From the Finance Act, 2021 to the Decisions in Ashish Agarwal & Rajeev Bansal: Delhi HC Clarifies Key Aspects of Reassessment under the Income-tax Act

Introduction

The decision in Kanwaljeet Kaur v. ACIT[i] represents a significant judicial pronouncement addressing both procedural and substantive complexities surrounding reassessment proceedings under the Income-tax Act, 1961 (‘IT Act’), particularly in light of the amendments introduced by the Finance Act, 2021. In this case, the Hon’ble Delhi High Court clarified various key issues, including the computation of limitation under s. 149 of the IT Act, the requirement for valid approvals under s. 151, and the issuance of reassessment notices under the faceless assessment scheme.

The Court reinforced the principles established in Ashish Agarwal[ii] and Rajeev Bansal[iii], providing much-needed clarity on the interplay between the old and new reassessment regimes. It emphasized the importance of procedural fairness and statutory compliance while holding that the introduction of the faceless assessment scheme does not strip Jurisdictional Assessing Officers (‘JAOs’) of their powers. This decision establishes a structured framework for future reassessment proceedings, ensuring that the curative measures permitted by Ashish Agarwal are not misused to bypass the safeguards introduced by the Finance Act, 2021.

Brief Facts & Background of the Controversy

• The case involved multiple writ petitions challenging reassessment proceedings initiated under s. 148 of the IT Act for various assessment years (‘AYs’). These petitions arose from procedural uncertainties following the introduction of the Finance Act, 2021, which overhauled the reassessment framework. During the transition period, many reassessment notices were issued under the pre-amended provisions, leading to legal challenges regarding their validity.

• The core issue pertained to the interplay between the Finance Act, 2021, and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘TOLA’), which extended statutory timelines due to the COVID-19 pandemic. The Supreme Court, in Ashish Agarwal, ruled that reassessment notices issued between 01.04.2021 and 30.06.2021 under the old regime should be deemed to have been issued under the new provisions. In Rajeev Bansal, the Supreme Court further clarified that while TOLA extended statutory deadlines, reassessment notices issued after 01.04.2021 must comply with the procedural requirements introduced by the Finance Act, 2021, particularly those under ss. 147 to 151 of the IT Act.

• Against this backdrop, the petitioners argued that reassessment notices issued during this period were legally unsustainable as they did not adhere to the new framework. Specifically, they contended that many notices violated s. 148A, which mandates a prior inquiry and an opportunity to be heard. Additionally, they alleged that certain notices lacked the mandatory approval under s. 151 and failed to comply with the faceless assessment mechanism under s. 151A.

• The petitioners further highlighted that some notices were issued based on search and seizure materials and should have been issued under ss. 153A/153C instead of s. 148. They also challenged the validity of reassessment notices without a Document Identification Number (‘DIN’), arguing that this violated CBDT Circular No. 19/2019. Additionally, they opposed the Revenue’s reliance on CBDT Instruction No. 01/2022, arguing that it conflicted with the Supreme Court’s ruling in Ashish Agarwal and the statutory framework under s. 119 of the IT Act.

Held

After examining the batch of writ petitions, the High Court identified seven key issues requiring adjudication and rendered its findings as follows:

• Validity of Reassessment Notices & Application of S. 149(1) First Proviso: The key question was whether reassessment notices were issued within the statutory time limits prescribed under s. 149 of the IT Act, particularly in light of the amendments introduced by the Finance Act, 2021. Relying on Rajeev Bansal, the High Court held that the period from 20.03.2020 to 30.06.2021 (covered under TOLA) must be excluded while computing the limitation period. Additionally, the period between the issuance of the original notice and the date of the Supreme Court’s decision in Ashish Agarwal, along with the time granted to the assessee to file objections under s. 148A must also be excluded. The Court directed AOs to re-evaluate the validity of each reassessment notice in light of these principles.

• Issuance of Notices Without DIN in Violation of CBDT Circular No. 19/2019: The Court, while examining this issue, refrained from adjudicating on it, noting that it is already under consideration in Brandix Mauritius Holdings[iv], where an interim order is in operation.

• Legality of Notices Under S. 148 Issued by JAOs Instead of the Faceless Assessment Centre: The Court held that the distribution of functions between the JAO and the NFAC is complementary and concurrent rather than conflicting. It clarified that the introduction of the Faceless Assessment Scheme, 2022, does not strip the JAO of its power to assess or reassess cases. Thus, it was observed that the JAO remains integral to the process, and faceless assessment does not override statutory powers vested in JAOs.

• Lack of Approval Under S. 151 From the Prescribed Authority: The Court held that while TOLA extended the time limit for initiating reassessment, it did not alter the hierarchy of approvals required under s. 151. Consequently, it was concluded that reassessment initiated four years before the end of the relevant AY could be approved by a JCIT. However, reassessment notices approved by a JCIT post-01.04.2021 were held invalid, as the statute mandates approvals from a Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner. Resultantly, all reassessment notices issued under such invalid approvals were quashed.

• Interpretation & Scope of Exp. 1 to S. 148 & the Definition of ‘Information’ Under the Finance Act, 2021: The High Court refrained from ruling on whether reassessment notices were validly issued based on an expansive interpretation of ‘information’ under exp. 1 to s. 148, introduced by the Finance Act, 2021, noting that this issue is already being considered in a batch of writ petitions led by W.P.(C) 1023/2024.

• Whether Reassessment Can Be Initiated When a Search is Conducted & Whether Ss. 153A/153C Override S. 147: The Court rejected the argument that reassessment proceedings cannot be initiated when a search has been conducted, holding that ss. 153A and 153C do not override s. 147. It held that if the conditions under s. 153C are satisfied, reassessment under s. 147 is impermissible. However, if the AO does not proceed under s. 153C but instead opts for s. 147, the due process provided under s. 147 must be followed. Relying on its own decision in Naveen Kumar Gupta[v], the Court affirmed that where the statutory conditions for invoking ss. 153A or 153C are not met, the Revenue is not precluded from initiating reassessment under s. 147.

Our Analysis

This ruling is a significant judicial pronouncement clarifying the reassessment framework under the IT Act, as amended by the Finance Act, 2021. It resolves key procedural ambiguities, prevents misuse of transitional provisions, and upholds taxpayer rights.

A crucial aspect of the judgment is its clarification of the limitation period under s. 149, ensuring that the Revenue cannot extend reassessment timelines beyond statutory limits. It also reinforces the requirement for valid approvals under s. 151, thereby preventing procedural shortcuts, which would undermine the legislative intent.

Additionally, the ruling balances procedural integrity in faceless assessments while affirming the JAOs’ authority. It also highlights the importance of DIN compliance and clarifies the independent operation of reassessment and search provisions.

By directing AOs to reassess notices strictly in line with Rajeev Bansal and Ram Balram, the High Court ensures adherence to statutory safeguards and procedural fairness. However, with certain issues still pending before the Supreme Court, further judicial developments are expected. Until then, the complete list of all cases cited in this decision, along with their context, alignment, and reasons for alignment, is provided below as food for thought. It not only maps the jurisprudential contours shaping reassessment proceedings but also highlights the interplay between statutory amendments and judicial interpretation, offering a structured perspective on the evolving framework.

End Notes

[i] [2025] 171 taxmann.com 174 (Delhi)[04-02-2025].

[ii] Union of India v. Ashish Agarwal, (2023) 1 SCC 617.

[iii] Union of India v. Rajeev Bansal, 2024 SCC OnLine SC 2693.

[iv] CIT (International Taxation)-1 v. Brandiz Mauritius Holdings Ltd., 2023 SCC OnLine Del 6481.

[v] Pr. CIT v. Naveen Kumar Gupta, 2024 SCC OnLine Del 8140.

Authored by Shivam Mishra, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.