High Court Quashes Income Tax Reassessment Issued Beyond Limitation under TOLA

The petitioner challenged an assessment order and demand notice dated May 27, 2023. An initial notice under Section 148 of the Income Tax Act, 1961, was issued on June 30, 2021, under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). A new notice under Section 148A(b) was issued on May 21, 2022, following a Supreme Court decision. An order passed on July 21, 2022, alleged income of Rs. 1,66,41,340/- had escaped assessment.

The HC had previously quashed the Section 148 notice, but the Supreme Court stayed that order. Relying on the stay, the respondent reactivated proceedings, leading to the impugned assessment order and demand notice.

Issue Raised: Whether, considering the Supreme Court ruling on limitation periods, the reassessment notices issued on July 21, 2022, and June 30, 2021, were time-barred under TOLA and the Income Tax Act.

HC’s Decision: The High Court granted the petition. Citing the Supreme Court’s decision in Union of India v. Rajeev Bansal, the Court noted that a June 30, 2021, notice under TOLA left only one day for issuance after providing the assessee time to reply. The Supreme Court’s decision in Union of India v. Ashish Agarwal had allowed 14 days for reply, setting the last reply date as June 5, 2022, and the last date for the issuance of notice as June 12, 2022. As the impugned notice under Section 148 was issued on July 21, 2022, it was deemed time-barred and invalid. Therefore, the High Court quashed and set aside the notices dated July 21, 2022, and June 30, 2021, and consequently, the assessment order dated May 27, 2023.