 "Delhi High Court")
The extended 10-year period for reopening Income Tax (I-T) assessments is applicable only in "serious cases" where there is evidence of concealing income above Rs 50 lakh, the Delhi High Court has said.
For income below Rs 50 lakh, the period for reopening assessment is three years. The issue raised by writ petitions for Financial Years 2015-16 and 2016-17 was whether the notices issued to the petitioners under Section 148 of the Income Tax Act, 1961, are sustainable in law.
The court had to decide the validity of the notices, keeping in view the ‘period of limitation’ (time within which notices for re-opening of cases can be issued).
The petitioners said in cases where the so-called escaped income (income which has been omitted from tax assessment) is below Rs 50 lakh, the period of limitation of three years as stipulated in clause (a) of section 149(1) should apply. The extended limitation period of 10 years would apply only if the escaped income was more than Rs 50 lakh, they argued.
In response, I-T officials said the notices were valid according to a Supreme Court judgment in the case of one Ashish Agarwal of May 4, 2022 and a circular that was subsequently issued by the Central Board of Direct Taxes.
A Delhi High Court bench of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that the time limit for reopening assessments under a tax new regime was reduced from six years to three years. The reopening could be only in “serious tax evasion cases”, that too, where evidence of concealment of income of Rs 50 lakh or more in a given period was found, the period for reopening the assessment was extended to 10 years.
The court said the new regime would apply even to past years, provided notices under section 148 were issued on or after April 1, 2021.
The court noted that orders passed under Section 148A (d) and the consequent notices issued under Section 148 of the amended Income Tax Act, 1961 concerning Assessment Years 2016–17 and 2017–18 cannot be sustained.
