Facts of the Case

The batch of writ petitions concerned reassessment proceedings initiated by the Income Tax Department for Assessment Years 2016–17 and 2017–18.

The core issue arose from notices issued under Section 148 of the Income Tax Act, 1961 after the amendment introduced by the Finance Act, 2021. The petitioners contended that the alleged escaped income in all cases was below ₹50 lakhs, and therefore the extended limitation period under Section 149(1)(b) (up to 10 years) could not be invoked.

The Revenue relied upon:

  • The decision of the Supreme Court in Union of India vs Ashish Agarwal,
  • CBDT Instruction dated 11.05.2022,
  • Provisions of TOLA,

to justify the validity of reassessment notices issued beyond three years.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are barred by limitation under Section 149(1)(a)?
  2. Whether the extended limitation period under Section 149(1)(b) can be invoked when escaped income is less than ₹50 lakhs?
  3. Whether TOLA and CBDT Instructions permit “travel back in time” to validate otherwise time-barred notices?
  4. Whether the Supreme Court judgment in Ashish Agarwal case extends limitation periods?

Petitioner’s Arguments

  • The limitation period of three years under Section 149(1)(a) had expired for AY 2016–17 and 2017–18.
  • Since escaped income was below ₹50 lakhs, the extended period under Section 149(1)(b) was not applicable.
  • The concept of “travel back in time” is not supported by:
    • The Income Tax Act,
    • TOLA,
    • Or the Supreme Court judgment.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override statutory provisions.
  • After Finance Act 2021, the new regime applies to all notices issued post 01.04.2021.
  • Substituted provisions cannot be bypassed by executive instructions.

Respondent’s Arguments

  • Notices issued between 01.04.2021 and 30.06.2021 are valid in view of Ashish Agarwal judgment.
  • TOLA extended limitation timelines due to COVID-19.
  • The Supreme Court exercised powers under Article 142, making directions binding.
  • Time exclusions and extensions make the notices within limitation.
  • CBDT Instruction is valid and clarifies implementation of Supreme Court directions.

Court Findings / Order

  • The new regime introduced by Finance Act 2021 applies to all reassessment notices issued after 01.04.2021.
  • The extended limitation under Section 149(1)(b) can only be invoked if:
    • Escaped income is ₹50 lakhs or more,
    • Which was not satisfied in these cases.
  • The “travel back in time” theory is legally unsustainable.
  • TOLA does not create any legal fiction to revive time-barred notices.
  • CBDT Instructions cannot override statutory provisions or judicial interpretation.
  • The Supreme Court in Ashish Agarwal did not extend limitation but only converted notices procedurally.

Important Clarifications

  • Finance Act 2021 substituted reassessment provisions entirely.
  • Limitation must be strictly interpreted in taxation statutes.
  • Executive instructions (CBDT) cannot override:
    • Parent Act
    • Supreme Court judgment
  • The benefit of ambiguity must go to the assessee.
  • TOLA only extends timelines for compliance—not substantive rights.

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

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