In a recent judgement, the Delhi High Court struck down the reassessment notices issued to the petitioner by the assistant commissioner of income tax under Section 148 of the Income Tax Act, x, stating that they violated the amended timelines set by the Finance Act 2021. The court reinforced the stricter time limits imposed by the new law to protect taxpayers from long scrutiny.
In the present case, the petitioner was issued a notice for a reassessment on 23-07-2022 for the already closed accounts of the 2015-16 assessment year ( AY ) under the reassessment provisions as per section 148A (d) of the act. This provision was introduced in the new reassessment regime under the Finance Act 2021. The petitioner challenged the notice, contending that such notice was issued beyond the legally permitted timeframe and was invalid.
The revenue relied on the Taxation and Other Laws ( Relaxation and Amendment of Certain Provisions ) Act, 2020 ( TOLA ), which extended statutory deadlines due to disruptions caused by the COVID-19 pandemic. The revenue further contended that these extensions allowed notices to be issued beyond the 3-year limit prescribed in the amended Section 148 of the Act.
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The petitioner contended that the Finance Act 2021 introduced a new framework altogether, which reduced the reassessment window to three years unless the income said to have escaped the assessment to exceed ₹50 Lakh, in which case the timeline could be extended to ten years. Regarding the 2015-16 AY, the petitioner aries the three-year limit expired on March 31, 2019, and any notices issued after April 1, 2021, were barred by limitation.
On hearing both sides, the High Court relied on the judgement made by the Supreme Court in Union of India v. Rajeev Bansal, where it was clarified that notices issued after April 1 2021, as per the old reassessment laws, could not be sustained under the new law. In that case, the court held that the revenue had issued such notices for the 2015-16 AY, which had to be dropped as they failed to meet the amended timeline requirements.
The two-judge bench consisting of Justice Yashwant Varma and Justice Dharmesh Sharma concluded that the notices issued to the petitioner were time-barred and lacked solid legal standing. The court also asserted that the Finance Act 2021 would override the TOLA extensions, which implies that the changes brought by the new laws were prospective and could not be applied retrospectively. As a result, the petition was allowed, and the reassessment notice under Section 148A ( d ) was quashed.
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