Facts of the Case

  • The petitioners, including Suman Jeet Agarwal and multiple other assessees, challenged reassessment notices issued by the Income Tax Department.
  • These notices were issued after 1 April 2021, i.e., after the new reassessment provisions came into force.
  • However, the Revenue authorities issued notices under the unamended (old) Section 148, instead of following the new procedure under Section 148A.
  • The Revenue relied upon certain notifications extending limitation due to COVID-19 (TOLA) to justify issuance under the old regime.

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 under the old Section 148 are valid in law?
  2. Whether the Revenue can rely on Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) to bypass the amended provisions?
  3. Whether the new procedure under Section 148A is mandatory for reassessment proceedings initiated after the amendment?

Petitioner’s Arguments

  • The Finance Act, 2021 introduced a complete overhaul of reassessment law, making Section 148A procedure mandatory.
  • Any notice issued after 01.04.2021 must comply with the new statutory framework, not the old one.
  • The Revenue’s reliance on TOLA is misplaced, as delegated legislation cannot override the parent statute.
  • Issuance of notices under old provisions violates principles of natural justice, since Section 148A mandates prior inquiry and opportunity of hearing.

Respondent’s Arguments

  • The Revenue argued that due to COVID-19 extensions under TOLA, the time limits for issuing notices were extended.
  • It was contended that such extensions allowed the Department to continue using the old reassessment provisions.
  • The notifications issued by the Central Government permitted issuance of notices under the old regime even after 01.04.2021.

Court’s Findings / Judgment

  • The Delhi High Court held that:
    • After 01.04.2021, the old provisions of Sections 147–151 ceased to apply.
    • The reassessment regime was substituted, not merely amended.
    • Any notice issued post-amendment must strictly comply with Section 148A procedure.
  • The Court ruled that:
    • TOLA cannot override the substituted provisions of the Income Tax Act.
    • Notifications cannot revive a repealed statutory provision.
  • Accordingly, the Court:
    • Quashed all reassessment notices issued under the old Section 148 after 01.04.2021
    • Declared such notices invalid and without jurisdiction 

Important Clarification by Court

  • The Court clarified that:
    • The Revenue is not barred from initiating reassessment proceedings, but must do so in accordance with the new law (Section 148A)
    • The judgment does not grant blanket immunity to assessees but ensures procedural compliance with amended provisions

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice for reassessment
  • Section 148A – Procedure for reassessment (inserted by Finance Act, 2021)
  • Section 149 – Time limit for notice
  • Finance Act, 2021 (amendments relating to reassessment)

Link to download the order -  https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3979-DB/58927092022CW4962022_173656.pdf

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