Facts of the Case

  • Multiple assessees challenged reassessment notices issued for AY 2016–17 and 2017–18.
  • Notices were issued under Section 148 after the amendment introduced by Finance Act, 2021.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • Revenue relied on:
    • TOLA (COVID-related extensions)
    • CBDT Instruction dated 11.05.2022
    • Supreme Court judgment in Union of India v. Ashish Agarwal
  • Assessees contended that notices were time-barred under Section 149(1)(a). 

Issues Involved

  1. Whether reassessment notices issued under Section 148 are valid when alleged escaped income is below ₹50 lakhs.
  2. Whether extended limitation of 10 years under Section 149(1)(b) can apply in such cases.
  3. Whether TOLA and CBDT Instructions can override statutory limitation under the amended law.
  4. Whether notices can “travel back in time” as argued by Revenue.

Petitioner’s Arguments

  • Limitation under Section 149(1)(a) (3 years) applies as escaped income is below ₹50 lakhs.
  • Extended limitation under Section 149(1)(b) is not applicable due to non-fulfilment of threshold condition.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override the statute.
  • TOLA does not permit “travel back in time” theory.
  • After Finance Act, 2021, only the new regime applies for notices issued post 01.04.2021.
  • Reliance placed on precedents including:
    • Mon Mohan Kohli v ACIT
    • Keenara Industries Pvt Ltd v ITO
    • Rajiv Bansal v Union of India

Respondent’s Arguments (Revenue)

  • Notices are valid when read with:
    • TOLA
    • CBDT Instruction (11.05.2022)
    • Supreme Court ruling in Union of India v. Ashish Agarwal
  • Notices issued between 01.04.2021 and 30.06.2021 are deemed valid under new regime.
  • Limitation should be computed by excluding time as per Supreme Court directions.
  • Extended limitation provisions and procedural adjustments justify validity of notices.

Court Findings / Order

  • The Court examined Section 149 post Finance Act, 2021 and its strict application.
  • Held that:
    • Where escaped income is below ₹50 lakhs, only 3-year limitation applies under Section 149(1)(a).
    • Revenue cannot invoke extended 10-year limitation under Section 149(1)(b) without satisfying statutory conditions.
  • The “travel back in time” theory has no legal basis.
  • CBDT Instructions cannot override statutory provisions.
  • Notices issued beyond limitation were held unsustainable in law.

 Important Clarifications by Court

  • Finance Act, 2021 substituted old reassessment regime completely.
  • TOLA does not extend limitation under the new regime unless explicitly provided.
  • Supreme Court decision in Ashish Agarwal does not validate time-barred notices.
  • Statutory interpretation in tax law must be strict and literal.

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

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