ITAT Delhi Invalidates Reassessment for AY 2015-16: TOLA Inapplicable and Notice Time-Barred under Section 149
The transition from the old reassessment regime to the new framework introduced by the Finance Act, 2021, has generated significant litigation regarding jurisdictional timelines. A critical area of dispute involves the interplay between the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), and the limitation periods prescribed under Section 149 of the Income Tax Act 1961.
In a recent pivotal ruling, the Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the case of Anil Kumar Garg Vs DCIT, adjudicated on the validity of reassessment proceedings for Assessment Year (AY) 2015-16. The Tribunal quashed the assessment order, establishing that TOLA relaxations do not apply to AY 2015-16 and that the final notice issued under Section 148 was barred by limitation based on the principles laid down by the Supreme Court in Union of India & Ors. v. Rajeev Bansal.
Factual Matrix of the Case
The dispute centers on the procedural history of the reassessment initiated against the assessee for AY 2015-16.
- Initial Notice: Despite the Finance Act, 2021 substituting Sections 147 to 151 with effect from April 1, 2021, the Assessing Officer (AO) issued a notice under the unamended (old) Section 148 on June 30, 2021.
- Supreme Court Intervention: Following the landmark judgment in Union of India & Ors. v. Ashish Agarwal, this initial notice was deemed to be a show-cause notice under the new Section 148A(b).
- Subsequent Proceedings:
- The AO issued a formal notice under Section 148A(b) on May 19, 2022.
- The assessee submitted objections/reply on June 02, 2022.
- The AO rejected the objections via an order under Section 148A(d) on July 20, 2022.
- Consequently, a fresh notice under the new Section 148 was issued on July 21, 2022.
The assessee challenged the validity of the proceedings, arguing that the final notice dated July 21, 2022, was issued beyond the permissible limitation period.
The Core Legal Controversy
The litigation revolved around three primary legal questions:
- Applicability of TOLA: Does the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 extend the limitation period for AY 2015-16?
- Validity of Old Notices: Was the notice issued under the old law between April 1, 2021, and June 30, 2021, valid in the eyes of the law?
- Surviving Limitation: Was the final notice issued on July 21, 2022, within the "surviving limitation period" as interpreted by the Supreme Court in Rajeev Bansal?