Facts of the Case

  • Multiple petitioners (including individuals and companies) were issued reassessment notices under Section 148.
  • These notices were issued post 01.04.2021, when the new reassessment scheme (Sections 147 to 151 as amended) had already come into force.
  • The Revenue authorities relied on old provisions of Section 148 and extended limitation periods through notifications issued under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
  • Petitioners approached the High Court challenging the legality of such notices.

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 under the old Section 148 are legally sustainable.
  2. Whether TOLA notifications can override or extend applicability of repealed provisions.
  3. Whether compliance with Section 148A (new procedure) is mandatory before issuing reassessment notices.
  4. Whether such notices violate principles of natural justice.

Petitioner’s Arguments

  • The Finance Act, 2021 substituted the entire reassessment framework, making the new provisions mandatory from 01.04.2021.
  • Notices issued under old Section 148 are without jurisdiction and void ab initio.
  • The Revenue failed to follow mandatory procedure under Section 148A, including:
    • Conducting inquiry
    • Providing opportunity of hearing
    • Passing a reasoned order
  • TOLA cannot revive or extend repealed provisions.
  • The impugned notices are arbitrary and violative of Article 14.

Respondent’s Arguments (Income Tax Department)

  • The Revenue relied on TOLA notifications, arguing that time limits were validly extended.
  • It was contended that old provisions continued to apply due to such extensions.
  • The notices were issued to protect revenue interests and prevent tax evasion.
  • Procedural lapses, if any, were argued to be curable defects.

Court’s Findings / Order

  • The Delhi High Court held that:
    • After 01.04.2021, only the new reassessment regime applies.
    • Notices issued under old Section 148 are invalid and without jurisdiction.
    • TOLA cannot override or defer the legislative mandate of the Finance Act, 2021.
    • Compliance with Section 148A procedure is mandatory, not optional.
  • The Court quashed the reassessment notices issued under the old regime.
  • However, the Court granted liberty to the Revenue to initiate fresh proceedings under the new law, subject to limitation.

Important Clarifications by Court

  • Substantive law cannot be overridden by executive notifications (TOLA).
  • The reassessment process must strictly follow due process under Section 148A.
  • The ruling balances:
    • Protection of taxpayer rights
    • Preservation of revenue powers (through fresh proceedings)

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice
  • Section 148A – Conducting inquiry before notice
  • Section 149 – Time limit
  • Section 151 – Sanction for notice
  • TOLA, 2020

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3994-DB/58927092022CW102022_184537.pdf

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