Delhi High Court Quashes Income Tax Reassessment Notice for AY 2015-16, Rules TOLA Cannot Extend Limitation Post-April 1, 2021 [Read Order]

The Delhi High Court has quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year (AY) 2015-16, ruling that the said notice issued after April 1, 2021, was time-barred and impermissible under the amended reassessment regime.

The Court noted that the reassessment was substantially revised by the Finance Act, 2021, and the transitional provisions under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) could not be invoked to sustain notices issued beyond the limitation period. The matter was decided based on the decision taken in Makemytrip India Pvt. Ltd. v. Deputy Commissioner of Income Tax Circle 16 (1) Delhi & Anr.

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The petitioner, Aten Portfolio Managers Private Limited, a company had filed its return for AY 2015-16 on 30.09.2015, declaring a loss of ₹7.28 lakhs. A notice seeking to reopen the assessment was issued on 28.06.2021 under the unamended Section 148, without complying with the new procedural safeguards under Section 148A.

Subsequently, on 25.05.2022, the Assessing Officer (AO) issued a communication referring to the Supreme Court’s judgment in Union of India v. Ashish Agarwal, treating the earlier notice as a deemed notice under Section 148A(b), and forwarded certain information alleging escapement of income.

The petitioner responded on 06.06.2022, but the AO nonetheless proceeded to pass an order under Section 148A(d) on 28.07.2022, leading to the issuance of a fresh notice under Section 148.

In Deepak Steel and Power Ltd. v. CBDT, the Supreme Court further supported this position by allowing assessee appeals and invalidating identical reassessment notifications sent after April 1, 2021, based on the Revenue's own concession in the case Union of India & Ors. v. Rajeev Bansal. The words reads: “19. (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.”

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Accordingly, the High Court allowed the writ petition, quashing the impugned order dated 28.07.2022 under Section 148A(d), the notice issued under Section 148, and all consequential proceedings. It concluded that “The impugned notice dated 28.07.2022 issued under Section 148 of the Act stands quashed and set aside. Concededly, the controversy is covered in favour of the petitioner by the decision of this Court in Makemytrip India Pvt. Ltd. v. Deputy Commissioner of Income Tax Circle 16 (1) Delhi & Anr.”