Facts of the Case

  • Multiple assessees challenged reassessment notices for AYs 2016-17 and 2017-18.
  • Notices under Section 148 were issued after 01.04.2021, following amendments introduced by the Finance Act, 2021.
  • The alleged escaped income in all cases was less than ₹50 lakhs.
  • Revenue relied on:
    • Supreme Court judgment in Ashish Agarwal case
    • CBDT Instruction dated 11.05.2022
    • TOLA extensions during COVID period

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are barred by limitation under Section 149(1)(a) when escaped income is below ₹50 lakhs?
  2. Whether the Revenue can invoke extended limitation of 10 years under Section 149(1)(b) without satisfying statutory conditions?
  3. Whether TOLA and CBDT Instructions allow notices to “travel back in time” to extend limitation?

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) (3 years) applies since escaped income is below ₹50 lakhs.
  • Notices issued after expiry of limitation are void and time-barred.
  • Extended period under Section 149(1)(b) is not applicable due to non-fulfilment of threshold condition.
  • CBDT Instruction introducing “travel back in time” theory is ultra vires the Act.
  • Supreme Court in Ashish Agarwal did not permit retrospective validation of limitation.

Respondent’s Arguments

  • Notices are valid considering:
    • Supreme Court ruling in Ashish Agarwal
    • TOLA extensions
  • Notices issued between 01.04.2021 and 30.06.2021 should be treated as valid under amended law.
  • Time period should be computed by excluding procedural delays under Section 149 proviso.
  • CBDT Instruction is valid and binding.

Court Findings / Analysis

  • The Court held that:
    • Section 149(1)(a) clearly prescribes 3-year limitation for cases below ₹50 lakhs.
    • Extended limitation under Section 149(1)(b) applies only when escaped income ≥ ₹50 lakhs.
    • The “travel back in time” theory is not supported by:
      • Statutory provisions
      • Supreme Court judgment in Ashish Agarwal
    • TOLA does not override the amended provisions introduced by Finance Act, 2021.
    • CBDT Instructions cannot override statutory provisions.

Court Order / Final Decision

  • Reassessment notices issued under Section 148 were held time-barred and invalid where:
    • Escaped income was below ₹50 lakhs
    • Notices were issued beyond 3 years
  • The writ petitions were allowed in favour of assessees.

Important Clarifications by Court

  • Finance Act, 2021 amendments apply prospectively but govern all notices issued after 01.04.2021.
  • CBDT instructions cannot create legal fiction beyond statute.
  • Limitation provisions in taxation laws must be strictly interpreted.
  • Supreme Court ruling in Ashish Agarwal does not extend limitation periods.

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

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