statutory framework.

Court’s Findings / Analysis

  • The Court held that Finance Act, 2021 introduced a new reassessment regime, which applies to all notices issued after 01.04.2021.
  • Section 149 clearly distinguishes:
    • Clause (a): 3-year limitation
    • Clause (b): up to 10 years only if escaped income ≥ ₹50 lakhs
  • Since in all cases:
    • Escaped income was below ₹50 lakhs,
    • Revenue could not invoke extended limitation.
  • The Court rejected the “travel back in time” theory, holding:
    • It is unsupported by statute
    • Not contemplated in Ashish Agarwal judgment
  • TOLA only extended timelines but did not override amended provisions.
  • CBDT Instructions cannot override statutory provisions or judicial interpretation.

Court Order / Final Decision

  • Reassessment notices issued under Section 148 were held time-barred and invalid.
  • Orders passed under Section 148A(d) and consequent notices were quashed.

Important Clarifications by Court

  • Post 01.04.2021, only amended reassessment provisions apply.
  • Extended limitation under Section 149(1)(b) is conditional and cannot be applied mechanically.
  • CBDT Instructions cannot create legal fiction contrary to statute.
  • Supreme Court judgment in Ashish Agarwal:
    • Did not revive limitation
    • Only converted notices into Section 148A(b) notices

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


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