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Delhi HC validates reassessment notice issued before 30 June 2021 for tax year 2012-13 in accordance with CBDT Instruction No. 1/2011 post SC ruling in Ashish Agarwal’s case
This Tax Alert summarizes a recent Delhi High Court (HC) ruling in the case of Touchstone Holdings Pvt. Ltd.[1] (Taxpayer) wherein with respect to the issue of time barring of reassessment notice and order, the HC has upheld the validity of the reassessment notice and order dated 20 July 2022 for tax year (TY) 2012-13 issued by the tax authority in accordance with the Supreme Court ruling in the case of Ashish Agrawal (SC ruling) and Central Board of Direct Taxes (CBDT ) Instruction 1/2022 (CBDT Instruction).
In the earlier round of litigation, reassessment notice, issued for TY 2012-13 on 29 June 2021 within the extension granted under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 (Relaxation Act) but following the old regime of reassessment despite the enactment of new regime with effect from 1 April 2021, was set aside by HC as invalid. However, post the SC ruling in Ashish Agarwal’s case, all these notices were revived and the tax authority was permitted to proceed with reassessment proceedings under the new regime.
In the present case, being second round of reassessment proceedings so revived, the Taxpayer contended that as per the new scheme of reassessment which is effective from 1 April 2021 a notice cannot be issued for reassessment of given TY on or after 1 April 2021 if the time period for issuance of notice under the old regime of reassessment has already expired on the date of issuance of such notice (Grandfathering Provision). The tax authority, however, rejected the Taxpayer’s contention citing the CBDT Instruction 1/2022 which was issued in the matter of implementation of said SC ruling in Ashish Agarwal’s case and passed an order together with notice of reassessment dated 20 July 2022 which was challenged by the Taxpayer before HC in Writ.
The HC held that since the reassessment proceedings were initiated during the time extended by the Relaxation Act and were undisputedly within time, the Grandfathering Provision is not attracted in the facts of this case. According to the HC, the SC in Ashish Agarwal’s case had declared the said reassessment notice as a notice issued under the new reassessment regime and permitted the tax authority to complete the reassessment proceedings. Therefore, the Taxpayer’s challenge to the reassessment notice and order and the CBDT Instruction 1/2022 was not maintainable.