Facts of the Case

  • The petitions relate to Assessment Years 2016–17 and 2017–18.
  • Notices under Section 148 were issued after 01.04.2021 following changes introduced by the Finance Act, 2021.
  • The alleged escaped income in all cases was below ₹50 lakhs.
  • The Revenue relied on:
    • TOLA extensions,
    • CBDT Instruction dated 11.05.2022,
    • Supreme Court judgment in Union of India vs Ashish Agarwal (2022).
  • Assessees challenged the notices as time-barred under the amended Section 149.

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 are governed by the amended provisions of Section 149.
  2. Whether the extended limitation period (up to 10 years) under Section 149(1)(b) applies when escaped income is less than ₹50 lakhs.
  3. Whether the “travel back in time” theory (based on CBDT Instruction and TOLA) is legally sustainable.
  4. Whether notices issued post Finance Act, 2021 can rely on old regime timelines.

Petitioner’s Arguments

  • Notices are barred by limitation under Section 149(1)(a) (3 years).
  • Escaped income being less than ₹50 lakhs, extended period under Section 149(1)(b) is not applicable.
  • Finance Act, 2021 substituted old provisions; hence old law cannot be invoked.
  • TOLA does not permit retrospective extension beyond statutory limits.
  • CBDT Instruction dated 11.05.2022 is ultra vires and cannot override the statute.
  • Supreme Court in Ashish Agarwal case did not approve any “travel back” concept.

Respondent’s Arguments

  • Notices are valid based on:
    • TOLA extensions,
    • CBDT Instruction,
    • Supreme Court ruling in Ashish Agarwal case.
  • Notices issued between 01.04.2021 and 30.06.2021 should be treated as valid under Section 148A(b).
  • Limitation should be computed by excluding time periods as per statutory provisions.
  • Supreme Court directions under Article 142 are binding and non-justiciable.

Court’s Findings / Analysis

  • The Finance Act, 2021 introduced a new reassessment regime, which applies to notices issued after 01.04.2021.
  • Section 149 clearly prescribes:
    • 3-year limitation (general rule)
    • 10-year limitation only if escaped income ≥ ₹50 lakhs
  • Since escaped income in all cases was below ₹50 lakhs, extended limitation cannot be invoked.
  • The “travel back in time” theory:
    • Has no statutory basis,
    • Is not supported by Supreme Court judgment.
  • CBDT Instruction cannot override statutory provisions.
  • TOLA only extends timelines within permissible statutory framework, not beyond it. 

Court Order / Final Decision

  • Reassessment notices issued under Section 148 were quashed.
  • The Court held that:
    • Notices are time-barred under Section 149(1)(a).
    • Revenue cannot invoke extended limitation under Section 149(1)(b).

Important Clarifications

  • Finance Act, 2021 applies retrospectively to pending reassessment proceedings where notices are issued after 01.04.2021.
  • CBDT circulars/instructions cannot override the Act.
  • Supreme Court’s ruling in Ashish Agarwal:
    • Only converted notices into Section 148A(b) notices,
    • Did not extend limitation or approve retrospective validation.
  • Strict interpretation applies in taxation statutes.

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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.