TaxTMI 
TaxTMI 
Navigating the Complexities of Time-Barred Notices post Rajeev Bansal Judgment
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....avigating the Complexities of Time-Barred Notices post Rajeev Bansal Judgment<br>By: - Ishtmeet Kaur<br>Income Tax<br>Dated:- 10-6-2025<br>Abstract Reassessment proceedings have always been a contentious issue between the Income Tax Department and the assessees especially in cases where its discretionary application by the Assessing Officers has resulted in various legal disputes. Since the introduction of these provisions, the assessees have contested the reassessment notices on various grounds such as mere change of opinion, time-barred notices, no "reason to believe", etc. The recent discourse which surrounds the reassessment provisions includes the latest series of judgments that have been given by the Supreme Court and the High Courts on the validity of notices issued under pre-amended provisions. The amendments made to the Income Tax Act of 1961 were aimed at easing the reassessment process by imposing some procedural safeguards like 148A and shortened time limits for issuance of notices. With this, it became a matter of legal concern as notices issued on or after 1st April 2021 challenging pre-amended provisions were taken up before the courts. Although, the judgment....
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.... of Supreme Court in Rajeev Bansal has cleared the air but still ambiguities remain. The article will consider the legal ramifications of this judgment, drawing attention to conflicting interpretations and their possible impact on taxpayers and the Income Tax Department, while underscoring the need for clarity in statutes on reassessment issues. 1. Background of the Issue 1. TOLA and the subsequent notifications: The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA), was promulgated on 29th September 2020 to meet the challenges arising from the COVID-19 pandemic in meeting statutory and regulatory compliances. Section 3(1) of the TOLA[1] granted the extension with respect to completion, compliance or issuance of any notice, intimation, notification, sanction or approval, or such other action under the Income Tax Act if it falls between 20th March 2020 and 31st December 2020. The Act granted an extension till 31st March 2021 and further granted the authority to the Central Government to extend the time-limit beyond this initial period by a notification. The Central Government exercising its powers under the TOLA issued 3 notifications, wit....
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....h the last notification being Notification No. 38/2021 (S.O. 1432(E)) dated 27.04.2021 which extended the deadline for issuance of notices to 30.06.2021. One of the major points of contention is the explanation given under these notifications which mentions that for the issuance of notices under the extended time periods provided by the TOLA and subsequent notifications, the pre-amended provisions would apply. 2. Amendments made by the Finance Act, 2021: On 1st April 2021, the Finance Act 2021 introduced new reassessment procedure to provide greater protection to taxpayers. The Act added Section 148A[2], requiring an enquiry and opportunity for the assessee to be heard before the issuance of any notice. Furthermore, the amended provisions also changed the time-limit under section 149[3] for the issuance of notice. As per the amended provisions a notice could be issued within 3 years from the end of the relevant assessment year. After 3 years but before the expiry of 10 years, a notice under Section 148 can only be issued if the income escaping assessment is greater than 50 lakhs. 3. Origin of the Conflict: During the period between 1st April 2021 and 30th June, the I....
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....ncome Tax Department issued 90,000 notices to the assessees under the old provision of Section 148. This led to a plethora of litigations in the High Courts challenging these notices on the pretext that the Assessing Officers did not follow the due procedure under Section 148A[4] while issuing these notices despite the fact that the new provisions have already come into force. Some of the major judgements of the High Courts, worth mentioning in this regard are Ashok Kumar Agarwal vs. Union of India[5], Vellore Institute of Technology v. CBDT[6], Mon Mohan Kohli vs. ACIT[7], etc. Most of the High Courts declared these notices as invalid and held that after the coming of the Finance Act, 2021 the old provisions cannot be applied as the reassessment notices issued after 01.04.2021 are governed by the substituted sections 147 to 151 of the Income Tax Act, 1961. 4. Union of India v. Ashish Agarwal: The Supreme Court in its historic judgment of Ashish Agarwal[8] agreed with the conclusion of other High Courts and held that the benefit of the new provisions must be extended to the previous assessment years if the notice had been issued after the 1st of April 2021. The Court also ruled t....
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....hat these notices would be treated as show-cause notices under 148A (b) in consideration of the huge revenue impact of quashing 90,000 notices. The proceedings could continue on the basis of the new provisions allowing the taxpayers to avail themselves of all defenses provided under the amended law, striking a balance between taxpayer rights and government revenue interests. 2. Continuing Legal Ambiguities in the Aftermath of the Ashish Aggarwal Judgment Although the apex court of the country in its judgment made it clear that the procedure provided under the new provisions would be followed with effect from 1st April 2021, still a major ambiguity remained with respect to the validity of the notices that had already become time barred before 1st April 2021. For the AY 2013-14 and 2014-15, the last date of issuing the notice in accordance with the pre-amended provisions was 31st March 2020 and 31st March 2021 respectively. The first proviso to Section 149 clearly mentions that in case a notice has already become time-barred before 1st April 2021 in accordance with the pre-amended provisions, then the same cannot be issued under the new provisions. This proviso covers the cases o....
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....f A.Y. 2013-14 and 2014-15 and ensures that taxpayers are not unfairly subjected to reassessment for periods that were closed under the previous legal framework. Furthermore, taking into account the amended provisions, the notices for the A.Y. 2015-16 and 2016-17 in cases where income escaping assessment is less than 50 lakhs would also be time-barred since the period of 3 years in such cases has already expired on 31st March 2019 and 31st March 2020 respectively. Framing the legal issue which came before various high courts after the judgment of the Supreme Court in the case of Ashish Agarwal[9] was: Whether the notices issued by the department between 1st April 2021 and 30th June 2021 which have already become time-barred before 1st April 2021 as per the pre-amended provisions are valid taking into account the TOLA and the subsequent notifications released by the government? 3. Various conflicting interpretations of the Rajeev Bansal case contributing to uncertainty The Supreme Court in the case of UOI v. Rajeev Bansal[10], overturning and modifying the judgements of various High Courts has held that after 1st April 2021, only the substituted provisions ....
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....of Income Tax Act, 1961 will be applicable. Section 2(1)(b)(ii) of TOLA defines 'specified Act' to include the Income Tax Act. After 1 April 2021, Section 2(1)(b)(ii) must be read to mean the Income Tax Act as amended by the Finance Act 2021. Moreover, the TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021. This means that TOLA is applicable after 1st April 2021 but only with regards to the amended provisions of the Income Tax Act, 1961. If we apply this to the past assessment years, then the following conclusions could be drawn: 3.1 Ambiguity surrounding A.Y. 2013-14 and A.Y. 2014-15: Although the cases of A.Y. 2013-14 and 2014-15 clearly fall under the proviso to Section 149 which states that any notice which has become time-barred before 1st April 2021 as per the pre-amended provisions, the same could not issued by taking advantage of the amended provisions which has extended the time limit to 10 years. However, the court has held that Section 3(1) of the TOLA overrides Section 149 of Income Tax Act, 1....
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....961 with regards to the extension of the time limits for issuance of notice. Therefore, one interpretation which could be drawn is that the notices issued for A.Y. 2013-14 and 2014-15 between 1st April 2021 and 30th June 2021 would be valid since TOLA extended the time-limit for the issuance of such notices. However, at the same time it is important to remember that TOLA can only be applied with respect to the new provisions and as per the amended law, a notice after 3 years from the end of the relevant A.Y. could only be issued if the income escaping assessment is greater than 50 lakhs. In case of A.Y. 2013-14 and 2014-15, the 3 year limit expired much earlier on 31.03.2017 and 31.03.2018 respectively. Hence, now in order to issue a notice under the new provisions for both these assessment years, the income escaping must be greater than 50 lakhs. Any notice of A.Y. 2013-14 and 2014-15 where the income escaping assessment is less than 50 lakhs would be time-barred and invalid. However, a conflicting interpretation which may come forward is with regards to the phrase, "if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion....
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.... between 20 March 2020 and 31 March 2021". This indicates that if as per the amended provisions the time limit for issuance of notice falls between 20.03.2020 and 31.03.2021, then only TOLA will be applicable. Applying this to A.Y. 2013-14, the time limit for issuing notices under the amended provisions is 3 years for all circumstances and 10 years in cases where income is greater than 50 lakhs. Hence, the last date for issuing notice under A.Y. 2013-14 would be either 31.03.2017(where income escaping assessment is less than 50 lakhs) or 31.03.2024 (where income escaping is more than 50 lakhs). Neither of this date falls within the specified period as given in the TOLA and hence, the TOLA would have no applicability in the present case. 3.2 Notices for A.Y. 2013-14 issued beyond the time extension of TOLA but before 31.03.2024: Another major ambiguity which may become the subject matter of the subsequent proceedings is that whether a notice for A.Y. 2013-14 where income escaping assessment is more than 50 lakhs issued after 30.06.2021 or later, that is beyond the time-extension of TOLA would be valid. Again going back to the ruling of the SC, which has offered a harmonious ....
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....construction between the TOLA and the Finance Act, 2021, we observe that there may be two different interpretations regarding the same. The first would be that since the proviso to section 149 has already been over-ridden by the TOLA and the 10 year time limit would be applicable, therefore, any notice for A.Y. 2013-14 which is issued before 31.03.2024 would be valid. However, a conflicting interpretation that may come forward is that the proviso would only remain inapplicable to the extent of the time-extension granted by TOLA, that is, till 30.06.2021. Therefore, only the notices issued till 30.06.2021 for A.Y. 2013-14 would be valid (income escaping greater than 50 lakhs) however, after this date the proviso would become operational and no new notices for A.Y. 2013-14 could be issued if they are not covered under the time-extensions of TOLA and the same would become time-barred. [Important note: In this situation, the notices under Section 148 issued by department between July-September 2022 (in pursuance of the notices issued between 01.04.2021 - 30.06.2021 under old provisions) would be within the time extension provided by TOLA as per the calculation scheme given by the Supre....
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....me Court and hence would be valid. However, this section talks about notices issued after this period.] 3.3 AY 2015-16 and 2016-17: For the A.Y. 2015-16, the 3 year period, in accordance with the new provisions would end on 31.03.2019. This date does not fall under the prescribed duration of the TOLA and hence, TOLA would not be applicable in such a case. However, if there is any notice of A.Y. 2015-16 where income escaping assessment is greater than 50 lakhs, it would be valid and the same would be covered by the 10 year limit provided by Section 149. Similarly, taking into account the A.Y. 2016-17, the three year limits would end on 31.03.2020, therefore, the extension of TOLA would be available and such a notice could be issued till 30.06.2021 even if the income escaping assessment is less than 50 lakhs. 4. Is the judgement of the court in Rajeev Bansal providing time extensions with regards to past assessment years justified? The judgement of the Supreme Court in the Rajeev Bansal[11] case could be open to critique on the following grounds: 1. In the UOI v. Ashish Agarwal[12] case, the court ruled that all defenses available to the assessee would remain intact. Ho....
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....wever, by passing this judgment, the court effectively removed the protection afforded to the assessee under the proviso to Section 149 of the Income Tax Act, which guards against the reopening of time-barred cases. This was done by holding that Section 3(1) of the TOLA overrides the provisions of the Section 149 of the Income Tax Act. 2. In rendering its decision, the Supreme Court considered the legislative intent behind extending deadlines due to delays in compliance caused by the COVID-19 pandemic and accordingly passed the order under Article 142 of the Constitution. The court considered the case of Banarsi Debi v. ITO[13] which held that, "The dominant purpose in interpreting a taxing statute is to ascertain the intention of the legislature to impose a charge." However, the legislative intent was equally clear when Parliament introduced the proviso to Section 149, aimed at ensuring that time-barred proceedings are not revived to harass assessees, particularly in older assessment years such as A.Y. 2013-14 and A.Y. 2014-15. 3. Supreme Court ruled that the TOLA overrides section 149 of the Income Tax Act due to the presence of the non-obstante clause, however the Allahabad ....
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....high court in its Rajeev Bansal judgment[14] observed that the non obstante clause of Section 3(1) of the Enabling Clause Act does not govern the entire scope of the said provision. It is confined to and may be employed only with reference to the second part of Section 3(1) of the TOLA 2020, i.e., to protect the proceedings already underway. The same rationale should also be taken into consideration while deciding the validity of the notices. 4. Moreover, it is settled law that a taxing statute must be interpreted in the light of what is clearly expressed. Generally, strict interpretation is followed by the courts in case of taxing statutes and they cannot be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. Therefore, where the pre-amended provisions itself has become inapplicable from 1st April 2021 onwards, the Act which provides time extensions with respect to those provisions must also cease to exist. Extending the TOLA after 01.04.2021 seems to deviate from the strict interpretation rule. The same was also held by Gujarat High Court in the case of Keenara Industries Pvt. Ltd. v. ITO[15] where the cou....
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....rt accepted the contention that when the law itself ceases to exist with effect from 01.04.2021, the Notification will die a natural death and therefore there cannot be any Notification in respect of the repealed Act. 5. The decision to allow the time-extensions of TOLA with respect to the new provisions in the case of past assessment years till 30.06.2021 sets an unfortunate precedent. The court has, in this case, ignored the protection that was given in the first proviso of Section 149 of the Income Tax Act and, on that basis, exposed the assessees to reassessment proceedings for closed cases as the likelihood of severe scrutiny came to the fore. Now, all the notices of A.Y 2013-14 where income escaping is more than 50 lakhs would be valid if reopened till 31st March 2024. In its own ruling, the Court recognized that "the proviso limits the retrospective operation of Section 149(1) (b) to protect the interests of the assessees". Following this reasoning, the proviso must have been given precedence over the provisions of the TOLA and its notifications. 6. At the same time, the judgement may also hold certain positive implications for the assessee. For instance, in cases like A....
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.....Y. 2015-16 where the provisions of TOLA are inapplicable, the revised time limit for reopening an assessment under Section 148 is set at 3 years, unless the income escaping assessment exceeds Rs.50 lakhs. This means that for assessments where the escaped income does not cross the Rs.50 lakh threshold, the case for A.Y. 2015-16 cannot be reopened beyond 31st March 2021. 5. Conclusion Hence, it can be said that while the Supreme Court's ruling has clarified the validity of notices that became time-barred before 01.04.2021, it does not fully resolve the complexities associated with reassessment proceedings, especially given the diverse factual and legal contexts of the cases. Due to the possibility of varied interpretations, it is likely that such reassessment notices will continue to face legal scrutiny in the future, necessitating the need for legislative clarity in taxation statutes. Such kind of legal ambiguity not only increases litigation but also damages public confidence in the taxation system. A comprehensive and cohesive statutory framework is required to safeguard taxpayer rights and reduce interpretational issues. If these interpretational conflicts are not reso....
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....lved, reassessment notices would continue to be delivered to taxpayers even years later, which will lead to undue harassment and erode the basis of fairness and certainty in tax administration. The continuous issuance of long-pending reassessment letters underscores the critical need for stronger safeguards against misuse, even while the legislature and judiciary work to fix procedural shortcomings. What is required is a balanced approach that would protect the rights of the taxpayers while maintaining the integrity of revenue collection. By prioritizing legislative precision, the taxation regime can evolve into a more transparent, efficient, and equitable system, fostering compliance and reducing disputes. [1] The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020, s 3(1) [2] Income Tax Act 1961, s 148A [3] Income Tax Act 1961, s 149 [4] Income Tax Act 1961, s 148A [5] ASHOK KUMAR AGARWAL VERSUS UNION OF INDIA THROUGH ITS REVENUE SECRETARY NORTH BLOCK AND 2 OTHERS - 2021 (10) TMI 517 - ALLAHABAD HIGH COURT [6] VELLORE INSTITUTE OF TECHNOLOGY VERSUS CENTRAL BOARD OF DIRECT TAXES, THE ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTI....
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....ONS) - 2022 (2) TMI 923 - MADRAS HIGH COURT [7] MON MOHAN KOHLI VERSUS ASSISTANT COMMISSIONER OF INCOME TAX & ANR. - 2021 (12) TMI 664 - DELHI HIGH COURT [8] UNION OF INDIA & ORS. VERSUS VERSUS ASHISH AGARWAL - 2022 (5) TMI 240 - SUPREME COURT [9] ibid. [10] UNION OF INDIA & ORS. VERSUS RAJEEV BANSAL - 2024 (10) TMI 264 - SUPREME COURT (LB) [11] ibid. [12] UNION OF INDIA & ORS. VERSUS VERSUS ASHISH AGARWAL - 2022 (5) TMI 240 - SUPREME COURT [13] BANARSI DEBI AND ANOTHER VERSUS INCOME-TAX OFFICER, DISTRICT IV, CALCUTTA, AND OTHERS - 1964 (3) TMI 11 - SUPREME COURT [14] RAJEEV BANSAL VERSUS UNION OF INDIA AND 3 OTHERS - 2023 (2) TMI 1081 - ALLAHABAD HIGH COURT [15] KEENARA INDUSTRIES PRIVATE LIMITED VERSUS THE INCOME TAX OFFICER, WARD 1 (1) (3), SURAT - 2023 (3) TMI 104 - GUJARAT HIGH COURT<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....