Reassessment notices for Assessment Year 2015-16 issued after March 31, 2021, are time-barred and invalid.

The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961 (“the Act”) for Assessment Year (AY) 2015-16.

The initial notice was issued on 01.04.2021 under the old reassessment regime, relying on the extension of timelines provided by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (“TOLA”).

Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, which addressed notices issued during the interregnum period (01.04.2021 to 30.06.2021), the Department treated the notice as one under Section 148A(b) and subsequently issued a fresh Section 148 notice in July/August 2022 after passing an order under Section 148A(d).

The petitioner contended that these notices were time-barred under the substituted Section 149 of the Act.

1. Whether the reassessment notice issued for AY 2015-16 after 31.03.2021 is legally sustainable in light of the limitation periods prescribed under the amended Section 149 and the application of TOLA

The Court primarily applied the limitation criteria under Section 149 of the Income Tax Act, 1961, as amended by the Finance Act, 2021, which came into effect on 01.04.2021

It relied on the Supreme Court precedents in Union of India v. Rajeev Bansal (2024) 469 ITR 46 (SC), which clarified the interaction between TOLA and the new reassessment regime

Deepak Steel and Power Ltd v. Central Board of Direct Taxes [2025] 174 taxmann.com 144 (SC)

These cases established that for AY 2015-16, the three-year limitation period expired on 31.03.2019, which predates the TOLA relaxation period, rendering extensions for that specific year invalid if issued after 01.04.2021

The Court observed that the Revenue had conceded before the Supreme Court in Rajeev Bansal that for AY 2015-16, all notices issued on or after 01.04.2021 must be dropped.

The reasoning is that under the new regime effective from 01.04.2021, the three-year window for AY 2015-16 had already expired on 31.03.2019 (before TOLA’s inception), and the six-year window ended on 31.03.2022.

Since the impugned notices in this case were either issued on 01.04.2021 (under the old regime) or in mid-2022 (after the six-year limit under the new regime had passed), the court found them to be hit by the bar of limitation.

The court followed various High Court precedents (Delhi, Punjab & Haryana, Rajasthan, Karnataka) that applied the same rationale to quash similar notices for AY 2015-16.

It held that the notice was invalid because it was issued during the extended period of TOLA which did not legally apply to the facts of AY 2015-16, as the initial three-year limitation had lapsed prior to TOLA's commencement.

Rule was made absolute with no order as to costs