Facts of the Case:

A batch of writ petitions challenged notices issued under Section 148 of the Income Tax Act, 1961 (“Act”) for Assessment Years 2016‑17 and 2017‑18. Petitioners contended that notices were time‑barred under the amended Section 149(1)(a) since alleged escaped income was below ₹50 lakhs, and therefore extended limitation under Section 149(1)(b) was inapplicable. Notices were issued post 01.04.2021 after enactment of the Finance Act, 2021 (“FA 2021”) and were aligned with the Supreme Court’s decision in Union of India & Ors. vs. Ashish Agarwal (2023) 1 SCC 617 and CBDT Instruction dated 11.05.2022. Petitioners objected via Section 148A(c) and raised writ petitions.

Issues Involved:

  1. Whether notices issued under Section 148 are sustainable where alleged escaped income is below ₹50 lakhs.
  2. Whether the extended limitation under Section 149(1)(b) applies absent jurisdictional conditions.
  3. Whether the Revenue’s “travel‑back in time” approach—treating notices as issued on original dates via FA 2021 and CBDT Instruction—has legal support.
  4. Interaction of Finance Act 2021 amendments and the CBDT Instruction with notice validity.

Petitioner’s Arguments:

• Notices under Section 148 have exceeded three‑year limitation under Section 149(1)(a) and extended period under Section 149(1)(b) cannot be invoked as escaped income is below ₹50 lakhs.
• The Revenue’s “travel‑back” doctrine has no statutory or judicial basis and is contrary to FA 2021, TOLA and settled principles.
• Instruction dated 11.05.2022 is vague and inconsistent with statutory provisions and Supreme Court directions.
• TOLA’s reliefs do not extend limitation for notices beyond prescribed statutory periods.

Respondent’s Arguments:

• Supreme Court’s decision in Ashish Agarwal should be read with TOLA and CBDT Instruction to validate notices by treating them as issued under Section 148A(b) of the Act.
• Extended limitation under Section 149(1)(a) applies when notices are so treated, irrespective of escaped income quantum.
• TOLA and coordinate bench decisions (e.g., Touchstone Holdings Pvt. Ltd. vs. ITO) validate extension of limitation.
• The travel‑back approach is consistent with legislative intent and Supreme Court directions.

Court Order / Findings:

• High Court held that the amended Section 149 is applicable post FA 2021.
• It rejected the Revenue’s “travel‑back in time” theory, noting no statutory support.
• TOLA notifications do not validly extend the limitation for reassessment notices beyond statutory limits for cases where escaped income is below ₹50 lakhs.
• CBDT Instruction dated 11.05.2022 cannot override the plain language of the statute and Supreme Court’s directions.
• Notices under Section 148 that exceed the prescribed limitation are invalid.

Important Clarifications:

• Section 149(1)(a) provides a three‑year limitation for issuance of reassessment notices.
• Section 149(1)(b) allows extended limitation up to ten years only if escaped income is ₹50 lakhs or more.
• TOLA extends statutory timelines but does not confer substantive rights beyond legislative framework.
• Supreme Court’s Ashish Agarwal decision treats certain notices as under Section 148A(b) but does not create a “back‑dating” doctrine.

Sections Involved:

• Section 148 – Issue of notice where income has escaped assessment.
• Section 149(1)(a) & (b) – Time limits for issue of notice.
• Section 148A – Procedure for reopening assessments under FA 2021.

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

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