Facts of the Case

The petitioners, including ATS Infrastructure Pvt. Ltd. and several connected assessees, challenged reassessment notices issued by the Income Tax Department under the old regime of Section 148 of the Income Tax Act after the Finance Act, 2021 had substituted the reassessment framework with effect from 01.04.2021.

The petitioners contended that after the substitution of Sections 147 to 151, the Department was required to comply with the newly introduced procedural safeguards under Section 148A before issuing any reassessment notice.

Earlier, in similar matters, the Delhi High Court had granted interim protection against such notices. In the present batch of petitions, the Court examined whether reassessment notices issued under the unamended law after 01.04.2021 were sustainable in law 

Issues Involved

1.     Whether reassessment notices issued under old Section 148 after 01.04.2021 are legally valid?

2.     Whether the Revenue can rely upon TOLA to extend the operation of the old reassessment provisions?

3.     Whether the amended provisions introduced by Finance Act, 2021 are mandatory from 01.04.2021?

4.     Whether procedural safeguards under Section 148A are compulsory before reopening assessment?

Petitioner’s Arguments

  • The reassessment notices were issued under a repealed/substituted legal framework.
  • Once Finance Act, 2021 came into force, reassessment proceedings could only be initiated under the amended provisions.
  • Section 148A introduced mandatory procedural safeguards such as inquiry, opportunity of hearing, and speaking order.
  • TOLA merely extends limitation and cannot revive the old substantive law.
  • The impugned notices are without jurisdiction and liable to be quashed.

Respondent’s Arguments

  • The Revenue argued that TOLA extended timelines for issuing notices under the old regime.
  • It was contended that because limitation stood extended, notices issued under old Section 148 remained valid.
  • Revenue relied upon Section 6 of the General Clauses Act to contend that pending rights and powers survive despite amendment.
  • The Department maintained that reassessment actions were legally protected by the relaxation legislation.

Court Findings / Observations

The Delhi High Court made important prima facie observations:

1. New Law Applies from 01.04.2021

The Court observed that the Finance Act, 2021 substituted the entire reassessment mechanism and introduced a new statutory framework.

2. Old Notices Prima Facie Unsustainable

The Court found prima facie merit in the petitioners’ contention that notices issued after 01.04.2021 under the old regime may not be sustainable.

3. TOLA Extends Limitation, Not Old Procedure

The Court clarified that extension of limitation does not automatically continue the applicability of repealed procedural provisions.

4. Mandatory Compliance of Section 148A

The Court emphasized the importance of procedural safeguards under the new regime before initiating reassessment.

Court Order / Interim Relief

The Delhi High Court:

  • Issued notice to the respondents.
  • Granted time for filing counter affidavits.
  • Restrained the Revenue from taking coercive steps or proceeding further pursuant to the impugned reassessment notices until further orders.
  • Directed listing along with connected matters.

Important Clarifications

A. TOLA Cannot Override Finance Act, 2021

The Court prima facie clarified that extension of limitation cannot preserve the old reassessment machinery after legislative substitution.

B. Procedural Safeguards are Mandatory

The newly introduced Section 148A cannot be bypassed.

C. Jurisdictional Validity under Challenge

Any notice issued under an outdated statutory framework is open to judicial scrutiny.

D. Batch Matters Impact

This order covered multiple writ petitions involving similar reassessment disputes, making it significant for a large number of taxpayers.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice where income has escaped assessment
  • Section 148A – Conducting inquiry before issuance of notice
  • Section 149 – Time limit for notice
  • Section 151 – Sanction for issue of notice
  • Section 6, General Clauses Act, 1897
  • Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA)
  • Finance Act, 2021

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:4493-DB/MMH02092021CW93302021_163051.pdf

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