Court’s decision
The Delhi High Court disposed of a writ petition challenging reassessment proceedings for Assessment Year 2013–14, holding that the question of limitation under Section 149 of the Income Tax Act, as reshaped by the Supreme Court’s rulings in Ashish Agarwal and Rajeev Bansal, cannot be adjudicated mechanically at the writ stage. Instead, the Court directed that the Assessing Officer must examine whether the reassessment notice survives limitation by undertaking a fact-specific computation, guided by binding precedent. The Court therefore refrained from quashing the reassessment proceedings outright and remitted the matter for reconsideration by the Assessing Officer through a reasoned order .
Facts
The petitioner, a private limited company, challenged a notice issued under Section 148A(b) dated 27 May 2022, the consequential order under Section 148A(d) dated 22 July 2022, and the reassessment notice issued on the same date for Assessment Year 2013–14. The petitioner’s principal grievance was that the reassessment proceedings were initiated beyond the permissible period of six years, which according to the petitioner expired on 17 June 2022.
The factual backdrop was shaped by the transition from the old reassessment regime to the new regime introduced by the Finance Act, 2021, and the series of extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act during the COVID-19 period. The petitioner relied heavily on a detailed limitation computation chart placed on record, contending that even after accounting for statutory extensions and exclusions, the notice dated 22 July 2022 was time-barred.
Issues
The core issue before the High Court was whether the reassessment notice issued for Assessment Year 2013–14 was barred by limitation under Section 149 of the Income Tax Act, particularly in light of the deeming fiction created by the Supreme Court in Ashish Agarwal, and the subsequent authoritative clarification in Union of India v. Rajeev Bansal. The Court also examined whether such limitation objections should be conclusively decided in writ jurisdiction or left to the statutory authority for initial determination.
Petitioner’s arguments
The petitioner argued that the reassessment notice dated 22 July 2022 was ex facie barred by limitation. It was submitted that for Assessment Year 2013–14, the outer limit of six years expired on 31 March 2020, which stood extended only up to 30 June 2021 under the relaxation provisions. Relying on the Supreme Court’s reasoning in Rajeev Bansal, the petitioner contended that only seven days of limitation survived after excluding the deemed stay period arising from the conversion of old Section 148 notices into deemed show cause notices under Section 148A(b).
According to the petitioner, once these seven days were added to the date on which the assessee was permitted to file its reply, the last permissible date for issuance of a valid reassessment notice was 17 June 2022. Since the notice under Section 148 was issued only on 22 July 2022, it was urged that the entire proceedings were non est in law and deserved to be quashed.
Respondents’ arguments
The Revenue opposed the writ petition, contending that the reassessment proceedings were initiated in accordance with law and that the computation of limitation in transitional cases involves application of multiple statutory provisions, judicial directions, and factual variables. It was submitted that such issues ought not to be conclusively determined at the threshold in writ jurisdiction.
The Revenue relied on recent judgments of the Supreme Court and the Delhi High Court to argue that the Assessing Officer is required to pass a reasoned order examining the survival of limitation in each individual case, rather than reassessment notices being struck down in a blanket manner.
Analysis of the law
The High Court examined the evolving jurisprudence governing reassessment proceedings post the Finance Act, 2021. It noted that the Supreme Court’s decision in Ashish Agarwal introduced a legal fiction converting old Section 148 notices into deemed show cause notices under Section 148A(b), and that this fiction necessarily impacted limitation computations.
The Court further noted that in Union of India v. Rajeev Bansal, the Supreme Court clarified how the “surviving period of limitation” must be calculated by excluding the period during which reassessment proceedings remained in abeyance by virtue of judicial orders. These principles, however, require case-by-case application, rather than mechanical application.
Precedent analysis
The Court placed reliance on its own recent decision in Kanwaljeet Kaur v. Commissioner of Income Tax, which had dealt with an identical controversy. In that judgment, the Court had held that Assessing Officers must evaluate each reassessment notice individually, bearing in mind the guidance in Rajeev Bansal and subsequent Delhi High Court decisions such as Ram Balram Buildhome Pvt. Ltd. The Court reproduced and followed paragraphs 27 to 29 of Kanwaljeet Kaur, which mandate a reasoned determination by the statutory authority.
Court’s reasoning
The High Court held that while the petitioner’s contention on limitation was arguable and supported by precedent, the proper course was not to quash the reassessment proceedings outright. Instead, consistent with Kanwaljeet Kaur, the Court directed that the Assessing Officer must undertake the exercise of computing the surviving period of limitation and pass a speaking order dealing with the applicability of Rajeev Bansal and allied judgments.
The Court emphasised that such an approach balances taxpayer rights with statutory procedure, ensuring that limitation objections are adjudicated on merits while preserving the hierarchy of remedies under tax law.
Conclusion
The Delhi High Court disposed of the writ petition by directing the Assessing Officer to re-examine the validity of the reassessment notice, specifically on the issue of limitation under Section 149, in light of the Supreme Court’s judgment in Rajeev Bansal and the Delhi High Court’s own precedent. The Court clarified that the Assessing Officer must pass a reasoned and speaking order, and that the petitioner would be at liberty to challenge any adverse decision in accordance with law. No final view on the merits of the limitation objection was expressed .
Implications
This decision reinforces a consistent judicial approach in reassessment litigation post-2021 reforms: limitation disputes arising from the Ashish Agarwal transition are fact-sensitive and must first be examined by the Assessing Officer. While protecting taxpayers from arbitrary reassessment, the ruling avoids blanket quashing of notices and channels disputes through structured statutory adjudication, thereby shaping the procedural roadmap for hundreds of similarly placed reassessment cases.
Case law references
- Union of India v. Rajeev Bansal – Clarified computation of surviving limitation period for reassessment notices post-Ashish Agarwal.
- Kanwaljeet Kaur v. Commissioner of Income Tax – Directed Assessing Officers to decide limitation objections through reasoned orders.
- Ram Balram Buildhome Pvt. Ltd. v. Income Tax Officer – Applied Rajeev Bansal principles to individual reassessment notices.
- Union of India v. Ashish Agarwal – Created deeming fiction converting old Section 148 notices into Section 148A(b) notices.
FAQs
1. Can reassessment notices for AY 2013–14 issued in 2022 still survive?
Possibly, but only if they fall within the surviving limitation period computed in accordance with Rajeev Bansal.
2. Will High Courts quash reassessment notices directly on limitation grounds?
Not routinely. Courts increasingly direct Assessing Officers to decide limitation issues through reasoned orders first.
3. What remedy does a taxpayer have if the Assessing Officer rejects the limitation objection?
The taxpayer may challenge the adverse order through appropriate statutory or writ remedies.
