Supreme Court Disposes of Revenue’s SLP in Light of Rajeev Bansal Judgment: TOLA Applies, But Time Limits Strictly Enforced
Issue
Whether the reassessment notice issued under Section 148 on 31-07-2022 for Assessment Year 2014-15 is barred by limitation, considering the interplay between the new reassessment regime (Finance Act, 2021) and the time extensions granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
Facts
Assessment Year: 2014-15.
The Notice: The Revenue issued a reassessment notice under Section 148 on 31.07.2022, following the procedure laid down by the Supreme Court in Union of India v. Ashish Agarwal.
High Court Decision: The Bombay High Court, in Godrej Industries Ltd. v. Asstt. CIT, quashed the notice. The High Court held that the validity of the notice must be tested based on the law existing on the date of issuance (July 2022). Under the First Proviso to Section 149 of the amended Act, no notice for AY 2014-15 could be issued on or after 01.04.2021 if it was already time-barred under the old regime. The HC effectively held that TOLA did not extend the time limits for the new regime.
Revenue’s Appeal: The Revenue filed a Special Leave Petition (SLP) before the Supreme Court, arguing that TOLA should apply to extend the limitation period.
Decision
The Supreme Court disposed of the SLP, holding that the issue is squarely covered by its recent landmark judgment in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC).
Partly in Favour of Revenue (Legal Principle): The Supreme Court in Rajeev Bansal reversed the High Court’s view that TOLA does not apply to the new regime. It held that TOLA applies and extends the limitation periods under Section 149.
In Favour of Assessee (Factual Outcome for AY 2014-15): However, applying the Rajeev Bansal calculation:
For AY 2014-15, the original time limit (6 years) expired on 31.03.2021.
Even with TOLA extensions, the “surviving time limit” available to the Assessing Officer to issue a fresh notice (after the Ashish Agarwal stay period) would have expired well before 31.07.2022.
Therefore, while the Revenue won the legal argument on TOLA, the specific notice for AY 2014-15 issued in July 2022 remains time-barred.
Direction: The assessee will be governed by the reasons and calculations discussed in the Rajeev Bansal judgment.
Key Takeaways
Applicability of TOLA: The Supreme Court has definitively settled that the TOLA extensions do apply to the time limits prescribed under Section 149 of the Income-tax Act (post-2021 amendment). High Court judgments holding otherwise were legally incorrect.
Surviving Time Limit: Despite TOLA’s applicability, the “surviving time” for issuing notices for older years (like AY 2013-14 and 2014-15) typically ran out before the department issued the fresh notices in mid-2022.
Outcome for AY 2014-15: Notices for AY 2014-15 issued in July 2022 are invalid because, even with TOLA, the limitation period could not be stretched that far. The Revenue’s concession in Rajeev Bansal for these years seals the fate of such notices.