Facts of the Case

The Petitioner, Salil Gulati, filed a writ petition challenging the order passed under Section 148A(d) and the reassessment notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013–14. The Petitioner also questioned the constitutional validity of CBDT Instruction No. 1/2022 dated 11 May 2022.

The reassessment proceedings originated from a notice issued within the extended time limit provided under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The earlier notice dated 23 June 2021 had been quashed due to non-compliance with the procedure under Section 148A.

Issues Involved

  1. Whether the reassessment notice issued under Section 148 for AY 2013–14 is barred by limitation under Section 149 of the Income Tax Act (as amended by Finance Act, 2021).
  2. Whether CBDT Instruction No. 1/2022 is constitutionally valid.
  3. Whether the benefit of extended timelines under TOLA and the Supreme Court judgment in Union of India vs Ashish Agarwal applies to the present case.

Petitioner’s Arguments

  • The reassessment notice dated 30 July 2022 is time-barred under Section 149(1)(a) and (b).
  • As per the amended law, reassessment beyond three years (or ten years subject to ₹50 lakh threshold) is restricted.
  • The first proviso to Section 149 prohibits reopening of cases that were already time-barred under the old regime.
  • For AY 2013–14, the limitation expired on 31 March 2020 under the old law (six-year limit).
  • Reliance was placed on similar stays granted by various High Courts on limitation grounds.

Respondent’s Arguments

  • The Revenue relied on the Supreme Court judgment in Union of India vs Ashish Agarwal (2022 SCC OnLine SC 543).
  • It was argued that:
    • TOLA extended limitation timelines.
    • Notices issued during 1 April 2021 to 30 June 2021 are deemed to be issued under Section 148A.
    • Such notices “travel back in time” to their original issuance date for applying Section 149.
  • Accepting petitioner’s argument would render the Supreme Court judgment ineffective.
  • The reassessment notice is valid as it falls within the extended limitation period.

Court’s Findings / Order

  • The Delhi High Court held that the reassessment proceedings were not time-barred.
  • The Court observed:
    • The original notice dated 23 June 2021 was issued within the extended limitation period under TOLA.
    • The Supreme Court in Ashish Agarwal validated such notices by deeming them as show cause notices under Section 148A.
    • The extended limitation allowed reassessment for AY 2013–14 up to 30 June 2021.
    • Since the escaped income exceeded ₹50 lakhs, the extended ten-year limitation applied.
  • The Court concluded that even without relying on CBDT Instruction No. 1/2022, the notice was within limitation.
  • Result: Writ petition dismissed.
  • However, the Court clarified that the Assessing Officer shall decide the case independently on merits without being influenced by observations in this order except on limitation.

Important Clarifications

  • TOLA validly extends limitation periods for reassessment.
  • Notices issued between 1 April 2021 and 30 June 2021 are legally sustained under Section 148A as per Supreme Court ruling.
  • The amended Section 149 must be interpreted harmoniously with TOLA and judicial precedents.
  • The ₹50 lakh threshold plays a crucial role in extending limitation up to ten years.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A – Procedure before issuing notice
  • Section 149 – Time limit for notice
  • Section 151 – Sanction for issue of notice
  • Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3709-DB/MMH31082022CW125412022_184334.pdf

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