Reopening of assessment: notice issued after TOLA limitation period held time barred and reassessment proceedings quashed in favour of taxpayer

Validity of reopening of assessment examines the retrospective operation of reassessment limitations under the substituted regime and the operation of TOLA. The article explains that notices for the specified assessment year issued on or after 01.04.2021 fall outside the completion period under TOLA and therefore must be dropped; consequently a reopening notice issued after that period was time barred and quashed, and all consequential reassessment proceedings were set aside in favour of the taxpayer. The analysis focuses on limitation period and the effect of the Finance Act, 2021 regime on reassessment.

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Issues: Whether the notice dated 30.07.2022 issued under Section 148 of the Income-tax Act, 1961 in respect of assessment year 2015-16 is time-barred and invalid in view of the amendments made by Finance Act, 2021 and the Supreme Court's decision in Rajeev Bansal concerning the operation of TOLA.

Analysis: The assessment year under consideration is 2015-16 and the statutory regime for reassessment was amended by Finance Act, 2021 with Sections 147 to 151 read in the light of the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA). The Supreme Court in Rajeev Bansal clarified the operative effect of the amended limitation provisions and the application of TOLA to notices issued between 1 April 2021 and 30 June 2021, and recorded the concession of the Revenue that for assessment year 2015-16 notices issued on or after 1 April 2021 will have to be dropped as not falling within the period permitted by TOLA. The notice dated 30.07.2022 for AY 2015-16 falls on or after 1 April 2021 and therefore does not meet the limitation requirement as interpreted in Rajeev Bansal; consequently the notice and ensuing reassessment proceedings cannot be sustained.

Conclusion: The notice dated 30.07.2022 issued under Section 148 is time-barred and quashed; all consequential reassessment proceedings are quashed and the appeal is allowed in favour of the assessee.

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