Delhi HC Clarifies Limitation Period for Reassessment Notices Issued under Amended Section 149 after TOLA Extensions [Read Order]

It was decided in a batch of writ where the petitioners challenged the validity of the reassessment notices issued post 01 April 2021 contending that the limitation for issuance of notice under the unamended law had already expired.

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

It was urged that the Finance Act, 2021 did not contain any express provision reviving such expired rights and that any such revival would be impermissible in law.

They further argued that their rights had crystallised with the lapse of time and that permitting reassessment based on amended provisions is contrary to the well-established legal principle that vested rights could not be divested without explicit legislative sanction.

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The petitioners relied on the Supreme Court decision in Union of India v. Ashish Agarwal (2023) to argue that CBDT Instruction No. 01/2022, which allowed the reopening of such cases, is contrary to the law laid down in Ashish Agarwal and the language of amended Section 149, and therefore was ultra vires the statute.

The Revenue submitted that the limitation period for issuance of notices stood extended by virtue of the TOLA and further supported by the directions of the Supreme Court in In Re: Cognizance for Extension of Limitation 2022 TAXSCAN (SC) 103

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The revenue further contended that the limitation for issuing reassessment notices stood extended under Section 3 of TOLA and that such extension remained effective despite the Finance Act, 2021. It was submitted that TOLA merely extended timelines due to the pandemic and did not alter or confer any new jurisdiction or impact the validity of notices issued post 1 April 2021.

Also Read: Reassessment Notice Beyond 10 Years Limit: Delhi HC Quashes Notice u/s 149 of Income Tax Act

The Delhi High Court relied on the supreme court's decision in Union of India v. Rajeev Bansal (2024 TAXSCAN (SC) 268) holding that periods from March 20 2020 to June 30 2021 and the time for assessee replies post Ashish Agarwal decision are excluded from the reassessment notice limitation period. Subsequently notices issued beyond the surviving time are time barred as the Assessing Officer must complete procedures within the remaining statutory timeframe

The Bench comprising Justice Yashwant Varma and Justice Harish Vaidyanathan Shankar rejected the Revenue’s contentions and clarified that the effect of the TOLA was merely to extend the life of proceedings which were alive and subsisting on 20 March 2020. It cannot be construed as reviving the right to initiate proceedings which stood barred by limitation on that date.

The Court clarified that the language employed in the amended Section 149 does not disclose any intention to operate retrospectively so as to revive the power to reopen assessments which were already time-barred under the unamended provision.

Also Read: Limitation Period Expired: Delhi HC Quashes Income Tax Reassessment Proceedings

It emphasized the settled position that any law curtailing or enlarging the limitation period must be given prospective effect unless a contrary intention is clearly expressed.

The Bench also distinguished the present matters from other situations where limitation had been alive as of March 2020. It observed that the notices impugned here pertained to assessment years in which the limitation had already expired prior to the pandemic related extensions and therefore even after applying TOLA and the amended Section 149 the revenue could not gain a fresh window to reopen such cases.

Accordingly, the Delhi High Court disposed of the batch of writ petitions with directions to the respective Assessing Officers to re-examine the reassessment proceedings in light of binding judicial precedents.

Subsequently the Court held that any notice issued after 1 April 2021, for assessment years where limitation had already expired prior to March 31, 2020, cannot be sustained even after applying TOLA extensions or the amended Section 149.

The Delhi High Court further emphasized that each notice must be tested afresh on these principles, and no blanket relief was granted. The writ petitions were disposed of in these terms.

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