Reassessment Held Time-Barred: Delhi HC Says No Judicial Direction to Extend Limitation u/s 153(6), Terminates Reassessment [Read Order]

The Delhi High Court in a recent case has terminated reassessment proceedings for Assessment Year (AY) 2013–14, holding them to be time-barred under Section 153(2) of the Income Tax Act, 1961.

The petitioner, Ameeta Goyal, challenged a show-cause notice dated 20 August 2024 and the reassessment proceedings for AY 2013–14, contending that they were barred by limitation under Section 153(2). She also sought directions for giving credit for taxes paid for AYs 2012–13 and 2013–14 while filing her Income Tax Settlement Application, along with a refund of the excess tax.

The petitioner had originally filed her return on 27 July 2013, declaring an income of ₹10,46,563. Subsequently, she approached the Income Tax Settlement Commission in December 2016, disclosing additional income for AYs 2012–13 to 2016–17 and paying an additional ₹77.35 lakh in taxes for AY 2013–14. While the applications for AYs 2015–16 and 2016–17 were accepted, those for AYs 2012–13 and 2013–14 were rejected.

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Meanwhile, a notice under Section 148 dated 20 March 2019 was issued by the AO for AY 2013–14. The petitioner filed a return in response and sought to challenge the notice before the Delhi High Court in earlier writ petitions. The Court granted interim protection on 20 December 2019, staying further reassessment proceedings under Section 148.

Despite the stay, further notices were issued under Section 142(1). In 2022, following the Supreme Court’s decision in Union of India v. Ashish Agarwal (2023) , the AO issued a notice. The petitioner reiterated that proceedings were stayed and thus inoperative. Consequently, the AO passed an order keeping the reassessment in abeyance.

Subsequently, on 18 May 2023, the High Court dismissed the petitioner’s earlier challenge to the Settlement Commission’s rejection of her application. Following this, on 13 December 2023, her pending writ petition against the reassessment notice was withdrawn as infructuous. The interim stay, therefore, ceased to operate from that date.

Counsel for the Revenue argued that the reassessment proceedings were still within limitation by virtue of Section 153(6), which permits a 12-month extension when the reassessment arises from any finding or direction of a court or authority. The Revenue contended that since the prior writ proceedings had a bearing on the reassessment, the extended limitation under Section 153(6) applied.

The Bench comprising Justice Vibhu Bakhru and Justice Tejas Karia categorically rejected the Revenue’s contention, holding that Section 153(6) was not attracted as there was no specific finding or direction issued by any court requiring the AO to complete reassessment. The petitioner had merely withdrawn her earlier writ petition after dismissal of related proceedings before the Settlement Commission, and thus, no judicial direction existed to extend the statutory time limit.

Referring to the proviso to Explanation 1 to Section 153, the Court noted that the reassessment proceedings were stayed from 20 December 2019 until 13 December 2023. Since the stay was vacated on 13 December 2023, the AO had a 60-day window to conclude the proceedings, expiring on 11 February 2024. As no reassessment order was passed within this period, the proceedings had become time-barred.

While allowing the petition, the Court clarified that the petitioner was free to make an appropriate application for a refund of the tax paid. The Revenue was directed to consider any such refund claim in accordance with the law.

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