Facts of the Case

  • Multiple writ petitions were filed challenging reassessment notices issued under Section 148 of the Income Tax Act for AY 2016–17 and 2017–18.
  • The notices were issued after 01.04.2021 under the new reassessment regime introduced by the Finance Act, 2021.
  • In all cases, the alleged escaped income was below ₹50 lakhs.
  • The Revenue relied on:
    • TOLA (COVID relaxation law)
    • CBDT Instruction dated 11.05.2022
    • Supreme Court judgment in Union of India vs Ashish Agarwal
  • Petitioners contended that reassessment proceedings were barred by limitation.

Issues Involved

  1. Whether reassessment notices issued under Section 148 after 01.04.2021 are time-barred under Section 149(1)(a) when escaped income is below ₹50 lakhs?
  2. Whether Revenue can invoke extended limitation under Section 149(1)(b) without satisfying the ₹50 lakh threshold?
  3. Whether TOLA and CBDT Instruction can override statutory limitation under the amended law?
  4. Whether the “travel back in time” theory for limitation is legally sustainable?

 Petitioner’s Arguments

  • Notices are barred by limitation of 3 years under Section 149(1)(a).
  • Since escaped income is below ₹50 lakhs, extended 10-year period cannot apply.
  • TOLA does not permit “revival” or “travel back in time” of limitation.
  • CBDT Instruction dated 11.05.2022 is ultra vires and contrary to law.
  • Supreme Court in Ashish Agarwal did not allow bypassing limitation provisions.
  • New regime under Finance Act, 2021 applies to all notices issued after 01.04.2021.

Respondent’s Arguments (Revenue)

  • Notices are valid due to extension under TOLA and Supreme Court ruling.
  • Old notices (issued between 01.04.2021–30.06.2021) deemed valid under Section 148A(b).
  • Limitation should be computed considering extended timelines and exclusions.
  • CBDT Instruction is valid and binding.
  • Supreme Court powers under Article 142 justify continuation of reassessment.

Court Findings / Order

 1. Limitation under Section 149 is Mandatory

  • For escaped income below ₹50 lakhs, only 3-year limitation applies.

2. Extended 10-Year Period Not Applicable

  • Since threshold condition not satisfied, Revenue cannot invoke Section 149(1)(b).

3. “Travel Back in Time” Theory Rejected

  • No legal basis for retrospective validation of notices.
  • Neither TOLA nor Supreme Court judgment supports such interpretation.

4. CBDT Instruction Cannot Override Statute

  • Executive instructions cannot override statutory provisions.

 5. Finance Act, 2021 Applies Fully

  • New reassessment regime governs all notices issued post 01.04.2021.

 Final Outcome

  • Reassessment notices issued beyond limitation were quashed.

 Important Clarifications by Court

  • Supreme Court judgment in Ashish Agarwal only saved procedural defects, not limitation defects.
  • TOLA only extends timelines—it does not create new legal fiction.
  • Taxing statutes must be strictly interpreted.
  • Benefit of ambiguity goes to the assessee.

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

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