SC Reaffirms: Reassessments for AY 2016-17 and Earlier Are Barred if Already Time-Expired Under Old Law.
The Dispute: The SMC Group Search & The 2024 Notice
The Conflict: The Revenue conducted a search on the SMC Group and suspected that the assessee had taken an “accommodation entry” (loan) from one of the group’s shell entities.
The Revenue’s Move: They issued a notice under Section 148 on August 30, 2024, for AY 2016-17.
The Assessee’s Defense: 1. The notice is time-barred (issued more than 8 years after the assessment year).
2. The search was on the SMC Group, not the assessee.
3. No “incriminating material” belonging to the assessee was found during the search.
The Judicial Verdict: The “Rajeev Bansal” Doctrine
The Supreme Court disposed of the Revenue’s SLP, effectively affirming the High Court’s view that the notice was invalid, based on these critical legal pillars:
1. The Failure of Section 153C (Search Procedure)
The Revenue tried to bypass the standard reassessment procedure by linking it to the SMC Group search. However, the Court found:
Clause (c) of Proviso to Section 148A: This clause allows for reopening without a preliminary inquiry only if it’s a search case.
The Ruling: Since no books or assets belonging to the assessee were found during the SMC search, it was not a Section 153C case. Therefore, the Revenue could not use search-related shortcuts to reopen the assessment.
2. The Six-Year Limitation Bar (Section 149)
The most significant aspect of this ruling is the application of the First Proviso to Section 149(1):
The Rule: No notice under the new regime can be issued for a year that was already time-barred under the old regime (pre-April 2021).
The Math: For AY 2016-17, the 6-year limit under the old law expired on March 31, 2023.
The Verdict: Since the notice was issued on 30-08-2024, it was clearly “dead” by the time the AO attempted to revive it. Even the TOLA (Relaxation Act) extensions cannot revive a notice that falls outside the 10-year outer limit or the 6-year “old law” limit as interpreted in Rajeev Bansal.
2026 Context: Section 282 of the Income-tax Act, 2025
Under the Income-tax Act, 2025, the rules for reopening search-linked cases have been completely overhauled:
Section 280 & 282: These replace the old 148/153C sections.
The “Relevant Evidence” Rule: Under the 2025 Act, the AO must have “specified information” which is defined narrowly.
Limitation: The new Act maintains a strict 10-year limit for high-value escapement (over ₹50 lakhs), but this ruling confirms that legacy cases (pre-2021) cannot be dragged into this 10-year window if they were already time-barred under the 6-year rule of the 1961 Act.
Strategic Takeaways for Taxpayers in 2026
Check the “Search Connection”: If your case is being reopened because of a search on a third party (like a broker or a group company), immediately check if a “Satisfaction Note” was recorded and if any material belonging to you was actually found. If not, the notice is likely invalid.
The 2024-25 Deadline: For AY 2016-17 and earlier, most notices issued in 2024 or 2025 are now vulnerable under the Rajeev Bansal precedent. If your reassessment is pending, a Writ Petition based on this limitation argument is your strongest move.
₹50 Lakh Threshold: For cases where the Revenue attempts to use the 10-year window, they must prove the escaped income is ₹50 lakhs or more. Even then, they must cross the hurdle of the “First Proviso to Section 149” (the old law limitation).
TOLA is not a “Reset” Button: This ruling confirms that TOLA only extended the time to act within the existing limitation; it did not create a new, infinite limitation period for the Revenue.