Gujarat HC Quashes Reassessment Notice for AY 2015-16: TOLA Extension Cannot Save Time-Barred 148 Notices

Recently, the Gujarat High Court confirmed that the Income Tax Department cannot reopen old cases (like those relating to the assessment year 2015-16) after a specific deadline unless very strict conditions are met. Even though the department tried to use COVID-related extensions (TOLA), the courts, including the Supreme Court, said those extensions do not help for years where time had already expired.

The present writ petition (R/Special Civil Application No. 19359 Of 2022) is being filed by a company named TTEC India Customer Solutions Private Limited (petitioner) in the Gujarat High Court, before the benches comprising Honourable Mr Justice Bhargav D. Karia and Honourable Mr Justice Pranav Trivedi, against the Assistant Commissioner of Income Tax-4(1)(1), Ahmedabad and Others (respondents). The company has challenged a notice related to the assessment year 2015-16 issued under section 148 of the Income Tax Act, 1961. This notice was issued under the old tax regime, extended temporarily by a law called TOLA (Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020). However, after 01.04.2021, a new procedure came into force under Section 148A, which made it mandatory to follow a new format, specifically, to issue a preliminary notice under Section 148A(b) before reopening a tax case.

In the present case, the company was first issued with a notice dated 30.06.2021, under Section 148; however, it did not follow the new procedure under 148A(b). Later, the department tried to correct it by issuing a Section 148A(b) notice dated 30.05.2022. This led to a rise in confusion because of the TOLA extension during COVID-19, which allowed the Income Tax Department extra time to act. They used this to justify the late notice. However, the Supreme Court in Judgement titled Union of India vs. Ashish Agarwal ruled that any notice issued between 01.04.2021 and 30.06.2021 under the old regime should be treated as a notice under the new regime under 148A(b), and proper steps must follow under this regime. Following these orders, the department again issued notices under Section 148A(b), invited replies, and passed orders under Section 148A(d), as per the new law.

The company and others challenged this procedure, claiming that in Ashish Agarwal’s case, too, the reassessment for assessment year 2015-16 was time-barred and therefore invalid. While this case was pending, similar cases were decided all over the country. One case of Rajeev Bansal (2014) was raised in the Supreme Court, where the court ruled that any notice issued on or after 01.04.2021 (even if under TOLA) was invalid because the initial 6-year time limit to reopen cases expired on 31.03.2022, and after that, the law only allowed reopening within 3 years unless very specific conditions were met, which were not met in that case.

Citing various similar case judgements, including cases of Deepak Steel and Power Ltd, Nehal Ashit Shah, and R.K. Build Creations Pvt. Ltd., the Gujarat High Court concluded that the notice issued to TTEC India for the assessment year 2015-16 after 01.04.2021, even though justified using TOLA, was invalid. The law after 01.04.2021 had changed, and any reassessment notice for the assessment year 2015-16 was barred by limitation. Therefore, the court set aside the reassessment notice issued to the company under Section 148. Hence, the petition was allowed, and the entire proceeding was dropped, bringing relief to the company.