Validity of reassessment proceedings under Section 147/148 under the new regime introduced by the Finance Act, 2021, particularly concerning limitation under Section 149 in cases where earlier notices issued between 1 April 2021 and 30 June 2021 were treated as deemed show-cause notices under Section 148A(b) pursuant to the judgment of the Supreme Court in Union of India v. Ashish Agarwal and later clarified in Union of India v. Rajeev Bansal.
In Jammu and Kashmir and Ladakh High Court, in the case of Jasbir Singh Oberoi v. Union of India & Ors decided on 27 February 2026, the Court examined the validity of reassessment proceedings initiated under Sections 147/148 under the new reassessment regime introduced by the Finance Act, 2021, particularly concerning the limitation prescribed under Section 149, the applicability of the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA), and the effect of the Supreme Court rulings in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal.
The reassessment proceedings pertained to Assessment Year 2013-14. Initially, a notice under Section 148 dated 31.05.2021 was issued under the erstwhile reassessment provisions. Subsequently, in view of the judgment of the Supreme Court in Ashish Agarwal, all reassessment notices issued between 01.04.2021 and 30.06.2021 under the old regime were directed to be treated as deemed show-cause notices under Section 148A(b) of the Act under the substituted provisions. In compliance with the said directions, the Assessing Officer issued a communication dated 24.05.2022, providing information suggesting escapement of income amounting to ₹1.30 crore and called upon the petitioner to show cause as to why notice under Section 148 should not be issued. The petitioner did not file any response. Thereafter, the Assessing Officer passed an order under Section 148A(d) dated 25.07.2022 holding the case fit for reopening and issued a notice under Section 148 dated 26.07.2022.
Events : The petitioner challenged reassessment proceedings relating to Assessment Year 2013-14.
Original notice under Section 148 issued on 31.05.2021 under the old regime.
After the Supreme Court decision in Ashish Agarwal, the notice was treated as a deemed show-cause notice under Section 148A(b).
Subsequently:
24.05.2022 – Show cause communication issued providing material alleging escapement of income of ₹1.30 crore.
No reply was filed by the assessee.
25.07.2022 – Order passed under Section 148A(d)
26.07.2022 – Notice issued under Section 148.
3. Statutory Framework
(i) Old Reassessment Regime Prior to Finance Act 2021, reopening was governed by:
Section 147 – Income escaping assessment
Section 148 – Issue of notice
Section 149(1)(b) – Limitation of six years from end of AY where escaped income exceeds ₹1 lakh.
For AY 2013-14, the six-year period expired on 31.03.2020.
COVID Relaxation under TOLA
Under the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020, time limits falling between 20 March 2020 and 31 March 2021 stood extended up to 30 June 2021.
Thus, the limitation for issuing notice for AY 2013-14 was extended up to 30.06.2021.
New Reassessment Regime (Finance Act 2021) Key provisions introduced:
Section 148A – Mandatory opportunity before reopening.
Section 149(1) – Limitation:
3 years generally
10 years where escaped income represented by asset ≥ ₹50 lakh.
First Proviso to Section 149 – Protects assessees by stating that no notice can be issued if it was already time-barred under the old law as on 01.04.2021.
The assessee challenged the proceedings before the High Court contending that the notice was barred by limitation under Section 149.
The principal challenge raised by the petitioner was that the entire reassessment proceeding was barred by limitation. It was contended that under the pre-amended provisions of Section 149, the time limit for issuing notice under Section 148 for AY 2013-14 was six years from the end of the relevant assessment year, which expired on 31.03.2020. Though the period stood extended due to the COVID relaxation granted under TOLA, the outer time limit stood extended only up to 30.06.2021. Therefore, according to the petitioner, any notice issued thereafter without satisfying the limitation provisions under the new regime was invalid.
The High Court examined the statutory framework governing reassessment both before and after the Finance Act, 2021. It observed that the Finance Act, 2021 introduced a new reassessment mechanism, including Section 148A, which mandates conducting an inquiry and providing an opportunity of hearing before issuing a notice under Section 148. It also substituted Section 149, reducing the normal limitation period to three years, extendable up to ten years only where income escaping assessment represented in the form of an asset exceeded ₹50 lakh. Importantly, the first proviso to Section 149 introduced a statutory safeguard by providing that no notice can be issued for assessment years beginning on or before 01.04.2021 if such notice could not have been issued on that date under the limitation provisions of the old law.
The Court further considered the effect of TOLA, which extended the time limits for certain actions that fell between 20.03.2020 and 31.03.2021 up to 30.06.2021. It also analysed the legal position emerging from Rajeev Bansal, wherein the Supreme Court clarified the manner in which limitation is to be computed for reassessment proceedings arising out of the deemed notices created by Ashish Agarwal. The Supreme Court held that once the legal fiction created in Ashish Agarwal is applied, the surviving limitation available to the Revenue under the Income-tax Act read with TOLA must be computed by calculating the balance period available between the date of issuance of the original notice and 30.06.2021. The same balance period would thereafter be available to the Assessing Officer to complete the subsequent steps under the new reassessment regime, including passing the order under Section 148A(d) and issuing notice under Section 148. The Court also clarified that certain periods must be excluded while computing limitation, including the period between issuance of the deemed notice and supply of information pursuant to the directions in Ashish Agarwal, as well as the time granted to the assessee to submit a reply to the show-cause notice.
Applying the above principles to the facts of the present case, the High Court observed that the last date for issuing notice for AY 2013-14 under the old regime was 31.03.2020, which stood extended up to 30.06.2021 by virtue of TOLA. The original notice dated 31.05.2021 was therefore issued when only thirty days of limitation remained. In terms of the law laid down in Rajeev Bansal, the period from 01.06.2021 till 04.05.2022, being the date of the Supreme Court judgment in Ashish Agarwal, was required to be excluded. The Court further held that the period from 04.05.2022 to 24.05.2022, when the Assessing Officer issued the communication under Section 148A(b), was also liable to be excluded. In addition, the two weeks’ period granted to the assessee to submit a response had to be excluded from the computation of limitation. Consequently, the limitation period recommenced on 08.06.2022, and since only thirty days of limitation were available, the Assessing Officer was required to complete the reassessment initiation process and issue a valid notice under Section 148 on or before 08.07.2022.
However, in the present case, the order under Section 148A(d) was passed on 25.07.2022 and the consequential notice under Section 148 was issued on 26.07.2022, which was clearly beyond the surviving limitation period available to the Revenue. The Court therefore held that the reassessment proceedings had been initiated beyond the permissible limitation prescribed under Section 149 read with TOLA and the principles laid down by the Supreme Court in Rajeev Bansal.
Accordingly, the High Court held that the order dated 25.07.2022 passed under Section 148A(d) and the notice dated 26.07.2022 issued under Section 148 were time-barred and without jurisdiction, and therefore liable to be quashed. The writ petition was consequently allowed and the impugned reassessment proceedings were set aside.
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