Delhi High Court clarifies limit for I-T assessment notices: Upholds ₹50 lakh threshold for 10-year review

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Delhi High Court has in its recent ruling clarified that the extended 10-year review period for Income-Tax (I-T) assessments should only be applied when the assessee's alleged undisclosed income exceeds ₹50 lakh, The Times of India reported. It further clarified that below the specified threshold, assessments can only be reopened within a three-year period, the report added. This will be applicable to all review notices sent on or after April 1, 2021.

The court was hearing a bunch of petitions filed in FY16 and FY17, requesting validity of I-T notices issued under Section 148 of the I-T Act, while considering the "period of limitation" for reopening cases, it said. Petitioners argued that if the undisclosed income fell below ₹50 lakh, the stipulated three-year limitation, as per clause (a) of section 149(1), should be enforced. The extended 10-year limitation, they contended, was applicable only for income surpassing the ₹50 lakh mark.

Also Read | I-T Calendar 2023: All important deadlines that you should not miss in November Contrarily, I-T authorities supported the validity of the notices, citing a May 2022 Supreme Court judgment regarding Ashish Agarwal; and a subsequent circular from the Central Board of Direct Taxes (CBDT). They also proposed a 'travel back in time' theory based on the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), to validate later-issued notices. The Delhi HC dismissed the 'travel back in time' theory, deeming it legally unsound based on CBDT's instruction.