The Madras High Court, in Thulasidass Prabavathi v. Income Tax Officer, has reaffirmed the significance of the limitation provisions governing reassessment proceedings under the Income-tax Act, 1961. The Court held that reassessment proceedings initiated after the expiry of the surviving limitation period prescribed under the amended provisions of Sections 148 and 149 were unsustainable in law. The judgment extensively applies the principles laid down by the Supreme Court in Union of India v. Rajeev Bansal while examining the impact of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and the new reassessment regime introduced by the Finance Act, 2021.
The petitioner, a proprietor engaged in the business of wholesale and retail trading in rice and food grains, challenged an order passed under Section 148A(d) and the consequential notice issued under Section 148 for Assessment Year 2017-18. The reassessment was proposed on the allegation that cash deposits of ₹48.96 lakh made during the demonetisation period remained unexplained and represented escaped income. The petitioner contended that the reassessment proceedings were barred by limitation since the alleged escaped income did not exceed the threshold of ₹50 lakh prescribed under the amended Section 149 for reopening beyond three years.
The High Court analysed the evolution of the reassessment provisions after the Finance Act, 2021 and examined the interaction between the amended limitation provisions, TOLA, the Supreme Court’s decision in Ashish Agarwal, and its subsequent authoritative ruling in Rajeev Bansal. The Court noted that while TOLA granted certain extensions during the COVID-19 period, reassessment notices under the new regime could only be issued within the surviving limitation period as interpreted by the Supreme Court. The Court also highlighted that the amended law significantly enhanced the monetary threshold for reopening assessments beyond three years from ₹1 lakh under the old regime to ₹50 lakh under the new regime.
Applying these principles, the Court observed that although the notice might have survived under the earlier regime, the notice issued on 30 June 2022 under the amended provisions fell outside the limitation period recognised by the Supreme Court in Rajeev Bansal. Consequently, the impugned order under Section 148A(d) and the consequential notice under Section 148 were held to be time-barred and liable to be quashed. The writ petition was accordingly allowed.
This judgment provides significant guidance on reassessment proceedings initiated after the introduction of the Finance Act, 2021. It reinforces that the Revenue must strictly adhere to the revised limitation framework and that reassessment notices issued beyond the surviving statutory period cannot be sustained merely because proceedings had earlier commenced under the old regime. The decision also illustrates the continuing importance of the Supreme Court’s rulings in Ashish Agarwal and Rajeev Bansal for determining the validity of reassessment notices issued during the transition to the new reassessment regime.
The ruling will be particularly relevant for taxpayers, Chartered Accountants, tax advocates, departmental officers, and litigation professionals dealing with reassessment notices relating to Assessment Years impacted by the transition from the old reassessment provisions to the amended regime.
 and 148 as time-barred, reiterating the limitation principles laid down in Rajeev Bansal.){kind=link}