Delhi High Court annuls reassessment notice where six-year limitation period had already lapsed

Background of the dispute

The Delhi High Court, in the matter of Kalpana Buildmart Private Limited Vs ITO, dealt with a challenge to reassessment proceedings initiated for AY 2014-15 under the Income Tax Act 1961. The assessee questioned the legality of a notice dated 30.08.2024 issued under Section 148, as well as the preceding proceedings under Section 148A(b) and Section 148A(d).

The central issue was whether reassessment could be validly initiated in AY 2014-15 under the new reassessment regime when, under the earlier law, the outer six-year limitation period had already ended on 31.03.2021.

Impugned notices and proceedings

The assessee approached the High Court seeking to quash:

  • The notice dated 30.08.2024 issued under Section 148 for AY 2014-15 (referred to as “the impugned notice”);
  • The prior show-cause notice issued under Section 148A(b); and
  • The order passed under Section 148A(d) that paved the way for issuing the Section 148 notice.

It was argued that all these steps were unsustainable since the jurisdictional precondition of issuance of notice within the statutory time limit was not satisfied.

Reliance on earlier Delhi High Court and Supreme Court rulings

Reference to Manju Somani decision

Counsel for the assessee pointed out that the controversy was no longer res integra. He relied upon the Delhi High Court’s own earlier judgment in Manju Somani v. Income Tax Officer Ward-70(1) & Ors: Neutral Citation : 2024: DHC:5411-DB, in which the Court had already examined the scope of the new reassessment regime and the limitation provisions under Section 149 as amended.

In that matter, the Court had interpreted the transition from the old to the new reassessment provisions and held that the new extended time limits could not be invoked where, under the earlier framework, the right to issue a reassessment notice had already become time barred.

Supreme Court’s authoritative interpretation in Union of India & Others v. Rajeev Bansal

In addition, the assessee’s counsel placed significant reliance on the judgment of the Supreme Court in **Union of India & Others v. Rajeev Bansal : 2024 SCC OnLine SC 2693. The High Court was specifically taken through key parts of that decision dealing with the construction of the proviso to Section 149(1)(b)`.

The Supreme Court, in the quoted passages, explained how the proviso operates to protect assessees from reassessment where limitation had already expired under the earlier regime:

“46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under Section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the “time limits specified under the provisions of” 149(1)(b) of the old regime. Thus, a notice could be issued under Section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under Section 149(1)(b) of the old regime.