ACIT Vs K.T.C. Automobiles Pvt. Ltd. (Kerala High Court)
Limitation Victory Recalled: Kerala HC Reopens Tax Dispute After TOLA & Supreme Court Extension Were Overlooked
Summary: In ACIT v. K.T.C. Automobiles Pvt. Ltd., Review Petition No. 957 of 2026 in W.P.(C) No. 7627 of 2022, decided on 19 August 2026, the Kerala High Court recalled its earlier judgment dated 7 July 2026, by which the assessee’s writ petition had been allowed on the ground of limitation u/s 153. The Court accepted that the earlier judgment required reconsideration because the effect of TOLA & the Supreme Court’s order extending limitation during the COVID-19 period had not been brought to its attention.
The review petition was therefore allowed, but the Court did not finally decide whether the assessment was within limitation. It merely recalled the earlier judgment & restored the writ petition for fresh hearing.
Relevant Facts
K.T.C. Automobiles Pvt. Ltd. had filed W.P.(C) No. 7627 of 2022 before the Kerala High Court, challenging income-tax proceedings on the ground that they were barred by the limitation prescribed u/s 153 of the Income-tax Act, 1961.
By judgment dated 7 July 2026, the High Court accepted the limitation challenge & allowed the writ petition. The tax proceedings were therefore invalidated on the reasoning that the statutory period available to the Department had expired.
The Assistant Commissioner of Income Tax & Principal Commissioner of Income Tax thereafter filed the present review petition. The Department contended that the earlier judgment had been rendered without considering two material legal developments that potentially extended the permissible period.
The first was the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, commonly referred to as TOLA. This legislation was enacted to extend or relax statutory time limits affected by the extraordinary disruption caused by the COVID-19 pandemic.
The second was the Supreme Court’s order dated 10 January 2022 in the suo motu proceedings titled In Re: Cognizance for Extension of Limitation. Through a series of orders, the Supreme Court had excluded or extended specified periods while computing limitation because courts, taxpayers, government departments & litigants were unable to act within ordinary statutory timelines during the pandemic.
According to the Department, these provisions & directions had a direct bearing on the calculation of limitation u/s 153. Since they had not been considered earlier, the conclusion that the proceedings were time-barred required review.
Issue Involved
The issue before the High Court was not whether the assessment was conclusively within limitation. The narrower issue was whether the earlier judgment should be recalled & reheard because potentially decisive provisions extending limitation had been omitted from consideration.
The Court was therefore required to determine whether non-consideration of TOLA & the Supreme Court’s limitation-extension order constituted a sufficient ground to exercise review jurisdiction.
Department’s Submissions
The Department submitted that the writ petition had been allowed exclusively on the basis of limitation u/s 153. However, the time available for completing the relevant proceedings could not be calculated by applying section 153 in isolation.
It was argued that TOLA statutorily extended several tax-related deadlines falling during the pandemic period. In addition, the Supreme Court’s order dated 10 January 2022 directed exclusion or extension of limitation for specified periods.
The combined effect of these provisions could materially alter the last permissible date for completing the assessment. Therefore, the earlier judgment, which did not examine either TOLA or the Supreme Court’s binding directions, suffered from a material omission requiring reconsideration.
The Department relied upon the Supreme Court order as Annexure B to the review petition & sought recall of the judgment dated 7 July 2026.
Assessee’s Submissions
Senior Counsel appearing for K.T.C. Automobiles Pvt. Ltd. fairly conceded that the implications of TOLA had not been pointed out when the writ petition was originally disposed of.
It was acknowledged that, because this material legal consideration had escaped attention, the limitation question required to be revisited. The assessee therefore did not oppose recall of the earlier judgment for fresh examination.
This concession was important because it avoided an extended controversy at the review stage regarding whether the omission satisfied the strict tests governing review jurisdiction.
Court’s Findings & Legal Reasoning
The High Court recorded that its earlier judgment had allowed the writ petition on the ground of limitation u/s 153. It also noted the Department’s contention that the judgment had omitted consideration of the Supreme Court’s extension order dated 10 January 2022 & the relevant provisions of TOLA.
Taking note of the assessee’s fair submission that TOLA’s implications had not been presented during the original hearing, the Court concluded that the matter required reconsideration.
Accordingly, the review petition was allowed & the judgment dated 7 July 2026 was recalled. W.P.(C) No. 7627 of 2022 was directed to be listed for fresh hearing on 3 September 2026.
The order is procedurally significant but deliberately limited. The Court did not hold that TOLA automatically extended every time limit u/s 153. Nor did it determine the exact period excludable pursuant to the Supreme Court’s orders. It did not uphold the assessment or reject the assessee’s limitation objection. All these questions remain open for adjudication when the writ petition is reheard.
Practical Implications
The decision demonstrates that any limitation computation covering the COVID-19 period must consider the ordinary statutory deadline, specific extensions granted through TOLA & the precise scope of the Supreme Court’s suo motu limitation orders.
Taxpayers should not assume that every pandemic-related order automatically extends limitation for departmental proceedings. Equally, the Department cannot rely on TOLA or the Supreme Court orders without preparing an exact date-wise computation showing their applicability to the particular statutory action.
The ruling also highlights the difference between review & final adjudication. Recall of a favourable judgment merely restores the dispute; it does not reverse the conclusion on merits in favour of the Department. At the rehearing, both parties must address whether TOLA applies to the particular deadline u/s 153, whether the Supreme Court’s exclusion operates upon that statutory period & what the correct terminal date becomes after applying all legally permissible extensions.
Cases Discussed
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
Heard Sri.Christopher Abraham, the learned Standing Counsel for the review petitioners, as well as Sri.Joseph Markose, the learned Senior Counsel for the respondent – writ petitioner.
2. The review petition has been instituted essentially pointing out that, this Court, while allowing the writ petition on the ground of limitation under the provisions of Section 153 of the Income Tax Act, 1961, has omitted to take note of the extension ordered by the Apex Court pursuant to Annexure-B order dated 10.01.2022. The review petitioners have also sought to rely on the provisions of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
3. Sri.Joseph Markose, the learned Senior Counsel, fairly points out that the implication of TOLA was not pointed out while disposing of the writ petition, on account of which, the matter requires to be revisited by this Court.
Taking note of the fair submission made by Sri.Joseph Markose, as above, this review petition would stand allowed, recalling the judgment dated 07.07.2026.
Post W.P.(C) No.7627 of 2022 for hearing on 03.09.2026.
