Delhi HC quashes over 1,300 time-barred reassessment notices

The Delhi High Court (HC)has quashed over 1300 reassessment notices of tax liability- for years prior to three assessment years, ruled that new tax regime doesn’t empower the revenue department to reopen matters beyond March 31. These notices were issued between April 1 and June 30, 2021

The move may affect 1.33 lakh reassessment notices issued during the period, said a senior tax official added that I-T department may move special leave petition in Supreme Court against the HC ruling or seek amendment in the Finance Act.

The finance ministry has changed the law for reassessment proceedings under Section 148 from this year onwards in the Union Budget 2021.


Section 148 of the Income Tax Act deals with the issuance of a notice wherein any income has escaped recomputation or assessment.

The new rule say that an assessing officer cannot issue a notice if three years have elapsed from the end of the relevant assessment year. The time-limit was earlier six years.

However, in case of serious tax evasion, the assessment can be reopened until 10 years, only when concealment of income is more than 50 lakh.

The law change was supposed to come into effect from April 1, 2021 which meant that notices were to be issued by March 31, 2021. But income tax authorities have extended the time limit to June 30, 2021, owing to the restrictions due to the second wave, leading to a flurry of notices to companies, businesses wherever the requirement of reassessment has been determined.

The official cited above said that the ruling won’t impact those cases where the assessing officer has evidence which reveals income escaping assessment, in form of an asset, amounts to or is likely to amount to Rs 50 lakhs or more, as in such cases notice can be issued beyond the three-year limiting period but not beyond 10 years from the end of the relevant assessment year, he explained.

ET reported about dozen of reassessment notices issued to global fund houses and private equity funds for under-reporting of income during AY13-16. Those are however for income over Rs 50 lakhs.

On Wednesday, High Court allows over 1300 writ petitions preferred by the assessees challenging the validity of reassessment notices issued under the old regime of reassessment.

Also rejected the doctrine of conditional legislation relied upon by the Chhattisgarh High Court, concurs with the view of the Allahabad High Court and Rajasthan High Court.

The court ruled that Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), does not empower the Revenue to extend application of the old reassessment regime beyond March 31 as the Finance Act, 2021 introduced new scheme of reassessment with effect from April,” HC noted.