10-Year Extended Reassessment Invalid as Escaped Income Not Represented as Asset u/s 153A(1) Proviso: Delhi HC [Read Order]
The Delhi High Court ruled that a 10-year extension under Section 153A(1) was invalid as escaped income was not represented as an asset
![10-Year Extended Reassessment Invalid as Escaped Income Not Represented as Asset u/s 153A(1) Proviso: Delhi HC [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/05/Delhi-high-court-Extended-reassessment-under-Section-153A-TAXSCAN.jpg "10-Year Extended Reassessment Invalid as Escaped Income Not Represented as Asset u/s 153A(1) Proviso: Delhi HC [Read Order]")
In a recent judgment, the Delhi High Court ruled that the 10-year reassessment window allowed under the proviso to Section 153A(1) was inapplicable as the escaped income was not represented in the form of an asset, as required by law. Smart Chip Private Limited, the petitioner, challenged the validity of the notice dated 21 March 2024, which was issued under a search conducted between 21...
In a recent judgment, the Delhi High Court ruled that the 10-year reassessment window allowed under the proviso to Section 153A(1) was inapplicable as the escaped income was not represented in the form of an asset, as required by law.
Smart Chip Private Limited, the petitioner, challenged the validity of the notice dated 21 March 2024, which was issued under a search conducted between 21 and 25 March 2023 under Section 132 of the Income Act.
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The petitioner argued that the reopening of the 2016-17 assessment was time-barred, as the income allegedly escaped assessment was not reflected as an asset, and therefore did not qualify under the extended limitation period allowed by the statute. The original return for the year in question had been filed on 30 November 2016 and assessed under Section 143(3) in December 2018, with some additions later modified by the Commissioner (Appeals) in 2020.
In response, the Income Tax Department’s counsel claimed that the reassessment was valid under the amended Section 149(1)(b), arguing that the escaped income exceeded Rs. 50 lakh and involved false claims, bogus expenses, and related entries uncovered during the search. The department stated that this gave them the authority to reopen the assessment even beyond the standard six-year period.
The single-judge bench comprising Justice C. Hari Shankar found that the assessment year 2016-17 fell outside the six-year reassessment period permitted under Section 153A of the Income Tax Act, and the extended 10-year period was only available where the income was represented in the form of an asset.
Since the income in question related to expenses and book entries, and not assets such as land, buildings, securities, or deposits, the extended limitation could not be invoked. The court relied on the Supreme Court’s decision in Union of India v. Rajeev Bansal, which limited the retrospective application of the expanded reassessment provisions.
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The court ruled that the conditions under the fourth proviso to Section 153A(1) were not satisfied in this case, and the reassessment proceedings were beyond the permissible time frame. The court quashed the notice issued under Section 148 of the Income Tax Act and set aside all consequential proceedings.
The writ petition was allowed, and the court clarified that the reassessment notice lacked legal validity due to non-fulfilment of statutory conditions for extended limitation.
To Read the full text of the Order CLICK HERE
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