Delhi HC Quashes AY 2015-16 Section 148 Reassessment Notice

Lalit Gulati Vs ACIT (Delhi High Court)

Delhi High Court has set aside a reassessment notice issued by the Income Tax Department for Assessment Year (AY) 2015-16, ruling that the notice was time-barred. The court’s decision in the case of Lalit Gulati Vs Assistant Commissioner of Income Tax (ACIT) hinged on a concession made by the Revenue before the Supreme Court in a separate matter concerning the applicability of limitation periods under the revamped reassessment framework and the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

The case before the Delhi High Court originated from a challenge filed by the petitioner, Mr. Lalit Gulati, against a notice dated July 23, 2022, issued under Section 148 of the Income Tax Act, 1961, initiating reassessment proceedings for AY 2015-16.

According to the court’s order, the petitioner had initially filed his return of income for AY 2015-16 on September 23, 2015. Subsequently, the Assessing Officer (AO) had issued a notice under Section 148 on April 5, 2021, seeking to reopen the assessment for the said assessment year. This notice was issued after March 31, 2021, the date from which a new regime for reassessment, incorporating procedures under Section 148A of the Act, came into effect. However, the April 5, 2021 notice was issued without following the mandatory procedure outlined in the newly introduced Section 148A, as it was based on the reassessment provisions that existed prior to the statutory changes effective from April 1, 2021.

The landscape of reassessment proceedings initiated during the transition period between the old and new regimes was significantly impacted by the Supreme Court’s decision in Union of India & Ors. v. Ashish Agarwal ((2022) 444 ITR 1). In this judgment, the Supreme Court intervened to harmonize the notices issued under the old Section 148 between April 1, 2021, and June 30, 2021, with the requirements of the new regime. The court directed that such notices should be deemed as notices issued under Section 148A(b) of the Act, requiring the tax authorities to follow the remaining steps of the new procedure, including providing information and considering the taxpayer’s response before deciding whether to issue a fresh Section 148 notice.

Following the directive of the Supreme Court in Ashish Agarwal, the AO in Mr. Gulati’s case issued a communication on May 30, 2022. This communication referenced the Ashish Agarwal judgment and treated the initial notice dated April 5, 2021, as a notice under Section 148A(b). The AO forwarded certain information to the petitioner, which purportedly indicated that income had escaped assessment for AY 2015-16. The petitioner responded to this communication on June 16, 2022.

Subsequently, on July 23, 2022, the AO passed an order under Section 148A(d) of the Act, concluding that it was a fit case to proceed with reassessment. On the same day, a fresh notice under Section 148 of the Act was issued to the petitioner for AY 2015-16. It was this July 23, 2022 notice and the subsequent proceedings that were challenged before the Delhi High Court.

The petitioner’s primary contention before the High Court was that the reassessment proceedings were legally unsustainable and should be set aside based on a crucial concession made by the Revenue before the Supreme Court in the case of Union of India and Ors. v. Rajeev Bansal (2024 INSC 754).

The Delhi High Court highlighted paragraphs 19(e) and 19(f) of the Supreme Court’s decision in Rajeev Bansal, which detailed the Revenue’s concession. Paragraph 19(e) discussed the interaction between the new reassessment regime, Section 149 (which deals with limitation periods), and the applicability of TOLA. It presented a table illustrating the limitation expiry dates read with TOLA for various assessment years, including AY 2015-16. While the table indicated that for AY 2015-16, TOLA was not applicable to both the three-year limitation (expiring March 31, 2019) and the six-year limitation (expiring March 31, 2022), paragraph 19(f) contained the direct and decisive concession.

Paragraph 19(f) of the Rajeev Bansal judgment explicitly states: “The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020;”.

The Delhi High Court noted that in light of this clear concession by the Revenue before the highest court, the impugned notice dated July 23, 2022, and the proceedings initiated pursuant to it for AY 2015-16 were required to be set aside.

The court further referenced another Supreme Court decision, Deepak Steel and Power Ltd. v. Central Board of Direct Taxes and Ors. (Civil Appeal No.5177/2025, decided on 02.04.2025). This appeal originated from orders of the Orissa High Court. The Supreme Court in Deepak Steel specifically took note of the Revenue’s concession in Rajeev Bansal concerning AY 2015-16 notices issued on or after April 1, 2021. Paragraph 5 of the Deepak Steel judgment, quoted in the Delhi High Court’s order, reiterated this concession and stated that nothing further needed to be adjudicated as the notices in that litigation were dated June 25, 2021 (i.e., on or after April 1, 2021). Based on this, the Supreme Court allowed the appeals in Deepak Steel, setting aside the proceedings.

The Delhi High Court also pointed out that the controversy in the present case was already covered in favour of the petitioner by its own previous decision in Makemytrip India Pvt. Ltd. v. Deputy Commissioner of Income Tax Circle 16 (1) Delhi & Anr. (Neutral Citation No.: 2025:DHC:1892-DB).

Considering the Revenue’s concession before the Supreme Court in Rajeev Bansal, the Supreme Court’s application of this concession in Deepak Steel and Power Ltd., and the Delhi High Court’s own precedent in Makemytrip India Pvt. Ltd., the court found no legal basis to uphold the reassessment notice issued to Mr. Lalit Gulati for AY 2015-16.

Consequently, the Delhi High Court allowed the petition, quashing and setting aside the notice dated July 23, 2022, issued under Section 148 of the Act, and all subsequent proceedings initiated in relation to it for Assessment Year 2015-16. The pending application in the case was also disposed of. The judgment underscores the binding nature of concessions made by the Revenue before the Supreme Court and their impact on similar cases pending before High Courts.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. The petitioner has filed the present petition, inter alia, impugning a notice dated 23.07.2022 issued under Section 148 of the Income Tax Act, 1961 [the Act] and further proceedings pursuant to the said notice in respect of Assessment Year [AY] 2015-16.

2. The petitioner filed its return of income for the AY 2015-16 on 23.09.2015, declaring total income of ₹ 13,63,47,964/-.

3. The Assessing Officer [AO] issued a notice dated 05.04.2021 under Section 148 of the Act seeking to reopen the assessment for AY 2015-16. Although the said notice was issued after 31.03.2021, the procedure as prescribed under Section 148A of the Act was not followed, as the notice was premised on the provisions relating to reassessment as were in force prior to 31.03.2021.

4. Thereafter, by a communication dated 30.05.2022, the AO referred to the decision of the Supreme Court in Union of India & Ors. v. Ashish Agarwal: (2022) 444 ITR 1 and forwarded certain information, which, according to the AO, suggested that the petitioner’s income had escaped assessment. The said communication also mentioned that in terms of the aforementioned decision in Union of India & Ors. v. Ashish Agarwal (supra), the notice dated 05.04.2021 issued under Section 148 of the Act was deemed to be a notice under Section 148A(b) of the Act. The petitioner responded to the said notice on 16.06.2022.

5. The AO passed an order dated 23.07.2022 under Section 148A(d) of the Act holding that it was a fit case for issuance of a notice under Section 148 of the Act in respect of AY 2015-16. The said order was forwarded to the petitioner along with a notice dated 23.07.2022 issued under Section 148 of the Act.

6. The petitioner contends that the proceedings initiated pursuant to the impugned notice dated 23.07.2022 are required to be set aside in view of the concession made by the Revenue before the Supreme Court in Union of India and Ors. v. Rajeev Bansal: 2024 INSC 754.

7. It is relevant to refer to paragraph 19(e) and 19(f) from the decision of the Supreme Court in Union of India and Ors. v. Rajeev Bansal (supra), which sets out the concession as made on behalf of the Revenue:

“The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income-tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-14, 2014-15, 2015-16, 2016-17, and 2017-18 will be within the period of limitation as explained in the tabulation below:

f. The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA;”

8. In view of the above concession, the impugned notice and the proceedings relating thereto are required to be set aside. We may also note the decision of the Supreme Court in Deepak Steel and Power Ltd. v. Central Board of Direct Taxes and Ors.: Civil Appeal No.5177/2025, decided on 02.04.2025. The said appeal arose from orders passed by the Hon’ble High Court of Orissa and Cuttack declining to entertain batch of petitions filed by the Assessees. The attention of the Supreme Court was drawn to the concession made on behalf of the Revenue in Union of India & Ors. v. Rajeev Bansal (supra) and noting the same, the Supreme Court allowed the appeals. The relevant extract of the said decision is set out below:

“4. The learned counsel appearing for the revenue with his usual fairness invited the attention of this Court to a three judge bench decision of this Court in Union of India and Ors. v. Rajeev Bansal, reported in 2024 SCC OnLine SC 2693, more particularly, paragraph 19(f) which reads thus:-

“19. (f) The Revenue concedes that for the assessment year 2015-2016, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.”

5. As the revenue made a concession in the aforesaid decision that is for the assessment year 2015-2016, all notices issued on or after 1st April, 2021 will have to be dropped as they would not fall for completion during the period prescribed under the taxation and other laws (Relaxation and Amendment of certain Provisions Act, 2020). Nothing further is required to be adjudicated in this matter as the notices so far as the present litigation is concerned is dated 25.6.2021.

6. In view of the aforesaid, in such circumstances referred to above the original writ petition nos.2446 of 2023, 2543 of 2023 and 2544 of 2023 respectively filed before the High Court of Orissa at cuttack stands allowed.”

9. The notice dated 23.07.2022 issued under Section 148 of the Act stands quashed and set aside. Concededly, the controversy is covered in favour of the petitioner by the decision of this court in Makemytrip India Pvt. Ltd. v. Deputy Commissioner of Income Tax Circle 16 (1) Delhi & Anr.: Neutral Citation No.: 2025:DHC:1892-DB.

10. The petition is, accordingly, allowed and all proceedings initiated pursuant thereto are set aside. The pending application is also disposed of.