Holding

The Income Tax Act, as amended by the Finance Act 2021, must be read with the substituted provisions and TOLA continues to apply to actions falling within its relief period, with Section 3(1) of TOLA overriding Section 149 only to relax the time limit for reassessment notices, and any notice issued beyond the surviving period under the Act read with TOLA is time‑barred.

Summary

The Supreme Court examined a batch of appeals concerning reassessment notices issued by the Revenue after the Finance Act 2021 amended Sections 147‑151 of the Income Tax Act, 1961. The Court considered whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and its notifications continued to apply to actions falling within the COVID‑19 relief period, and whether Section 3(1) of TOLA overrides Section 149 of the Income Tax Act. It held that the Income Tax Act must be read with the substituted provisions, TOLA remains applicable to actions completed between 20 March 2020 and 31 March 2021, and Section 3(1) relaxes only the time limit for issuing reassessment notices. The Court also affirmed that the directions in Union of India v. Ashish Agarwal extend to all ninety‑thousand reassessment notices issued between 1 April 2021 and 30 June 2021, and that any reassessment notice issued under the new regime after the surviving period is time‑barred. Consequently, the Revenue’s appeals were allowed, the High Court judgments set aside, and the reassessment notices beyond the permissible period declared invalid.

Issues considered

Whether, after 1 April 2021, the Income Tax Act, 1961 must be read along with the substituted provisions introduced by the Finance Act 2021.
Whether the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) continues to apply to the Income Tax Act after 1 April 2021.
Whether Section 3(1) of TOLA overrides Section 149 of the Income Tax Act and to what extent.
Whether TOLA extends the time limit for the grant of sanction by the authority specified under Section 151 of the Income Tax Act.
Whether the directions in Union of India v. Ashish Agarwal apply to all reassessment notices issued under the old regime between 1 April 2021 and 30 June 2021.
What are the requirements for issuing a reassessment notice under Section 148 of the new regime.
Whether the reassessment notices issued under Section 148 of the new regime between July and September 2022 are valid.
Whether TOLA applies to reassessment notices issued after 30 June 2021.

Legislation cited

Finance Act, 2021s. substituted provisions of Sections 147‑151
Income Tax Act, 1961s. 147, s. 148, s. 148A, s. 149, s. 151
Taxation and other laws (Relaxation and Amendment of Certain Provisions) Act, 2020s. 3(1)

Headnote

Issue for Consideration Whether after 01 April 2021, the Income Tax Act, 1961 has to be read along with the substituted provisions; whether Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 (TOLA) will continue to apply to the Income Tax Act after 01 section 3(1) of TOLA overrides section 149 of the Income Tax Act; whether TOLA will extend the time limit for the grant of sanction by the authority specified under section 151 of the Income Tax Act; whether the directions in Ashish Agarwal will extend to all the reassessment notices issued

Subjects

Time limitRelaxing of time limitSection 3(1) of TOLA overrides section 149 of the Income Tax ActReassessment notices issued under old regimeSection 151 of the old regimeAssessment as a quasi-judicial functionAssessment as an issue of jurisdictionPrinciples of strict interpretation and workabilityHarmonious constructionSection 148 of the new regimeSection 149 of the new regimeFirst proviso to Section 149(1) of the new regimeTaxing statute

Judgment

[2024] 10 S.C.R. 1633 : 2024 INSC 754

Union of India & Ors.
v.
Rajeev Bansal
(Civil Appeal No. 8629 of 2024)
03 October 2024
[Dr Dhananjaya Y Chandrachud,* CJI,
J.B. Pardiwala and Manoj Misra, JJ.]

Issue for Consideration
Whether after 01 April 2021, the Income Tax Act, 1961 has to be
read along with the substituted provisions; whether Taxation and
Other Laws (Relaxation and Amendment of Certain Provisions)
Act 2020 (TOLA) will continue to apply to the Income Tax Act
after 01 April 2021; whether section 3(1) of TOLA overrides
section 149 of the Income Tax Act; whether TOLA will extend
the time limit for the grant of sanction by the authority specified
under section 151 of the Income Tax Act; whether the directions
in Ashish Agarwal will extend to all the reassessment notices
issued under old regime; what were the requirements for issuing
reassessment notice under section 148 of the new regime.

Headnotes†
Income Tax Act, 1961 – Finance Act 2021 – Whether after
01 April 2021, the Income Tax Act, 1961 has to be read along
with the substituted provisions:
Held: After 01 April 2021, the Income Tax Act has to be read along
with the substituted provisions. [Para 114(a)]

Income Tax Act, 1961 – Taxation and Other Laws (Relaxation
and Amendment of Certain Provisions) Act 2020 (TOLA) –
Finance Act 2021 – Whether TOLA will continue to apply to
the Income Tax Act after 01 April 2021:
Held: TOLA will continue to apply to the Income Tax Act after 01
April 2021 if any action or proceeding specified under the substituted
provisions of the Income Tax Act falls for completion between 20
March 2020 and 31 March 2021. [Para 114(b)]

* Author
1634 [2024] 10 S.C.R.

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Income Tax Act, 1961 – s.149 – Taxation and Other Laws
(Relaxation and Amendment of Certain Provisions) Act 2020 –
s.3(1) – Finance Act 2021 –Whether section 3(1) of TOLA
overrides section 149 of the Income Tax Act:
Held: Section 3(1) of TOLA overrides Section 149 of the Income
Tax only to the extent of relaxing the time limit for issuance of a
reassessment notice under Section 148. [Para 114(c)]

Income Tax Act, 1961 – Taxation and Other Laws (Relaxation
and Amendment of Certain Provisions) Act 2020 (TOLA) –
Finance Act 2021 – Whether TOLA will extend the time limit
for the grant of sanction by the authority specified under
section 151 of the Income Tax Act :
Held: TOLA will extend the time limit for the grant of sanction by
the authority specified under Section 151 – The test to determine
whether TOLA will apply to Section 151 of the new regime is this:
if the time limit of three years from the end of an assessment
year falls between 20 March 2020 and 31 March 2021, then
the specified authority under Section 151(i) has extended time
till 30 June 2021 to grant approval – In the case of Section 151
of the old regime, the test is: if the time limit of four years from
the end of an assessment year falls between 20 March 2020
and 31 March 2021, then the specified authority under Section
151(2) has extended time till 31 March 2021 to grant approval.
[Para 114(d), 114(e)]

Income Tax Act, 1961 – Taxation and Other Laws (Relaxation
and Amendment of Certain Provisions) Act, 2020 – Finance Act
2021 – Whether the directions in Ashish Agarwal will extend
to all the reassessment notices issued under old regime:
Held: The directions in Ashish Agarwal will extend to all the ninety
thousand reassessment notices issued under the old regime
during the period 01 April 2021 and 30 June 2021 – The time
during which the show cause notices were deemed to be stayed
is from the date of issuance of the deemed notice between 01
April 2021 and 30 June 2021 till the supply of relevant information
and material by the assessing officers to the assesses in terms
of the directions issued by this Court in Ashish Agarwal, and the
period of two weeks allowed to the assesses to respond to the
show cause notices. [Para 114(f), 114(g)]
[2024] 10 S.C.R. 1635

Union of India & Ors. v. Rajeev Bansal

Income Tax Act, 1961 – Taxation and Other Laws (Relaxation
and Amendment of Certain Provisions) Act, 2020 – Finance Act
2021 – What were the requirements for issuing reassessment
notice under section 148 of the new regime:
Held: The assessing officers were required to issue the
reassessment notice under Section 148 of the new regime within
the time limit surviving under the Income Tax Act read with TOLA –
All notices issued beyond the surviving period are time barred and
liable to be set aside. [Para 114(h)]

Income Tax Act, 1961 – Assessment as a quasi-judicial
function:
Held: The assessing officers perform a quasi-judicial function
during reassessment, the powers vested in them are regulated
by law – The process of reassessment is generally preceded
by administrative proceedings, which require the assessing
officer to obtain the sanction of the specified authorities – The
taxing statutes generally lay down the procedure for issuance
of notice to the proposed assessee in respect of income or
property proposed to be taxed – It also prescribes the authority
and procedure for hearing any objections to the liability for
taxation. [Para 27]

Income Tax Act, 1961 – Assessment as an issue of jurisdiction:
Held: The Income Tax Act, 1961 also mandates assessing
officers to fulfil certain pre-conditions before issuing a notice of
reassessment – Section 149 requires assessing officers to issue
a notice of reassessment under Section 148 within the prescribed
time limits – Further, Section 151 requires assessing officers to
obtain sanction of the specified authority before issuing notice
under Section 148 – A statutory authority may lack jurisdiction if
it does not fulfil the preliminary conditions laid down under the
statute, which are necessary to the exercise of its jurisdiction –
There cannot be any waiver of a statutory requirement or provision
that goes to the root of the jurisdiction of assessment – An
order passed without jurisdiction is a nullity – Any consequential
order passed or action taken will also be invalid and without
jurisdiction – Thus, the power of assessing officers to reassess
is limited and based on the fulfilment of certain preconditions.
[Paras 31, 32]
1636 [2024] 10 S.C.R.

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Interpretation of Statutes – Taxing statutes – Principles of
strict interpretation and workability:
Held: Taxing statutes are interpreted by following the principles of
strict interpretation – While interpreting a taxing statute, there is
no room for any intendment – A taxing statute must be construed
by having regard to the strict letter of the law – In a taxing statute,
it is not possible to assume any intention or governing purpose
more than what is stated in the plain language – A taxing statute
can successfully impose liability on persons or property only if it
frames appropriate provisions to that end – The courts cannot
plug in a loophole in a taxing statute “by a strained construction in
reference to the supposed intention of the Legislature” – Further,
the considerations of equity or justice are not relevant in interpreting
a taxing statute – It is a well-accepted rule of construction that in
situations where the interpretation of taxing legislation is ambiguous
or leads to two possible interpretations, the interpretation most
beneficial to the subject of the tax should be adopted – It would
not be an unjust result if a taxpayer escapes the tax net on account
of the legislature’s failure to express itself clearly – A statute is
designed to be workable – A statutory provision must be construed
in a manner to make it workable to achieve the purpose of the
legislation – A construction that fails to achieve the manifest purpose
of legislation or reduces the statutory provisions to futility should
be avoided. [Paras 35, 37]
Interpretation of statutes – Harmonious construction –
Discussed. [Paras 39-43]

Income Tax Act, 1961 – First proviso to Section 149(1) of the
new regime – Ingredients of the proviso:
Held: The ingredients of the proviso could be broken down for
analysis as follows: (i) no notice under Section 148 of the new
regime can be issued at any time for an assessment year beginning
on or before 1 April 2021; (ii) if it is barred at the time when the
notice is sought to be issued because of the “time limits specified
under the provisions of” 149(1)(b) of the old regime – Thus, a
notice could be issued under Section 148 of the new regime for
assessment year 2021-2022 and before only if the time limit for
issuance of such notice continued to exist under Section 149(1)(b)
of the old regime. [Para 46]
[2024] 10 S.C.R. 1637

Union of India & Ors. v. Rajeev Bansal

Income Tax Act, 1961 – s.149(1) of the new regime – Position
of law:
Held: (i) Section 149(1) of the new regime is not prospective – It
also applies to past assessment years; (ii) The time limit of four
years is now reduced to three years for all situations – The Revenue
can issue notices under Section 148 of the new regime only if
three years or less have elapsed from the end of the relevant
assessment year; (iii) the proviso to Section 149(1)(b) of the
new regime stipulates that the Revenue can issue reassessment
notices for past assessment years only if the time limit survives
according to Section 149(1)(b) of the old regime, that is, six
years from the end of the relevant assessment year; and (iv) all
notices issued invoking the time limit under Section 149(1)(b) of
the old regime will have to be dropped if the income chargeable
to tax which has escaped assessment is less than Rupees fifty
lakhs. [Para 53]

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1638 [2024] 10 S.C.R.

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[2024] 10 S.C.R. 1639

Union of India & Ors. v. Rajeev Bansal

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1640 [2024] 10 S.C.R.

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Union of India & Ors. v. Rajeev Bansal

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1642 [2024] 10 S.C.R.

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Books and Periodicals Cited
Thomas Cooley, The Law of Taxation (4th edn, 1924) 2116; G P
Singh, Principles of Statutory Interpretation (15th edn, 2023) 616;
Cary Coglianese and Neysun Mahboubi, ‘Administrative Law in
a Time of Crisis: Comparing National Responses to COVID-19’
(2021) 73(1) Administrative Law Review 1, 10; Cebreiro Gomez,
et al, COVID-19: Revenue Administration Implications – Potential
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List of Acts
Income Tax Act 1922; Income Tax Act 1961; Taxation and Other
Laws (Relaxation and Amendment of Certain Provisions) Act 2020;
Finance Act, 2002; Finance Act, 2012; Finance Act 2015; Finance
Act 2021; Finance Act 2022; Arbitration and Conciliation Act, 1996;
Indian Stamp Act 1899; Preventive Detention Amendment Act 1950;
Haryana Amendment Act, 1995; Punjab Pre-emption Act, 1913;
Land Acquisition Act 1894; Code of Civil Procedure 1908; Bengal
Sales Tax Rules 1941; Constitution of India.

List of Keywords
Time limit; Relaxing of time limit; Section 3(1) of TOLA overrides
section 149 of the Income Tax Act; Reassessment notices issued
under old regime; Section 151 of the old regime; Assessment as
a quasi-judicial function; Assessment as an issue of jurisdiction;
Principles of strict interpretation and workability; Harmonious
construction; Section 148 of the new regime; Section 149 of the
new regime; First proviso to Section 149(1) of the new regime;
Taxing statute.

Case Arising From
CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal No.
8629 of 2024
From the Judgment and Order dated 22.02.2023 of the High Court
of Judicature at Allahabad in WT No. 1086 of 2022
With
C.A. Nos. 8631, 9270, 8632, 10238, 8640, 10239, 10240, 8644,
8641, 8650, 8645, 8643, 8649, 8652, 8642, 8647, 8636, 8646, 8639,
8648, 8634, 8651, 8653, 8637, 8654, 8658, 8661, 8638, 8659, 8660,
[2024] 10 S.C.R. 1643

Union of India & Ors. v. Rajeev Bansal

8662, 8655 and 8664 of 2024, T.P.(C) No. 767 of 2023, C.A. Nos.
9253, 8702, 8667, 8666, 8843-8844, 8668, 8678, 8680, 8679, 8669,
8673, 8682, 10242, 8683, 8685, 8687, 10244, 8684, 8671, 9822,
8689, 10245, 8672, 10246, 8670, 8681, 10250, 8676, 8686, 8688,
10251, 10252, 8695, 8674, 8677, 8713, 8692, 8690, 8699, 8691,
8704, 10254, 8845, 8846, 8696, 8707, 8697, 8847, 8706, 8852,
8705, 8848, 8709, 8708, 8703, 8849, 8630, 8656 and 8665 of 2024,
T.P.(C) No. 2187-2194 of 2024, C.A. Nos. 8675, 8700, 8969, 8746,
8825, 8698, 8693, 8800, 9507, 8710, 8799, 10257, 8694, 8716,
8719, 8717, 8736, 8712, 8723, 8727, 8718, 8729, 8953, 8711, 8738,
8724, 8714, 8730, 8701, 8732, 8720, 8731, 8734, 8733, 8721, 8715,
8735, 8725, 8726, 8742, 8737, 8747, 8728, 8722, 8740 and 8942
of 2024, T.P.(C) No. 2127 of 2024, C.A. Nos. 8739, 8955, 8745,
8794, 8743, 8751, 8795, 9217, 8798, 8749, 8750, 8943, 8948, 8966,
8949, 8741, 8951, 8952, 8748, 8796, 8950, 8954, 8744 and 8797 of
2024, T.P.(C) No. 2714-2723 of 2023, C.A. Nos. 8802, 8956, 9056,
8826, 8958, 8957, 8827, 8959, 8962, 9044, 8967, 8963 of 2024,
T.P.(C) Nos. 2942 and 2937 of 2023, C.A. Nos. 9052, 9170, 9048,
9180, 9186, 9043, 9046, 8960, 9231, 8964, 9042, 9228, 8961, 9202,
9205, 9184, 9172, 9177, 8896, 9225, 9619, 9238, 9208, 9189, 9220,
8897, 8905, 8930, 9223, 8898, 8926, 8899, 9240, 8900, 8895, 8906,
8901, 9503, 8907, 8908, 8909, 8902, 8903, 8904, 9280, 8910, 9282,
9285, 9287, 9296, 9298, 9300, 9302, 9304, 8911, 9305, 9306, 9311,
9314, 9312, 8976, 8994, 8912, 8977, 8850, 8978, 8983, 8972, 8973,
8974, 8995, 8996, 8984, 8985, 8988, 8989, 8990, 8999, 8913, 8991,
10215, 8992, 9001, 9002, 8914, 9003, 8993, 9005, 9006, 8635,
10984, 9261, 9273, 9038, 8997, 9000, 9039, 9008, 9009, 9010,
9025, 9027, 9004, 9011, 8915, 9012, 9041, 9289, 8916, 9250,
9013, 9014, 9028, 9168, 9015, 9171, 8917, 9016, 9017, 9007,
9018, 9019, 9759, 8918, 9020, 9021, 9248, 9030, 9031, 9023,
8919, 8920, 9032, 9173, 9175, 8946, 8921, 8922, 9024, 9262,
9247, 9033, 9178, 8923, 8924, 9181, 9183, 9187, 9191, 9194, 9195,
9760, 9037, 9196, 9221, 9198, 9266, 9224, 9201, 9203, 9226, 9230,
8998, 9053, 9207, 9210, 9055, 9232, 9233, 9236, 9212, 9239, 9215,
9243, 9245, 9252, 9216, 9295, 9057, 9269, 9254, 9058, 9271, 9272,
9255, 9256, 9258, 9275, 9260, 9806, 9188, 9192, 9211, 9200, 9213,
9218, 9222, 9229, 9234, 9824, 9825, 9235, 9241, 9364, 9602, 9330,
9204, 9206, 9246, 9331, 9257, 9259, 9263, 9332, 9333, 9264, 9265,
9334, 9267, 9335, 9365, 9336, 9268, 9288, 9290, 9291, 9292, 9293,
9337, 9801, 9803, 9294, 9338, 9348, 9799, 9321, 9322, 9366, 9349,
9351, 9323, 9374, 9324, 9375, 9376, 9378, 9805, 9325, 9329, 9352,
9488, 9573, 9576, 9574, 9354, 9380, 9473, 9581, 9474, 9586, 9496,
1644 [2024] 10 S.C.R.

Digital Supreme Court Reports

9497, 9381, 9359, 9360, 9499, 9489, 9495, 9363, 9575, 9502,
9583, 9342, 9341, 9411, 9297, 9277, 8851, 9529, 9483, 9484,
9800, 9431, 9485, 9567, 9432, 9804, 9802, 9556, 9487, 9490,
9379, 8807, 9433, 9584, 9634, 9578, 9585, 9557, 9494, 9558,
9498, 9501, 9491, 9340, 9449, 9492, 9463, 8803, 9353, 9377,
9391, 9350, 9450, 9370, 9452, 9530, 9373, 9390, 9399, 9367,
9356, 9453, 9531, 9532, 9389, 9368, 9345, 9347, 9386, 9533,
9454, 9412, 9414, 9387, 9461, 9925, 9493, 9395, 9534, 8809,
9392, 8804, 9396, 8805, 9437, 9328, 9447, 9455, 9535, 9346,
9465, 9451, 8810, 9398, 9388, 9517, 9559, 9430, 9394, 9459,
9560, 9358, 9536, 8808, 9456, 9384, 9383, 9371, 9457, 9393,
9561, 9518, 9568, 9519, 9520, 9537, 9562, 9538, 9563, 9407,
9397, 8814, 9564, 9408, 9539, 9436, 8811, 9446, 9460, 9540,
8806, 9541, 9542, 9543, 9544, 9521, 9400, 9545, 9522, 9438,
8836-8837, 9441, 9468, 9546, 9547, 9523, 9571, 9548, 9319,
9401, 9355, 9361, 9471, 9472, 9362, 9549, 9467, 9550, 9448,
9551, 9445, 9552, 9443, 8945, 8813, 9339, 9464, 9565, 8817,
9524, 9310, 9553, 9343, 8835, 9313, 9357, 9372, 8933, 9554,
8812, 9525, 8815, 9320, 9442, 9466, 9526, 9439, 9926, 9555,
9527, 8935, 9385, 9528, 8816, 8936, 8839, 9572, 9440, 9344,
9566, 9237, 9242, 8633, 8657, 9251, 9569, 9307, 9570, 9577,
10293, 9435, 9403, 8834, 9382, 9579, 9318, 9580, 9315, 9326,
9405, 9591, 9406, 9593, 9582, 9587, 9594, 9054, 10985, 9402,
9047, 9588, 8934, 9595, 9404, 9409, 9589, 8833, 9244, 9249,
9426, 9045, 9281, 10036, 9600, 8937, 9278, 9590, 9601, 9169,
10986, 9274, 9276, 9416, 9286, 9179, 9227, 9219, 9209, 9415,
9279, 9417, 8828, 8832, 9190, 9182, 9197, 9283, 9174, 10987,
9176, 10988, 9418, 9284, 9419, 8829, 9214, 9420, 9193, 8831,
9185, 9421, 9423, 9424, 8830 and 9425 of 2024

Appearances for Parties
N Venkatraman, A.S.G., Rupesh Kumar, V Sridharan, Percy
Pardiwala, Amar Dave, Tushar Hemani, Parsi Pardiwala, Saurabh
Soparkar, Raju K. Patel, K. Shivram, Dr. K. Shivaram, Suryanarayana
Singh, Sr. Advs., Amrish Kumar, Mahesh Agarwal, Alok Yadav,
Abhinabh Garg, E. C. Agrawala, Tushar Thareja, Rishabh Ostwal,
Bhakti Vardhan Singh, Ajay Kumar, Raj Bahadur Yadav, Shashank
Bajpai, Venkatraman Chandrashekhara Bharathi, Ishaan Sharma,
Annirudh Sharma Ii, Alka Aggarwal, Praneet Pranab, Mrs. Anamika
Aggarwal, Santosh Kumar, Mrs. A Deepa, Rajesh Kumar Singh,
Sonal Jain, Atit Jain, Ankur Aggarwal, Ms. Shradhanjali Patra,
Pravesh Nirwal, Uday Ram Bokadia, Pankaj Agarwal, Ruchesh
[2024] 10 S.C.R. 1645

Union of India & Ors. v. Rajeev Bansal

Sinha, Amjid Maqbool, Ms. Prachi Pratap, Ms. Yashvi Aswani,
Dr. Prashant Pratap, Ms. Kinjal Agarwal, Vishavjeet Chaudhary,
Ms. Pallavi Pratap, Harish Pandey, Ved Jain, Nischay Kantoor,
Ms. Soniya Dodeja, Subodh S. Patil, Ms. Kavita Jha, Rohit Jain,
Vaibhav Kulkarni, Udit Naresh, Himanshu Aggarwal, Samarth
Chaudhari, Aditeya Bali, Akash Shukla, Mrs. Vanita Bhargava, Ajay
Bhargava, Ms. Nandita Chauhan, Ms. Tijil Thakur, M/s. Khaitan &
Co., Rahul Krishna, Hardik Vora, Ms. Palak Kshatriya, Daivat Bhatt,
Pranaya Sahoo, Ms. Hetu Arora Sethi, Madhur Agrawal, Kunal
Cheema, Raghav Deshpande, Shubham Chandankhede, Rohit K.
Singh, Akhilesh Kumar, Vipin Garg, Prakhar Srivastav, Abhishek
Aggarwal, Vandana Kothari, Rahul Narula, Ms. Aishwarya Bhatia,
Dr. Rakesh Gupta, Somil Agarwal, Ambhoj Kumar Sinha,
Kishore Kunal, Ravi Sawana, S Sriram, Karanjot Singh Khurana,
S Vasudevan, Ms. Neha Sharma, Devashish Jain, Sridattha Charan,
Romil Hotwani, Ms. Charanya Lakshmikumaran, Muhammad Ali
Khan, Omar Hoda, Ms. Eesha Bakshi, Uday Bhatia, Kamran Khan,
Arjun Sharma, Abishek Jebaraj, Ms. A Reyna Shruti, Nishant
Thakkar, Ms. Jasmin Amalsvaada, Ms. Jasmin Amalsadvala, Hiten
C Thakkar, Hitten Thakkar, Ranjan Nikhil Dharnidhar, Sidharth
Ranka, A. Karthik, Gursharan H. Virk, Ms. Aastha Mehta, Ms.
Deepanwita Priyanka, Simranjit H. Virk, Ms. Prerana Mohapatra,
Prashanth Undurti, Saswat Kumar Acharya, Dhananjay Bhaskar
Ray, Abhijeet Agarwal, Kumar Kale, Devendra Jain, Dharan
Gandhi, Ms. Gunjan Kakad, Rajat Mittal, Suprateek Neogi, Mridul
Agnihotri, Prince Kumar, Jasdeep Singh Dhillon, Ms. Amanat Kaur
Chahal, Yutangar Singh Chauhan, Hds Bains, R. K. Batra, Abhay
Singh Mann, Jas Sanghavi, Sandeep Yadav, Shubhranshu Padhi,
Jay Nirupam, D. Girish Kumar, Pranav Giri, Ekansh Sisodia, Sanjay
Prakash Goyatan, Dhiraj Kumar Sammi, Dr. Chandrakant S.
Sarkar, Sourabh Saini, Asutosh Sharma, Kapil Goel, Sougat Sinha,
Sandeep Goel, Dhananjay Garg, Abhishek Garg, Tanuj Gulati,
Ms. Gayathri R. Manasa, Gaurav Choudhary, Ms. Anu Kushwaha,
Ghanshyam Choudhary, R.P. Bansal, Sukhsagar Syal, C. George
Thomas, P. S. Sudheer, Rishi Maheshwari, Ms. Anne Mathew,
Bharat Sood, Ms. Miranda Solaman, Ms. Nivedita Sudheer, Purvish
Jitendra Malkan, Alok Kumar, Kush Goel, Suraj Pandey, Ms. Neha
Ambashtha, Ryan Singh, Abhinav Mehrotra, Kalrav Mehrotra, Ms.
Bhavna Mehrotra, S.V. Mehrotra, Piyush Kaushik, Anil Kumar, Asish
Bansal, Akarsh Garg, Kaushik Choudhury, Ms. Rupali Sharma,
Ms. Abhipsha Anamika, Yudhishthir Bharadwaj, Rachit Aggarwal,
Vikas Jain, Neelakash Gogoi, Subhan Shankar Gogoi, Kunal
Verma, Jeet Kamdar, Ritik Gupta, Shivraj Pawar, Rakesh
1646 [2024] 10 S.C.R.

Digital Supreme Court Reports

Wadhwa, Ms. Priyanshi Agrawal, Ms. Monika Sharma, Subhash
Chandra, Mohinder Singh, Sandeep Saxena, K. R. Anand,
Deepak Chopra, Dr. Vikas Pahal, Chand Qureshi, B.K. Satija,
Ms. Vaibhavi Parikh, Ms. Anushree Prashit Kapadia, Nitin
Mehta, Ms. Ekta Kundu, Shrey Lodha, Akshat Vachher, Ms.
Abhiti Vachher, Ms. Nandni Sharma, Parvesh Bansal, Rahul
Bansal, Jasvinder Choudhary, M/s. Vachher And Agrud, Salil
Kapoor, Ms. Ananya Kapoor, Sumeet Lalchandani, Sanat
Kapoor, Sumit Lalchandani, Dr. Shashwat Bajpai, Tarun
Chanana, Shivam Yadav, Ravi Kumar, Praveen Swarup, Arvind
Kumar, Aditya Singh, Venketesh Chaurasia, Ms. Rano Jain,
Dr. Parbodh Malhotra, Mrs. Renu Kamra Arora, Ms. Sakshi Rustagi,
Ms. Shakshi Srivastava, Jay Kishor Singh, Kedar Nath Tripathy,
Ms. Praveena Gautam, Pawan Shukla, Ms. Kanika Kalyan,
Ms. Akanksha Tyagi, Vishal Kalra, Saumyendra Singh Tomar,
Ankit Sahni, Ms. Snigdha Gautam, Anil Kumar Gautam, Manish
Shah, Dillip Kumar Nayak, Ms. Disha Ray, Mrs. Sumita Ray,
Aneesh Mittal, Rahul Kaushik, Arjun Garg, Aakash Nandolia,
Ms. Sagun Srivastava, Ms. Kriti Gupta, Bandish Soparkar,
Malak Manish Bhatt, Darshan Patel, Ms. Sukanya Joshi,
Merusagar Samantaray, Ruturaj Satapathy, Abinash Barik, Ms.
Lhingneivah, Ms. Ayushi Upadhaya, Deepak Prakash, Rahul
Hakani, Ms. Bhuvneshwari Pathak, Ms. Shilpi Satyapriya Satyam,
Dhanesh Kumar, Mohit Balani, Pulkit Agarwal, Mohd Anas
Chaudhary, Sudhanshu Kaushesh, Mohd Sharyab Ali, Avnish
Chaturvedi, Rovin Singh Solanki, Zahid Ali, Vibhu Tandon, Ms.
Manya Pundhir, Shreyans Raniwala, Rajeev Jadhav, Priyanshu
Chauhan, Manoj Kumar, Manish Paliwal, Shashi Bekal, Ms. Niyati
Mankad, Ms. Neelam Jadhav, Ms. Megha Yadav, Mrs. Trupti
Das, Dr. Avinash Poddar, Ms. Diva Singh, Ms. Anchal Poddar,
Ms. Rudrani Mishra, Awadhesh Sharma, Soumitra Chatterjee,
Devendra Singh, Sudhir Mehta, Ms. Shailee Mehta, Ankit
Anandraj Shah, Shubham Chopra, Tarun Arora, S. K. Verma, Ms.
Rutuja N Pawar, Ms. Hetal Laghave, Ms. Sneha More, Saurabh
Upadhyay, Ms. Hardikaa Kalia, Ms. Tavishi Jain, Vikas Verma,
Ms. Pragati Neekhra, Aditya Bhanu Neekhra, Atul Dong, Aniket
Patel, Rohit Singh, Ashok Anand, Ajay Gupta, Vinod Mehta, Ms.
Astha Tyagi, Mahesh Aaarwal, Ms. Fereshte D Sethna, Sachit
Jolly, Ms. Anuradha Dutt, Ms. Soumya Singh, Ms. Disha Jham,
Mrunal Parekh, Devansh Jain, Vivek Agarwal, Raghav Dutt, Ms.
B. Vijayalakshmi Menon, Suhrith Parthasarathy, Ms. Amritha
Sathyajith, Ms. Rashmi Nandakumar, Ms. Yashmita Pandey,
Advs. for the appearing parties.
[2024] 10 S.C.R. 1647

Union of India & Ors. v. Rajeev Bansal

Judgment / Order of the Supreme Court

Judgment

Dr Dhananjaya Y Chandrachud, CJI

Table of Contents*

A. Background ...................................................................... 35
i. Income Tax Act .......................................................... 35
ii. TOLA .......................................................................... 39
iii. Finance Act 2021 ....................................................... 41
B. Issues ................................................................................ 50
C. Submissions ..................................................................... 51
D. Legal Background ............................................................ 55
i. Assessment as a quasi-judicial function .................. 55
ii. Assessment as an issue of jurisdiction ..................... 59
iii. Principles of strict interpretation and workability ........ 63
iv. Principle of harmonious construction ....................... 66
E. Reading TOLA into the Income Tax Act .............................. 70
i. First proviso to Section 149(1) of the new regime ........ 70
ii. TOLA can extend the time limit till 31 June 2021 ......... 75
a. Finance Act 2021 substituted the old regime ......... 75
b. Reading TOLA into Section 149 ............................... 82
iii. Sanction of the specified authority ............................ 86
F. Section 148 notices issued in June-September 2022 ....... 91
i. Scope of Article 142 ................................................. 91
ii. The scope of Ashish Agarwal extended to all the
reassessment notices issued between 1 April 2021
and 30 June 2021 under the old regime ............... 96
iii. Effect of the legal fiction .......................................... 99
a. Third proviso to Section 149 ................................. 100
b. Interplay of Ashish Agarwal with TOLA ................... 107
G. Conclusions .................................................................... 110

* Ed. Note: Pagination as per the original Judgment.
1648 [2024] 10 S.C.R.

Digital Supreme Court Reports

1. The present batch of appeals involves the interplay of three
Parliamentary statutes: the Income Tax Act 1961,1 the Taxation and
Other Laws (Relaxation and Amendment of Certain Provisions) Act
2020,2 and the Finance Act 2021. The Income Tax Act was enacted
to levy and collect tax on the income of assesses.3 Sections 147 to
151 of the Income Tax Act deal with the procedure of reassessment
of income chargeable to tax which has escaped assessment. The
TOLA was enacted in the backdrop of the COVID-19 pandemic to
provide relaxation of time limits specified under the provisions of the
Income Tax Act and certain other legislations as defined under Section
2(1)(b) of TOLA. The Finance Act 2021 amended the provisions
dealing with the reassessment procedure under the Income Tax Act
with effect from 1 April 2021.

A. Background

i. Income Tax Act
2. Sections 147 to 151 deal with the procedure of reassessment. The
scheme of reassessment under Sections 147 to 151 was substantially
overhauled by the Finance Act 2021 with effect from 1 April 2021.
Under the old regime, Section 147 empowered the assessing officer4
to reopen assessment proceedings if they had “reason to believe”
that any income chargeable to tax has escaped assessment for the
relevant assessment year.5 Section 148 mandated the assessing

1 “Income Tax Act”
2 “TOLA”
3 Section 2(7), Income Tax Act. [It defines an “assessee” to mean “a person by whom any tax or any other
sum of money is payable under this Act, and includes –
(a) every person in respect of whom any proceeding under this Act has been taken for the assessment
of his income or assessment of fringe benefits or of the income of any other person in respect of
which he is assessable, or of the loss sustained by him or by such other person, or of the amount
of refund due to him or to such other person;
(b) every person who is deemed to be an assessee under any provisions of this Act;
(c) every person who is deemed to be an assessee in default under any provision of this Act;”]
4 Section 2(7A), Income Tax Act. [It defines an “assessing officer” to mean “the Assistant Commissioner or
Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested
with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section
(2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional
Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of
that section to exercise or perform all or any of the powers or functions conferred on, or assigned to, an
Assessing Officer under this Act.”]
5 Section 147, Income Tax Act
[2024] 10 S.C.R. 1649

Union of India & Ors. v. Rajeev Bansal

officer to serve a notice on the assessee requiring them to submit
a return of their income.6
3. Section 1497 prescribed the following time limits for issuing a notice
under Section 148 for an assessment year:

6 Section 148, Income Tax Act. [It read:
“148.(1) Before making the assessment, reassessment or recomputation under section 147, the
Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as
may be specified in the notice, a return of his income or the income of any other person in respect of
which he is assessable under this Act during the previous year corresponding to the relevant assessment
year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars
as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such
return were a return required to be furnished under section 139:
Provided that in a case –
(a) where a return has been furnished during the period commencing on the 1st day of October, 1991
and ending on the 30th day of September, 2005 in response to a notice served under this section, and
(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve
months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the
amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the
time limit for making the assessment, re-assessment or recomputation as specified in sub-section
(2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice:
Provided further that in a case –
(a) where a return has been furnished during the period commencing on the 1st day of October, 1991
and ending on the 30th day of September, 2005 in response to a notice served under this section,
and
(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after
the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood
immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but
before the expiry of the time limit for making the assessment, re-assessment or recomputation
as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be
deemed to be a valid notice.
Explanation – For the removal of doubts, it is hereby declared that nothing contained in the first proviso
or the second proviso shall apply to any return which has been furnished on or after the 1st day of
October 2005 in response to a notice served under this section.
(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing
so.”]
7 Section 149, Income Tax Act. [It reads:
“149. Time limit for notice - (1) No notice under section 148 shall be issued for the relevant assessment
year,—
(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls
under clause (b) or clause (c);
(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment
year unless the income chargeable to tax which has escaped assessment amounts to or is likely
to amount to one lakh rupees or more for that year;
(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment
year unless the income in relation to any asset (including financial interest in any entity) located
outside India, chargeable to tax, has escaped assessment.
Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes
of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the
purposes of that section.
(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of
a non-resident under section 163 and the assessment, reassessment or recomputation to be made in
pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be
issued after the expiry of a period of six years from the end of the relevant assessment year.
Explanation.—For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and
(3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning
on or before the 1st day of April, 2012.”]
1650 [2024] 10 S.C.R.

Digital Supreme Court Reports

(i) four years from the end of the relevant assessment year;
(ii) four years but not more than six years from the end of the
relevant assessment year if the income chargeable to tax which
has escaped assessment amounted to or was likely to amount
to Rupees one lakh or more for that year; and
(iii) four years but not more than sixteen years from the end of the
relevant assessment year if the income in relation to any asset
(including financial interest in any entity) located outside India
and chargeable to tax has escaped assessment.
4. Section 151 required the assessing officer to obtain the sanction of
the specified authority before issuing a notice under Section 148.8 In
case the notice was issued within four years, the sanctioning authority
was the Joint Commissioner.9 In case the notice was issued after the
expiry of four years, the sanctioning authority was the Principal Chief
Commissioner,10 Chief Commissioner,11 Principal Commissioner or
Commissioner.12 The authorities have a distinct meaning under the
Income Tax Act. Following a decision of this Court in GKN Driveshafts
(India) Ltd v. Income Tax Officer,13 the assessing officer was also

8 Section 151, Income Tax Act. [It read:
151.(1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period
of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded
by the Assessing Officer, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148
by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner
is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such
notice.
(3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the
Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as
the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a
case for the issue of notice under section 148, need not issue such notice himself.]
9 Section 2(28C) of the Income Tax Act defines Joint Commissioner to mean “a person appointed to be a
Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under sub-section (1) of
section 117.”
10 Section 2(34-A) of the Income Tax Act defines Principal Chief Commissioner of Income tax to mean “a
person appointed to be a Principal Chief Commissioner of Income-tax under sub-section (1) of section
117.”
11 Section 2(15A) of the Income Tax Act defines a Chief Commissioner to mean “a person appointed to a
Chief Commissioner of Income tax or a Director General of Income tax or a Principal Chief Commissioner
of Income tax or a Principal Director General of Income-tax under sub-section (1) of Section 117.”
12 Section 2(16) defines Principal Commissioner or Commissioner to mean “a person appointed to be a
Principal Commissioner or Commissioner of Income tax or a Principal Director or Director of Income tax
or a Principal Commissioner of Income tax or a Principal Director of Income tax under sub-section (1) of
section 117.”
13 (2003) 1 SCC 72 [2002] Supp. (4) S.C.R. 359 [5]. It reads:
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required to furnish reasons for reopening assessments and give an
opportunity of hearing to the assessee.
5. The Revenue had to follow the following procedure for reopening
assessment under the old regime:
(i) Section 147 allowed the assessing officer to reassess any
income chargeable to tax if the officer had“reasons to believe”
that such income escaped assessment;
(ii) The assessing officer had to ensure that the notice under
Section 148 was issued within the timelimits prescribed under
Section 149;
(iii) The assessing officer had to obtain the sanction of the specified
authority under Section 151 before issuing a reassessment
notice;
(iv) The assessing officer had to grant an opportunity of hearing to
the assessee in terms of GKN Driveshafts (supra); and
(v) The assessing officer was thereafter empowered to issue anotice
of reassessment under Section 148.

ii. TOLA
6. On 24 March 2020, the Central Government announced “a complete
lockdown for the entire nation” for twenty-one days to contain the
spread of the COVID-19 pandemic.14 Following this, the Central
Government sought to implement various relief measures to redress
the challenges faced by the taxpayers in meeting the statutory
requirements due to the pandemic.15 On 31 March 2020, the President
of India promulgated the Taxation and Other Laws (Relaxation

“5. […] However, we clarify that when a notice under Section 148 of the Income Tax Act is issued,
the proper course of action for the noticee is to file return and if he so desires, to seek reasons for
issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of
reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound
to dispose of the same by passing a speaking order. In the instant case, as the reasons have been
disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing
a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment
years.”]
14 Press Information Bureau, PM calls for complete lockdown of entire nation for 21 days (24 March 2020)
https://pib.gov.in/Pressreleaseshare.aspx?PRID=1608009
15 Press Information Bureau, ‘Finance Minister announces several relief measures relating to Statutory and
Regulatory compliance matters across Sectors in view of COVID-19 outbreak’ (24 March 2020) available
at: https://pib.gov.in/PressReleseDetail.aspx?PRID=1607942
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of Certain Provisions) Ordinance 202016 to extend time limits for
completion or compliance of actions under the specified Acts falling
for completion or compliance between 20 March 2020 and 29 June
2020 till 30 June 2020. On 24 June 2020, the Central Government
issued a notification under Section 3(1) of the TOLA Ordinance to
extend the time limit for completion or compliance of actions under
the specified Actstill 31 March 2021.17
7. On 29 September 2020, Parliament enacted TOLA, which came into
force with retrospective effect from 31 March 2020.18 Section 2(1)(b)
defines “specified Act” to mean and include the Income Tax Act. Section
3(1) of TOLA extended the time limit for completion or compliance
of actions under the “specified Act”, which fell for completion or
compliance during the period from 20 March 2020 and 31 December
2020, to 31 March 2021. The relevant part of Section 3 reads thus:
“3(1) Where, any time-limit has been specified in, or
prescribed or notified under, the specified Act which falls
during the period from the 20th day of March, 2020 to the
31st day of December, 2020, or such other date after the
31st day of December, 2020, as the Central Government,
may, by notification, specify in this behalf, for the completion
or compliance of such action as –
(a) completion of any proceedings or passing of any
order or issuance of any notice, intimation, notification,
sanction or approval, or such other action, by
whatever name called, by any authority, commission
or tribunal, by whatever name called, under the
provisions of the specified Act;
[…]
And where completion of compliance of such action
has not been made within such time, then, the time-
limit for completion or compliance of such action shall,
notwithstanding anything contained in the specified Act,
stand extended to the 31st day of March, 2021, or such
other date after 31st day of March, 2021, as the Central
Government may, by notification, specify in this behalf:”

16 “TOLA Ordinance”
17 CBDT, Notification No. 35 of 2020, dated 24 June 2020.
18 Section 1(2), TOLA. [It reads: “(2) Save as otherwise provided, it shall be deemed to have come into
force on the 31st day of March, 2020.”]
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8. Section 3(1) empowered the Central Government to extend the time
limit beyond 31 March 2021 by a notification. In pursuance of its
powers, the Central Government issued the following notifications
to extend the period of relaxation till 30 June 2021:
a. Notification No. 93 of 2020 dated 31 December 2020 extended
the end date to 30 March 2021. Resultantly, TOLA covered
the period between 20 March 2020 to 30 March 2021;
b. Notification No. 20 of 2021 dated 31 March 2021 specified that
31 April 2021 shall be the end date of the time period covered
by TOLA. It extended the time limit for completion or compliance
of actions under the Income Tax Act till 30 April 2021; and
c. Notification No. 38 of 2021 dated 27 April 2021 extended the time
limit for completion or compliance of actions till 30 June 2021.
9. The effect of TOLA and the notifications issued under the legislation
was that: (i) if the time prescribed for passing of any order or
issuance of any notice, sanction, or approval fell for completion
or compliance from 20 March 2020 to 31 March 2021; and (ii) if
the completion or compliance of such action could not be made
during the stipulated period, then the time limit for completion or
compliance of such action was extended to 30 June 2021.
iii. Finance Act 2021
10. The Finance Act 2021 substituted the entire scheme of reassessment
under Sections 147 to 151 of the Income Tax Act with effect from
1 April 2021. Substantial changes were brought about by the new
regime. Broadly speaking, they are summarized thus:
(i) Section 148 19 mandates the assessing officer to initiate
proceedings only based on prior information and with the prior
approval of the specified authority;

19 Section 148, Income Tax Act [It reads:
[“148. Issue of notice where income has escaped assessment - Before making the assessment,
reassessment or recomputation under section 147, and subject to the provisions of section 148A, the
Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required,
under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such
notice, a return of his income or the income of any other person in respect of which he is assessable
under this Act during the previous year corresponding to the relevant assessment year, in the prescribed
form and verified in the prescribed manner and setting forth such other particulars as may be prescribed;
and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return
required to be furnished under section 139:
Provided that no notice under this section shall be issued unless there is information with the Assessing
Officer which suggests that the income chargeable to tax has escaped assessment in the case of the
assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the
specified authority to issue such notice.
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(ii) Section 148A20 requires the assessing officer to provide an
opportunity of being heard to the assessee before deciding to
issue a reassessment notice under Section 148. Section 148A
requires the assessing officer to:
(a) conduct any enquiry, if required, with the prior approval
of the specified authority;
(b) provide an opportunity of hearing to the assessee by
serving a show cause notice with the prior approval of
the specified authority;

Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing
Officer which suggests that the income chargeable to tax has escaped assessment means,—
(i) any information flagged in the case of the assessee for the relevant assessment year in accordance
with the risk management strategy formulated by the Board from time to time;
(ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the
assessment in the case of the assessee for the relevant assessment year has not been made in
accordance with the provisions of this Act.
Explanation 2.—For the purposes of this section, where,—(i) a search is initiated under section 132 or
books of account, other documents or any assets are requisitioned under
section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or
(ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of
that section, on or
after the 1st day of April, 2021, in the case of the assessee; or
(iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or
Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned
under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021,
belongs to the assessee; or
(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner,
that any books of account or documents, seized or requisitioned under section 132 or section 132A in
case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information
contained therein, relate to, the assessee,
the Assessing Officer shall be deemed to have information which suggests that the income chargeable
to tax has escaped assessment in the case of the assessee for the three assessment years immediately
preceding the assessment year relevant to the previous year in which the search is initiated or books
of account, other documents or any assets are requisitioned or survey is conducted in the case of the
assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents
are seized or requisitioned in case of any other person.
Explanation 3.—For the purposes of this section, specified authority means the specified authority
referred to in section 151.]
20 Section 148A, Income Tax Act [It reads:
“Section 148A. Conducting inquiry, providing opportunity before issue of notice under section 148.
The Assessing Officer shall, before issuing any notice under section 148,—
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the
information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority,
by serving upon him a notice to show cause within such time, as may be specified in the notice, being
not less than seven days and but not exceeding thirty days from the date on which such notice is issued,
or such time, as may be extended by him on the basis of an application in this behalf, as to why a
notice under section 148 should not be issued on the basis of information which suggests that income
chargeable to tax has escaped assessment in his case for the relevant assessment year and results of
enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in
clause (b);
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(c) consider the reply furnished by the assessee in response
to the show cause notice; and
(d) decide on the basis of available material, including the
reply of the assessee, whether or not it is a fit case to
issue a notice under Section 148 by passing an order.
(iii) The time limit under Section 149 has been reduced from four
years to three years from the end of the relevant assessment
year for all situations.21 Assessments can be reopened beyond

(d) decide, on the basis of material available on record including reply of the assessee, whether or
not it is a Ct case to issue a notice under section 148, by passing an order, with the prior approval of
specified authority, within one month from the end of the month in which the reply referred to in clause
(c) is received by him, or where no such reply is furnished, within one month from the end of the month
in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
(a) a search is initiated under section 132 or books of account, other documents or any assets are
requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or
Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search
under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st
day of April, 2021, belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or
Commissioner that any books of account or documents, seized in a search under section 132 or
requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021,
pertains or pertain to, or any information contained therein, relate to, the assessee.
Explanation.—For the purposes of this section, specified authority means the specified authority referred
to in section 151.”]
21 Section 149, Income Tax Act. [It reads:
149. Time limit for notice - (1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under
clause (b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year
unless the Assessing Officer has in his possession books of account or other documents or evidence
which reveal that the income chargeable to tax, represented in the form of asset, which has escaped
assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment
year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time
on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1)
of this section, as they stood immediately before the commencement of the Finance Act, 2021:
Provided further that the provisions of this sub-section shall not apply in a case, where a notice under
section 153A, or section 153C read with section 153A, is required to be issued in relation to a search
initiated under section 132 or books of account, other documents or any assets requisitioned under
section 132A, on or before the 31st day of March, 2021:
Provided also that for the purposes of computing the period of limitation as per this section, the time or
extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section
148A or the period during which the proceeding under section 148A is stayed by an order or injunction
of any court, shall be excluded:
Provided also that where immediately after the exclusion of the period referred to in the immediately
preceding proviso, the period of limitation available to the Assessing Officer for passing an order under
clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven
days and the period of limitation under this sub- section shall be deemed to be extended accordingly.
Explanation.—For the purposes of clause (b) of this sub-section, “asset” shall include immovable
property, being land or building or both, shares and securities, loans and advances, deposits in bank
account.
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three years but within ten years from the end of the relevant
assessment year if the income chargeable to tax which has
escaped assessment amounts to or is likely to amount to Rupees
fifty lakhs or more. However, the first proviso to Section 149
prohibits the issuance of a reassessment notice under the new
regime if such notices have become time-barred under the old
regime; and
(iv) The sanctioning authorities specified under Section 151 of the new
regime are different from those specified under the old regime.22
Section 151 of the new regime specifies the following authorities
for Section 148 and 148A: (i) Principal Commissioner or Principal
Director23 or Commissioner or Director if three years or less have
elapsed from the end of the relevant assessment year; and
(ii) Principal Chief Commissioner or Principal Director General or
Chief Commissioner or Director General if more than three years
have elapsed from the end of the relevant assessment year.
11. The notifications dated 31 March 2021 and 27 April 2021 issued
by the Central Government under Section 3(1) of TOLA contained
an explanation declaring that the provisions under the old regime
shall apply to the reassessment proceedings initiated under them.24
Thus, the notifications directed the assessing officers to apply the

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section
151.]
22 Section 151, Income Tax Act. [It reads:
151. Sanction for issue of notice – Specified authority for the purposes of section 148 and section 148A
shall be, -
(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than
three years have elapsed from the end of the relevant assessment year;
(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief
Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three
years have elapsed from the end of the relevant assessment year.”]
23 Section 2(21) of the Income Tax Act defines Principal Director General or Director General or Principal
Director or Director to mean “a person appointed to be a Principal Director General or Director General
of Income tax or a Principal Director General or Director General of Income tax or, as the case may be,
a Principal Director or Director of Income tax or Principal Director of Income tax, under sub-section (1)
of Section 117, and includes a person appointed under that sub-section to be an Additional Director of
Income tax or a Joint Director of Income tax or as Assistant Director or Deputy Director of Income tax.”
24 Notification No. 20 of 2021 dt. 31 March 2021; Notification No. 38 of 2021 dt. 27 April 2021. [The
explanation reads:
“Explanation – For the removal of doubts, it is hereby clarified that for the purposes of issuance of notice
under section 148 as per time-limit specified in section 149 or sanction under section 151 of the Income-
tax Act, under this sub-clause, the provisions of section 148, section 149 and section 151 of the Income-
tax Act, as the case may be, as they stood as on the 31st day of March 2021, before the commencement
of the Finance Act, 2021, shall apply.”]
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provisions of the old regime for reassessment notices issued after 1
April 2021. The assessing officers accordingly issued reassessment
notices between 1 April 2021 and 30 June 2021 by relying on the
provisions under Section 148 of the old regime. These reassessment
notices were challenged by the assesses before various High Courts.25
12. The High Courts allowed the writ petitions and quashed all the
reassessment notices issued between 1 April 2021 and 30 June
2021 under the old regime on the ground that: (i) Sections 147 to
151 stood substituted by Finance Act 2021 from 1 April 2021;26 (ii)
In the absence of any saving clause, the Revenue could initiate
reassessment proceedings after 1 April 2021 only in accordance with
the provisions of the new regime since they were remedial, beneficial,
and meant to protect the rights and interests of the assesses;27 and
(iii) the Central Government could not exercise its delegated authority
to “re-activate the pre-existing law.”28
13. In Union of India v. Ashish Agarwal,29 this Court held that it
was “in complete agreement with the view taken by various High
Courts in holding” that “the benefit of the new provisions shall be
made available even in respect of the proceedings relating to past
assessment years, provided Section 148 notice has been issued on
or after 1-4-2021.” However, the Court observed that the Revenue
issued the reassessment notices under a “bona fide belief that the
amendments may not yet have been enforced.” This Court exercised
its discretionary jurisdiction under Article 142 in order to balance the
interests of the Revenue and the assesses and directed that the
reassessment notices issued under the old regime shall be deemed
to have been issued under Section 148-A(b) of the new regime. This
Court issued the following directions:

25 See: Ashok Kumar Agarwal v. Union of India, 2021 SCC OnLine All 799; Vellore Institute of Technology
v. CBDT, 2022 SCC OnLine Mad 2213; Tata Communications Transformation Services Ltd v. ACIT, 2022
SCC OnLine Bom 664; Bagaria Properties and Investment Pvt Ltd v. Union of India, 2022 SCC OnLine
Cal 1093; Mon Mohan Kohli v. ACIT, 2021 SCC OnLine Del 5250; Sudesh Taneja v. ITO, 2022 SCC
OnLine Raj 937; Manoj Jain v. Union of India, 2022 SCC OnLine Cal 1369.
26 Sudhesh Taneja (supra) [36]
27 Ashok Kumar Agarwal (supra) [66]; Mon Mohan Kohli (supra) [66]; Tata Communications Transformation
Services (supra) [34]
28 Ashok Kumar Agarwal (supra) [80]; Sudesh Taneja (supra) [40]; Mon Mohan Kohli [49]; Tata
Communications Transformation Services [49]
29 [2022] 3 SCR 638 : (2023) 1 SCC 617
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“28. In view of the above and for the reasons stated above,
the present appeals are allowed in part. The impugned
common judgments and orders passed by the High Court
of Judicature at Allahabad in WT No. 524 of 2021 and
other allied tax appeals/petitions, is/are hereby modified
and substituted as under:
28.1. The impugned Section 148 notices issued to the
respective assessees which were issued under unamended
Section 148 of the IT Act, which were the subject-matter
of writ petitions before the various respective High Courts
shall be deemed to have been issued under Section 148-A
of the IT Act as substituted by the Finance Act, 2021 and
construed or treated to be show-cause notices in terms
of Section 148-A(b). The assessing officer shall, within
thirty days from today provide to the respective assessees
information and material relied upon by the Revenue, so
that the assessees can reply to the show-cause notices
within two weeks thereafter.
28.2. The requirement of conducting any enquiry, if
required, with the prior approval of specified authority under
Section 148-A(a) is hereby dispensed with as a one-time
measure vis-à-vis those notices which have been issued
under Section 148 of the unamended Act from 1-4-2021
till date, including those which have been quashed by the
High Courts.
28.3. Even otherwise as observed hereinabove holding any
enquiry with the prior approval of specified authority is not
mandatory but it is for the assessing officers concerned
to hold any enquiry, if required.
28.4. The assessing officers shall thereafter pass orders
in terms of Section 148-A(d) in respect of each of the
assessees concerned; Thereafter after following the
procedure as required under Section 148-A may issue
notice under Section 148 (as substituted).
28.5. All defences which may be available to the assessees
including those available under Section 149 of the IT Act
and all rights and contentions which may be available to
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the assessees concerned and Revenue under the Finance
Act, 2021 and in law shall continue to be available.”
14. On 11 May 2022, the Central Board of Direct Taxes issued an
Instruction30 for the implementation of the decision Ashish Agarwal
(supra). The Instruction “clarified” that Ashish Agarwal (supra) will
apply “to all cases where extended reassessment notices have been
issued […] irrespective of the fact whether such notices have been
challenged or not.” Paragraph 6.1 of the Instruction stated that the
reassessment notices will “travel back in time to their original date
when such notices were to be issued and then new section 149 of
the Act is to be applied at that point.” Thus, the Instruction is based
on the presumption that the notices issued under Section 148 of the
new regime will travel back in time to their original dates, that is, the
date when the Section 148 notice under the old regime was issued.
15. Paragraph 6.2 of the Instruction elaborated on the mechanism for
issuing notices under Section 148 of the new regime:
“6.2 Based on the above, the extended assessment notices
are to be dealt with as under:
AY 2013-14, AY 2014-15 and AY 2015-16: Fresh notice
under section 148 of the Act can be issued in these cases,
with the approval of the specified authority, only if the case
falls under clause (b) of sub-section (1) of section 149 as
amended by the Finance Act, 2021 and reproduced in
paragraph 6.1 above. Specified authority under section
151 of the new law in this case shall be the authority
prescribed under clause (ii) of that section.
AY 16-17, AY 17-18: Fresh notice under Section 148
can be issued in these cases, with the approval of the
specified authority, under clause (a) of sub-section (1) of
new section 149 of the Act, since they are within the period
of three years from the end of the relevant assessment
year. Specified authority under section 151 of the new law
in this case shall be the authority prescribed under clause
(i) of that section.”

30 Instruction No. 01/2022 dt. 11 May 2022
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16. The assessing officers accordingly considered the replies furnished
by the assesses and passed orders under Section 148A(d).
Subsequently, notices under Section 148 of the new regime were
issued to the assesses by the assessing officers between July
and September 2022 for the assessment years 2013-2014, 2014-
2015, 2015-2016, 2016-2017, and 2017-2018. These notices were
challenged before several High Courts. The High Courts declared the
notices to be invalid on the ground that they were: (i) time-barred; and
(ii) issued without the appropriate sanction of the specified authority.
17. In Ashish Agarwal (supra), this Court was called upon to decide
whether the Revenue was correct in issuing the reassessment notices
under the old regime when the new regime, which was beneficial to
the assesses, was already in force. This Court resolved the issue by
holding that all reassessment notices issued after 1 April 2021 should
have been issued in accordance with the new regime. However, the
Court construed the notices issued under Section 148 of the old regime
by deeming them to be notices issued under Section 148A(b) of the
new regime. In Ashish Agarwal (supra), this Court did not deal with the
issue of whether or not the reassessment notices were issued within the
time limits prescribed under the provisions of the Income Tax Act read
with the relaxations provided under TOLA. This is the primary issue
that comes up for our consideration in the present batch of appeals.

B. Issues
18. The present batch of appeals gives rise to the following issues:
a. Whether TOLA and notifications issued under it will also apply
to reassessment notices issued after 1 April 2021; and
b. Whether the reassessment notices issued under Section 148 of
the new regime between July and September 2022 are valid.

C. Submissions
19. Mr N Venkataraman, learned Additional Solicitor General of India,
made the following submissions on behalf of the Revenue:
a. Parliament enacted TOLA as a free-standing legislation to provide
relief and relaxation to both the assesses and the Revenue
during the time of COVID-19. TOLA seeks to relax actions and
proceedings that could not be completed or complied with within
the original time limits specified under the Income Tax Act;
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b. Section 149 of the new regime provides three crucial benefits
to the assesses: (i) the four-year time limit for all situations has
been reduced to three years; (ii) the first proviso to Section 149
ensures that re-assessment for previous assessment years
cannot be undertaken beyond six years; and (iii) the monetary
threshold of Rupees fifty lakhs will apply to the re-assessment
for previous assessment years;
c. The relaxations provided under Section 3(1) of TOLA apply
“notwithstanding anything contained in the specified Act.” Section
3(1), therefore, overrides the time limits for issuing a notice
under Section 148 read with Section 149of the Income Tax Act;
d. TOLA does not extend the life of the old regime. It merely
provides a relaxation for the completion or compliance of actions
following the procedure laid down under the new regime;
e. The Finance Act 2021 substituted the old regime for re-
assessment with a new regime. The first proviso to Section
149 does not expressly bar the application of TOLA. Section
3 of TOLA applies to the entire Income Tax Act, including
Sections 149 and 151 of the new regime. Once the first proviso
to Section 149(1)(b) is read with TOLA, then all the notices
issued between 1 April 2021 and 30 June 2021 pertaining to
assessment years 2013-2014, 2014-2015, 2015-2016, 2016-
2017, and 2017-2018 will be within the period of limitation as
explained in the tabulation below:
Assessment Within 3 Expiry of Within six Expiry of
Year Years Limitation Years Limitation
(1) (2) read with (4) read with
TOLA for TOLA for
(2) (3) (4) (5)
2013-2014 31.03.2017 TOLA not 31.03.2020 30.06.2021
applicable
2014-2015 31.03.2018 TOLA not 31.03.2021 30.06.2021
applicable
2015-2016 31.03.2019 TOLA not 31.03.2022 TOLA not
applicable applicable
2016-2017 31.03.2020 30.06.2021 31.03.2023 TOLA not
applicable
2017-2018 31.03.2021 30.06.2021 31.03.2024 TOLA not
applicable
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f. The Revenue concedes that for the assessment year 2015-
16, all notices issued on or after 1 April 2021 will have to be
dropped as they will not fall for completion during the period
prescribed under TOLA;
g. Section 2 of TOLA defines “specified Act” to mean and include
the Income Tax Act. The new regime, which came into effect
on 1 April 2021, is now part of the Income Tax Act. Therefore,
TOLA continues to apply to the Income Tax Act even after 1
April 2021; and
h. Ashish Agarwal (supra) treated Section 148 notices issued
by the Revenue between 1 April 2021 and 30 June 2021 as
show-cause notices in terms of Section 148A(b). Thereafter, the
Revenue issued notices under Section 148 of the new regime
between July and August 2022. Invalidation of the Section 148
notices issued under the new regime on the ground that they
were issued beyond the time limit specified under the Income
Tax Act read with TOLA will completely frustrate the judicial
exercise undertaken by this Court in Ashish Agarwal (supra).
20. Mr Percy Pardiwalla, Mr V Sridharan, Mr Tushar Hemani, Mr Saurabh
Soparkar, and Mr K Shivram, learned senior counsel, Mr Manish
Shah, Mr Darshan Patel, Mr Suhrith Parthasarthy, Mr Dharan Gandhi,
and Mr Ved Jain, learned counsel, made the following submissions
on behalf of the respondents:
a. TOLA applies only when the period of limitation expires between
20 March 2020 and 31 March 2021. Finance Act 2021 was
enacted after TOLA. Consequently, TOLA only held the field
till the new regime came into effect from 1 April 2021. The
Revenue had to issue Section 148 notices in terms of the new
regime without recourse to the extended timelines under TOLA;
b. TOLA did not amend the erstwhile Section 149 but merely
extended the specified timelimits. The first proviso to Section
149(1)(b) only refers to the period of limitation under the erstwhile
Section 149(1)(b);
c. Notification No. 38 of 2021 was issued on 27 April 2021 to
extend the time limits expiring under Section 149(1)(b) of the
old regime till 30 June 2021. The notification was issued after
1 April 2021,when the old regime was repealed and substituted
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by a new regime. Therefore, this notification cannot be read
into the new regime;
d. The notices can be categorized into the following four categories:
i. First category: for assessment years 2013-2014 and
2014-2015, the six-year time limit in terms of Section 149
expired on 31 March 2020 and 31 March 2021 respectively.
However, the reassessment notices were issued after 1
April 2021 and would be barred by limitation;
ii. Second category: for the assessment year 2015-2016, the
issue pertains to whether the sanction of the appropriate
authority was obtained by the assessing officers before
issuing re-assessment notices under Section 148 of the
old regime. For this category of cases, the four-year period
expired on 31 March 2020. However, notices were issued
after 31 March 2020 by obtaining sanction under Section
151(2) instead of Section 151(1) of the old regime;
iii. Third category: for assessment years 2016-2017 and
2017-2018, the three-year period in terms of the amended
regime expired on 31 March 2020 and 31 March 2021,
respectively. The notices under Section 148 were issued
after the expiry of three years, that is, after 1 April 2021.
However, the sanctions were obtained under Section 151(i)
instead of Section 151(ii) of the new regime; and
iv. The directions issued by this Court in Ashish Agarwal
(supra) were not intended to apply to assesses who did
not challenge the reassessment notices before the High
Courts or this Court. Therefore, reassessment proceedings
could not have been initiated for such assesses.
e. The applicability of the first proviso to Section 149(1)(b) of the
new regime has to be tested on the date of issuance of notice
under Section 148 of the new regime. Even if TOLA is read into
the Income Tax Act, the time limits for completion or compliance
of actions can be extended till 30 June 2021. However, the
notices under Section 148 of the new regime were issued by
the Revenue from July to September 2022. The period of July
to September 2022 is beyond the extended time limits stipulated
under the Income Tax Act read with TOLA;
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f. Ashish Agarwal (supra) cannot be interpreted in a manner
to exclude the entire period from April 2021 to September
2022. The directions issued by this Court under Article 142 of
the Constitution cannot contravene the substantive provisions
contained in the Income Tax Act. Moreover, this Court in Ashish
Agarwal (supra) expressly left open all the defences available
to the assesses under the new regime, including the defence
of limitation available under Section 149; and
g. TOLA is only applicable to the provisions that specify time limits.
Section 151 does not prescribe any time limit for the issuance
of sanctions by the specified authorities. Therefore, TOLA does
not apply to Section 151.

D. Legal Background

i. Assessment as a quasi-judicial function
21. The power to levy tax is an essential and inherent attribute of
sovereignty.31 It is an inherent attribute because the government
requires funds to discharge its governmental functions.32 Taxation is
also a recognised fiscal tool to achieve fiscal and social objectives.33
Although the power to levy taxes is plenary, it is subject to certain
well-defined limitations. Article 265 of the Constitution provides
that no tax shall be levied or collected except by authority of law. A
taxing statute must be valid and conform to other provisions of the
Constitution.34
22. Article 265 makes a distinction between “levy” and “collection.”
The expression “levy” has a wider connotation. It includes both
the imposition of a tax as well as assessment.35 The quantum of
tax levied by a taxing statute, the conditions subject to which it is
levied, and how it is sought to be recovered are all matters within
the competence of the legislature.36In a taxing statute, the charging

31 Jindal Stainless Ltd v. State of Haryana (2017) 12 SCC 1 [17]; [310]
32 Amrit Banaspati Co. Ltd. v. State of Punjab (1992) 2 SCC 411 [10]; Dena Bank v. Bhikhabhai Prabhudas
Parekh & Co. (2000) 5 SCC 694 [8]
33 Elel Hotels & Investments Ltd v. Union of India (1989) 3 SCC 698 [20]
34 Mafatlal Industries Ltd v. Union of India (1997) 5 SCC 536 [25]
35 CCE v. National Tobacco Co. of India Ltd. (1972) 2 SCC 560 [19]
36 Rai Ramkrishna v. State of Bihar (1963) SCC OnLine SC 31 [12]
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provisions are generally accompanied by a set of provisions for
computing or assessing the levy. The character of assessment
provisions bears a relationship to the nature of the charge.37
23. Thomas Cooley describes assessment as the most important of all
the proceedings in taxation. He further describes the necessity of
assessment thus:
“An assessment, when taxes are to be levied upon a
valuation, is obviously indispensable. It is required as the
first step in the proceedings against individual subjects of
taxation, and is the foundation of all which follow it. Without
an assessment they have no support, and are nullities.
The assessment is, therefore, the most important of all
the proceedings in taxation, and the provisions to insure
its accomplishing its office are commonly very full and
particular. If there is no valid assessment, a tax on sale
of lands is a nullity. A want of assessment is not a mere
irregularity remedied by a curative statute.
On the other hand, no assessment is necessary where the
statute itself prescribes the amount to be paid, and this
can be recovered by suit. For instance, where a statute
imposes a tax at a specified rate upon bank deposits, no
other assessment other than that made by the statute
itself is necessary.”38
24. The expression “assessment” comprehends the entire procedure for
ascertaining and imposing liability upon taxpayers.39 The process of
assessment involves computation of the income of the assessees,
determination of tax payable by them, and the procedure for collecting
or recovering tax.40 An assessing officer is concerned with the
assessment and collection of revenue. An assessing officer must

37 CIT v. B C Srinivasa Setty (1981) 2 SCC 460 [10]
38 Thomas Cooley, The Law of Taxation (4th edn, 1924) 2116
39 Kalawati Devi Harlalka v. CIT, 1967 SCC OnLine SC 44; Addl ITO v. E Alfred, 1961 SCC OnLine SC
243 [7]; S Sankappa v. ITO, 1967 SCC OnLine SC 25 [3]; CCE v. National Tobacco Co. of India (1972)
2 SCC 560 [19] [“19. […] The term “assessment”, on the other hand, is generally used in this country for
the actual procedure adopted in fixing liability to pay a tax on account of particular goods of property or
whatever may be the object of the tax in a particular case and determining its amount.”]
40 Bhopal Sugar Industries Ltd v. State of Madhya Pradesh (1979) 3 SCC 792 [12]
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administer the provisions of the Income Tax Act in the interests of
the public revenue and to prevent evasion or escapement of tax
legitimately due to the State.41
25. In Province of Bombay v. Khushaldas S Advani,42 Justice S R Das
(as the learned Chief Justice then was), in his concurring opinion
observed that if a statutory authority has the power to perform any
act that will prejudicially affect the subject, then although there are
no two parties apart from the authority and the contest is between
the authority proposing to do the act and the subject opposing it, the
final determination of the authority will be quasi-judicial provided the
authority is required by the statute to act judicially. A quasi-judicial
authority is under an obligation to act judicially.43
26. An assessment acquires finality on the making of an assessment order
by the assessing officer.44 It creates a vested right in favour of the
assessee.45 Section 2(8) of the Income Tax Act defines “assessment”
to include reassessment. Reassessment is nothing but a fresh
assessment.46 The effect of reopening the assessment is to vacate
or set aside the order of assessment and to substitute in its place
the order of reassessment.47 The procedure of reassessment of tax
is quasi-judicial because it prejudicially affects the vested rights48 of
the assessee. In CIT v. Simon Carves Ltd.,49 Justice H R Khanna,
speaking for a Bench of three Judges, explained the quasi-judicial
function performed by the assessing officers during the process of
assessment and reassessment thus:
“10. […] The taxing authorities exercise quasi-judicial
powers and in doing so they must act in a fair and not a
partisan manner. Although it is part of their duty to ensure

41 M M Ipoh v. CIT, 1967 SCC OnLine SC 40 [14]
42 1950 SCC OnLine SC 26 [80]; Also see Express Newspaper (P) Ltd. v. Union of India, 1958 SCC OnLine
SC 23 [111]
43 Gullapalli Nageswara Rao v. State of A P, 1959 SCC OnLine SC 53 [6]
44 Indian & Eastern Newspaper Society v. CIT (1979) 4 SCC 248 [5]; K T Moopil Nair v. State of Kerala,
1960 SCC OnLine SC 7 [9]
45 CED v. M A Merchant, 1989 Supp (1) SCC 499 [8]
46 CST v. H M Esufali, H M Abdali (1973) 2 SCC 137 [17]
47 Deputy Commissioner of Commercial Taxes v. H R Sri Ramulu (1977) 1 SCC 703 [7]
48 See Income Tax Officer v. S K Habibullah, 1962 SCC OnLine SC 58 [7]
49 [1977] 1 SCR 207 : (1976) 4 SCC 435
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that no tax which is legitimately due from an assessee
should remain unrecovered they must also at the same
time not act in a manner as might indicate that scales are
weighted against the assessee. We are wholly unable to
subscribe to the view that unless those authorities exercise
the power in a manner most beneficial to the revenue
and consequently most adverse to the assessee, they
should be deemed not to have exercised it in a proper
and judicious manner.”
27. Since the assessing officers perform a quasi-judicial function during
reassessment, the powers vested in them are regulated by law.50
The process of reassessment is generally preceded by administrative
proceedings, which require the assessing officer to obtain the sanction
of the specified authorities.51 The taxing statutes generally lay down
the procedure for issuance of notice to the proposed assessee in
respect of income or property proposed to be taxed. It also prescribes
the authority and procedure for hearing any objections to the liability
for taxation.52

ii. Assessment as an issue of jurisdiction
28. Jurisdiction is defined as the power of a court, tribunal, or authority to
hear and determine a cause or exercise any judicial power concerning
such cause.53 The Revenue officers must have requisite jurisdiction
to perform their functions and responsibilities following the provisions
of the Income Tax Act. Under the Income Tax Act 1922,54 Section
34 allowed an Income Tax Officer to reassess income that escaped
assessment for a relevant assessment year. Section 34 provided that
a reassessment notice could not be issued beyond the prescribed
time limit (which was generally within eight years from the end of the

50 Supdt. of Taxes v. Onkarmal Nathmal Trust (1976) 1 SCC 766 [37];
51 S Narayanappa v. CIT, 1966 SCC OnLine SC 173 [4] [“4. […] The proceedings for assessment or re-
assessment under Section 34(1)(a) of the Income Tax Act start with the issue of a notice and it is only
after the service of the notice that the assessee, whose income in sought to be assessed or re-assessed,
becomes a party to those proceedings. The earlier stage of the proceeding for recording the reasons
of the Income Tax Officer and for obtaining the sanction of the Commissioner are administrative in
character and are not quasi-judicial.]
52 K T Moopil Nair v. State of Kerala, 1960 SCC OnLine SC 7 [9]
53 In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the
Indian Stamp Act 1899, 2023 INSC 1066 [125]
54 “Income Tax Act 1922”
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relevant assessment year). Thus,Section 34 conferred jurisdiction
on Income Tax Officers to reopen an assessment subject to the
issuance of notice within the prescribed time limits.55 In Ahmedabad
Manufacturing and Calico Printing Co. Ltd. v. S G Mehta, ITO,56
Justice M Hidayatullah (as the learned Chief Justice then was),
writing for himself and Justice Raghubar Dayal, observed:
“It must be remembered that if the Income-tax Act prescribes
a period during which the tax due in any particular
assessment year may be assessed, then on the expiry of
that period the department cannot make an assessment.
Where no period is prescribed that assessment can be
completed at any time but once completed it is final.
Once a final assessment has been made, it can only
be reopened to rectify a mistake apparent from the
record (section 35) or to reassess where there has
been an escapement of assessment of income for one
reason or another (section 34). Both these sections
which enable reopening of back assessments provide
their own periods of time for action but all these
periods of time, whether for the first assessment or for
rectification, or for reassessment, merely create a bar
when that time passed against the machinery set up
by the Income-tax Act for the assessment and levy of
the tax. They do not create an exemption in favour of
the assessee or grant an absolution on the expiry of
the period. The liability is not enforceable but the tax
may again become exigible if the bar is removed and
the taxpayer is brought within the jurisdiction of the
said machinery by reasons of a new power. This is,
of course, subject to the condition that the law must
say that such is the jurisdiction, either expressly or
by clear implication. If the language of the law has that
clear meaning, it must be given that effect and where
the language expressly so declares or clearly implies
it, the retrospective operation is not controlled by the
commencement clause.”

55 R K Upadhyaya v. Shanabhai Patel (1987) 3 SCC 96 [2]
56 [1963] Supp. 2 SCR 92 : 1962 SCC OnLine SC 73
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29. In S S Gadgil v. Lal & Co., a three-Judge Bench of this Court held
that the period prescribed under Section 34 of the Income Tax Act
1922 “is not a period of limitation.”57 It was further observed that
Section 34 “imposes a fetter upon the power of the Income Tax Officer
to bring to tax escaped income” by prescribing “different periods in
different classes of cases for enforcement of the right of the States to
recover tax.”58 Under Section 34, Income Tax Officers were statutorily
barred from issuing a notice of assessment or reassessment after
the expiry of the statutory time limit prescribed under the Income
Tax Act. Consequently, reassessment notices issued by the Revenue
beyond the prescribed time limits were declared invalid for being
time-barred.59 Assessment proceedings that have attained finality
under existing law due to a time bar cannot be held to be open for
revival unless the amended provision is given retrospective effect
to allow upsetting the legal proceedings.60
30. If a statute expressly confers a power or imposes a duty on a
particular authority, then such power or duty must be exercised or
performed by that authority itself.61 Further, when a statute vests
certain power in an authority to be exercised in a particular manner,
then that authority has to exercise its power following the prescribed
manner.62 Any exercise of power by statutory authorities inconsistent
with the statutory prescription is invalid.63 Section 34 of the Income
Tax Act 1922 prescribed a duty on Income Tax Officers to seek
prior approval of the Commissioner before issuing a reassessment
notice. In CIT v. Maharaja Pratapsingh Bahadur of Gidhaur,64 a
three-Judge Bench of this Court held that a notice issued under
Section 34 without prior approval of the Commissioner was invalid.

57 [1964] 8 SCR 72 : 1964 SCC OnLine SC 112 [10]
58 S S Gadgil (supra) [10]
59 CIT v. Robert J Sas (1963) 48 ITR 177; CIT v. Thayaballii Mulla Jeevaji Kapasi, 1967 SCC OnLine SC
352.
60 CIT v. Onkarmal Meghraj (1974) 3 SCC 349 [11]; K M Sharma v. ITO (2002) 4 SCC 339 [14]; M A
Merchant (supra) [8]
61 Dr Premchandran Keezhoth v. Chancellor, Kannur University, 2023 SCC OnLine SC 1592 [73]
62 CIT v. Anjum M.H. Ghaswala (2002) 1 SCC 633 [27]; State of U P v. Singhara Singh, 1963 SCC OnLine
SC 23 [8]
63 Tata Chemicals Ltd. v. Commissioner of Customs (2015) 11 SCC 628 [18]
64 1960 SCC OnLine SC 55 [1961] 2 SCR 760 [6]
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31. The Income Tax Act 1961 also mandates assessing officers to fulfil
certain pre-conditions before issuing a notice of reassessment.
Section 149 requires assessing officers to issue a notice of
reassessment under Section 148 within the prescribed time limits.
Further, Section 151 requires assessing officers to obtain sanction
of the specified authority before issuing notice under Section 148.
In Chhugamal Rajpal v. S P Chaliha, a three-Judge Bench of this
Court held that Section 151 must be strictly adhered to because it
contains “important safeguards.”65
32. A statutory authority may lack jurisdiction if it does not fulfil the
preliminary conditions laid down under the statute, which are necessary
to the exercise of its jurisdiction.66 There cannot be any waiver of a
statutory requirement or provision that goes to the root of the jurisdiction
of assessment.67 An order passed without jurisdiction is a nullity. Any
consequential order passed or action taken will also be invalid and
without jurisdiction.68 Thus, the power of assessing officers to reassess
is limited and based on the fulfilment of certain preconditions.69

iii. Principles of strict interpretation and workability
33. The dominant purpose in interpreting a taxingstatute is to ascertain
the intention of the legislature to impose a charge.70 A literal rule
of construction requires the language of a statute to be construed
according to its literal and grammatical meaning, whatever the result
may be.71 In comparison, a strict interpretation of a statute does not
encompass strict literalism, which leads to absurdity or goes against
the express legislative intent.72 The principle of strict interpretation
requires the courts to interpret and decipher the meaning of the
words of the statute in their usual sense.73

65 [1971] 3 SCR 442 : (1971) 1 SCC 453 [5]
66 Chhotobhai Jethabhai Patel v. Industrial Court, Maharashtra (1972) 2 SCC 46 [16]
67 Superintendent of Taxes v. Onkarmal Nathmal Trust (1976) 1 SCC 766 [28]
68 Dwarka Prasad Agarwal v. B D Agarwal (2003) 6 SCC 230 [37]
69 CIT v. Kelvinator of India Ltd (2010) 2 SCC 723 [6]. [“6. […] Reassessment has to be based on the
fulfilment of certain precondition […]”]
70 Banarsi Debi v. ITO, 1964 SCC OnLine SC 48 [6]
71 Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court (1990) 3
SCC 682 [67]
72 Commissioner of Customs v. Dilip Kumar & Co. (2018) 9 SCC 1 [28]
73 State of Gujarat v. Mansukhbhai Kanjibhai Shah (2020) 20 SCC 360 [24]
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34. Taxing statutes are interpreted by following the principles of strict
interpretation.74 While interpreting a taxing statute, there is no room
for any intendment.75 A taxing statute must be construed by having
regard to the strict letter of the law.76 In a taxing statute, it is not
possible to assume any intention or governing purpose more than
what is stated in the plain language. A taxing statute can successfully
impose liability on persons or property only if it frames appropriate
provisions to that end. The courts cannot plugin a loophole in a taxing
statute “by a strained construction in reference to the supposed
intention of the Legislature.”77 Further, the considerations of equity
or justice are not relevant in interpreting a taxing statute.78
35. It is a well-accepted rule of construction that in situations where
the interpretation of taxing legislation is ambiguous or leads to two
possible interpretations, the interpretation most beneficial to the
subject of the tax should be adopted.79 It would not be an unjust
result if a taxpayer escapes the tax net on account of the legislature’s
failure to express itself clearly.80
36. In a taxing statute, the charging section has to be construed strictly,
but the machinery provisions must be interpreted in accordance with
the ordinary rules of statutory interpretation.81 The purpose is to give
effect to the clear intention of the legislature. In Murarilal Mahabir
Prasad v. B R Vad,82 this Court held that:
“29. […] There is no equity about a tax in the sense that a
provision by which a tax is imposed has to be construed
strictly, regardless of the hardship that such a construction
may cause either to the treasury or to the taxpayer. If
the subject falls squarely within the letter of law he must

74 G P Singh, Principles of Statutory Interpretation (15th edn, 2023) 616.
75 Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) KB 64, 71
76 A.V. Fernandes v. State of Kerala, 1957 SCC OnLine SC 23
77 Muralilal Mahabir Prasad v. B R Vad (1975) 2 SCC 736 [28]
78 ITO v. T S Devinatha Nadar, 1967 SCC OnLine SC 52 [30]
79 Central India Spinning and Waving Co. Ltd. v. Municipal Committee, 1957 SCC OnLine SC 18 [5]; CIT v.
Shahzada Nand & Sons, 1966 SCC OnLine SC 24 [10]; T S Devinatha Nadar (supra) [25]; Voltas Ltd. v.
State of Gujarat (2015) 7 SCC 527 [24]
80 CIT v. Jargaon Electric Supply Co. Ltd., 1960 SCC OnLine SC 105 [7]; State of W.B. v. Kesoram
Industries Ltd. (2004) 10 SCC 201 [106]
81 Mahim Patram (P) Ltd. v. Union of India (2007) 3 SCC 668 [25]
82 [1976] 1 SCR 689 : (1975) 2 SCC 736 [29]
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be taxed, howsoever inequitable the consequences may
appear to the judicial mind. If the Revenue seeking to tax
cannot bring the subject within the letter of law, the subject
is free no matter that such a construction may cause serious
prejudice to the Revenue. In other words, though what is
called equitable construction may be admissible in relation
to other statutes or other provisions of a taxing statute,
such a construction is not admissible in the interpretation
of a charging or taxing provision of a taxing statute.”
37. A statute is designed to be workable. A statutory provision must be
construed in a manner to make it workable to achieve the purpose
of the legislation.83 A construction that fails to achieve the manifest
purpose of legislation or reduces the statutory provisions to futility
should be avoided.84 The machinery provisions must be construed
to effectuate the object and purpose of a statute and not defeat
them. In J K Synthetics Ltd. v. CTO,85 a Constitution Bench of this
Court observed:
“16. It is well-known that when a statute levies a tax
it does so by inserting a charging section by which a
liability is created or fixed and then proceeds to provide
the machinery to make the liability effective. It, therefore,
provides the machinery for the assessment of the liability
already fixed by the charging section, and then provides
the mode for the recovery and collection of tax, including
penal provisions meant to deal with defaulters. Provision is
also made for charging interest on delayed payments, etc.
Ordinarily the charging section which fixes the liability
is strictly construed but that rule of strict construction
is not extended to the machinery provisions which
are construed like any other statute. The machinery
provisions must, no doubt, be so construed as would
effectuate the object and purpose of the statute and
not defeat the same.”
(emphasis supplied)

83 K P Mohammed Salim v. CIT (2008) 11 SCC 573 [14];
84 Mohan Kumar Singhania v. Union of India, 1992 Supp (1) SCC 594 [52]; CIT v. Hindustan Bulk Carriers
(2003) 3 SCC 57 [17]
85 [1997] 1 SCR 603 : (1994) 4 SCC 276
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38. The provisions in a taxing statute dealing with machinery for
assessment have to be construed in accordance with the intention of
the legislature to make the charge levied effective.86 While interpreting
provisions that set up the machinery of assessment, the rule is
that construction should be preferred which makes the machinery
workable87 and furthers the intention of the legislature.88 In CIT v.
Sun Engineering Works (P) Ltd.,89 a two-Judge Bench of this Court
observed that the provision dealing with reassessment contained in
Section 147 of the Income Tax Act was for the benefit of the Revenue:
“40. Although, Section 147 is part of a taxing statute,
it imposes no charge on the subject but deals merely
with the machinery of assessment and in interpreting a
provision of that kind, the rule is that construction should
be preferred which makes the machinery workable. Since
the proceedings under Section 147 of the Act are for the
benefit of the Revenue and not an assessee and are
aimed at gathering the ‘escaped income’ of an assessee,
the same cannot be allowed to be converted as ‘revisional’
or ‘review’ proceedings at the instance of the assessee,
thereby making the machinery unworkable.”

iv. Principle of harmonious construction
39. The legislature is presumed to enact a consistent and harmonious
body of laws in deference to the rule of law.90 In case of any apparent
conflict within a provision or between two provisions of the same
statute, the courts must read the provisions harmoniously.91 The
principle of harmonious construction requires courts to bring about
a reconciliation between seemingly conflicting provisions to give
effect to both. An interpretation which reduces one of the provisions
to a “dead letter” is not a harmonious construction. The principle of
harmonious construction also applies to reconcile two seemingly
conflicting provisions of different statutes.92

86 Gursahai Saigal v. CIT (1963) 48 ITR (SC) 1 [9]
87 CIT v. Mahaliram Ramjidas, AIR 1940 PC 124
88 Gursahai Saigal (supra) [13]
89 [1992] Supp. 1 SCR 732 : (1992) 4 SCC 363 [40]
90 MCD v. Shiv Shankar (1971) 1 SCC 442 [5]
91 Sultana Begum v. Prem Chand Jain (1997) 1 SCC 373 [15]
92 In re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the
Indian Stamp Act 1899, 2023 INSC 1066 [165]
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40. A legislature often appends a non obstante clause to a provision to
give it an overriding effect over provisions contained in the same
statute or a separate statute.93 The purpose of incorporating a non
obstante clause in a provision is to prohibit the operation and effect
of all contrary provisions.94 In Chandavarkar Sita Ratna Rao v.
Ashalata S Guram,95 Justice Sabyasachi Mukharji (as the learned
Chief Justice then was) explained the purpose of a non obstante
clause thus:
“67. A clause beginning with the expression “notwithstanding
anything contained in this Act or in some particular provision
in the Act or in some particular Act or in any law for the
time being in force, or in any contract” is more often than
not appended to a section in the beginning with a view to
give the enacting part of the section in case of conflict an
overriding effect over the provision of the Act or the contract
mentioned in the non obstante clause. It is equivalent to
saying that in spite of the provision of the Act or any other
Act mentioned in the non obstante clause or any contract
or document mentioned the enactment following it will
have its full operation or that the provisions embraced in
the non obstante clause would not be an impediment for
an operation of the enactment.”
41. A non-obstante clause must be given effect to the extent Parliament
intended and not beyond.96 In construing a provision containing a
non obstante clause, courts must determine the purpose and object
for which the provision was enacted.97 The courts are also required
to find out the extent to which the legislature intended to give one
provision overriding effect over another provision.98 In case of a clear
inconsistency between two enactments, a provision containing a non
obstante clause can be given an overriding effect over a provision
contained in another statute.

93 State of Bihar v. Bihar Rajya MSESKK Mahasangh (2005) 9 SCC 129 [45]
94 Union of India v. G M Kokil, 1984 Supp SCC 196 [11]
95 [1986] 3 SCR 866 : (1986) 4 SCC 447
96 ICICI Bank Ltd v. SIDCO Leathers Ltd (2006) 10 SCC 452 [37]
97 SIDCO Leathers Ltd (supra) [34]; Geeta v. State of U P (2010) 13 SCC 678 [45]
98 A G Varadarajulu v. State of Tamil Nadu (1998) 4 SCC 231 [16]
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42. Another principle of interpretation is that when two laws are
inconsistent or repugnant, the later legislation is interpreted as having
impliedly repealed the earlier legislation. The principle underlying
implied repeal is that there is no need for the later enactment to state
in express words that the earlier enactment has been repealed if the
legislative intent to supersede the earlier law is manifested through
the provisions of the later enactment.99 In MCD v. Shiv Shankar,100
this Court culled out the following principles applicable to the implied
repeal of legislation:
a. A subsequent legislation may not be too readily presumed to
effectuate a repeal of existing statutory laws in the absence of
express or at least unambiguous indication to that effect;
b. Courts must lean against implying a repeal unless the two
provisions are so plainly repugnant to each other that they
cannot stand together and it is not possible on any reasonable
hypothesis to give effect to both at the same time;
c. It is necessary to closely scrutinise and consider the true
meaning and effect of both the earlier and the later statute; and
d. If the objects of the two statutory provisions are different and the
language of each statute is restricted to its objects or subject,
then they are generally intended to rule in parallel lines without
meeting and there would be no real conflict.
43. The principle on which the rule of implied repeal rests is that if the
subject-matter of a later legislation is identical to that of an earlier
legislation so that they both cannot stand together, then the earlier
legislation is impliedly repealed by the later legislation.101 The courts
have to determine whether the legislature intended the two sets of
provisions to be applied simultaneously.102 The presumption against
implied repeal is based on the theory that the legislature knows the
existing laws and does not intend to create any confusion by retaining
two conflicting provisions or statutes.103 The test to be applied for the

99 State of Orissa v. M A Tulloch, 1963 SCC OnLine SC 18 [20]
100 [1971] 3 SCR 607 : (1971) 1 SCC 442 [5]
101 Zaverbhai Amaidas v. State of Bombay (1954) 2 SCC 345 [16]
102 Ratan Lal Adukia v. Union of India (1989) 3 SCC 537 [18]
103 Pradeep S Wodeyar v. State of Karnataka (2021) 19 SCC 62 [69]
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construction of implied repeal is whether the new or subsequent law
is inconsistent with or repugnant to the old law. The inconsistency
or repugnancy should clearly and manifestly reveal an intention to
repeal the existing laws.104 The inconsistency or repugnancy must
be such that the two statutes cannot be reconciled on reasonable
construction or hypothesis. To determine whether a later statute
repeals by implication an earlier statute, it is necessary to examine
the scope and object of the two enactments by comparison of their
provisions.105 Implied repeal should be avoided, if possible, where
both the statutes can stand together.106
44. We now proceed to analyse the issues given the broad legislative
and judicial background discussed above.
E. Reading TOLA into the Income Tax Act
i. First proviso to Section 149(1) of the new regime
45. The first proviso to Section 149(1)(b) provides thus:
“149. (1) No notice under section 148 shall be issued for
the relevant assessment year, -
(a) If three years have elapsed from the end of the
relevant assessment year, unless the case falls
under clause (b);
(b) If three years, but not more than ten years, have
elapsed from the end of the relevant assessment
year unless the Assessing Officer has in possession
of books of account or other documents or evidence
which reveal that the income chargeable to tax,
represented in the form of asset, which has escaped
assessment amounts to or is likely to amount to fifty
lakh rupees or more for that year:
Provided that no notice under section 148 shall be
issued at any time in a case for the relevant assessment
year beginning on or before 1st day of April 2021, if
such notice could not have been issued at that time

104 Municipal Council Palai v. T J Joseph, 1963 SCC OnLine SC 55 [10]
105 State of M P v. Kedia Leather & Liquor Ltd. (2003) 7 SCC 389 [15]
106 Harshad S Mehta v. State of Maharashtra (2001) 8 SCC 257 [31]
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on account of being immediately beyond the time limit
specified under the provisions of clause (b) of sub-
section (1) of this section, as they stood immediately
before the commencement of the Finance Act, 2021:”
(emphasis supplied)
46. The ingredients of the proviso could be broken down for analysis as
follows: (i) no notice under Section 148 of the new regime can be
issued at any time for an assessment year beginning on or before 1
April 2021; (ii) if it is barred at the time when the notice is sought to
be issued because of the “time limits specified under the provisions
of” 149(1)(b) of the old regime. Thus, a notice could be issued under
Section 148 of the new regime for assessment year 2021-2022 and
before only if the timelimit for issuance of such notice continued to
exist under Section 149(1)(b) of the old regime.
47. In CTO v. Biswanath Jhunjhunwalla,107 the Bengal Sales Tax
Rules 1941 empowered the Commissioner to revise any assessment
within four years from the date of assessment. Subsequently,
the State Government issued a notification following the law to
extend the time limit from four years to six years from the date
of assessment. The extension of the time limit was challenged
by the respondents on the ground that the assessments which
had attained finality because of the expiry of the period of four
years could not be reassessed. This Court observed that it was
the clear intention of the notification to permit the Commissioner
to revise any assessment made or order passed, provided the
assessment had not been made before six years. It was held that if
the legislative intention is clear and the language is unambiguous,
full effect must be given to the legislative intention by reading the
notification as applying not only to the incomplete assessments
but also to assessments that had reached finality because of lapse
of the earlier prescribed period. The principle that emanates from
Biswanath Jhunjhunwalla (supra) is that the courts should give
full effect to the legislative intention of granting reassessment
powers to assessing officers unless the legislature, by express
provision, states otherwise.

107 [1996] Supp. 5 SCR 286 : (1996) 5 SCC 626
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48. Notices have to be judged according to the law existing on the date
the notice is issued. Section 149 of the old regime primarily provided
two timelimits: (i) four years for all situations and (ii) beyond four
years and within six years if the income chargeable to tax which
escaped assessment amounted to Rupees one lakh or more. After
1 April 2021, the timelimits prescribed under the new regime came
into force. The ordinary timelimit of four years was reduced to three
years. Therefore, in all situations,reassessment notices could be
issued under the new regime if not more than three years have
elapsed from the end of the relevant assessment year. For example,
for assessment year 2018-2019, the four year period would have
expired on 31 March 2023 under the old regime. However, if the
notice is issued after 1 April 2021, the three year time limit prescribed
under the new regime will be applicable. The three year timelimit
will expire on 31 March 2022.
49. The first proviso to Section 149(1)(b) requires the determination of
whether the timelimit prescribed under Section 149(1)(b) of the old
regime continues to exist for the assessment year 2021-2022 and
before. Resultantly, a notice under Section 148 of the new regime
cannot be issued if the period of six years from the end of the relevant
assessment year has expired at the time of issuance of the notice.
This also ensures that the new time limit of ten years prescribed
under Section 149(1)(b) of the new regime applies prospectively. For
example, for the assessment year 2012-2013, the ten year period
would have expired on 31 March 2023, while the six year period
expired on 31 March 2019. Without the proviso to Section 149(1)(b)
of the new regime, the Revenue could have had the power to reopen
assessments for the year 2012-2013 if the escaped assessment
amounted to Rupees fifty lakhs or more. The proviso limits the
retrospective operation of Section 149(1)(b) to protect the interests
of the assesses.
50. Another important change under Section 149(1)(b) of the new regime
is the increase in the monetary threshold from Rupees one lakh
to Rupees fifty lakhs. The old regime prescribed a time limit of six
years from the end of the relevant assessment year if the income
chargeable to tax which escaped assessment was more than Rupees
one lakh. In comparison, the new regime increases the time limit to
ten years if the escaped assessment amounts to more than Rupees
fifty lakhs. This change could be summarized thus:
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Regime Time limit Income chargeable to
tax which has escaped
assessment
Old regime Four years but not Rupees one lakh or
more than six years more
New regime Three years but not Rupees fifty lakhs or
more than ten years more

51. Given Section 149(1)(b) of the new regime, reassessment notices
could be issued after three years only if the income chargeable to
tax which escaped assessment is more than Rupees fifty lakhs. The
proviso to Section 149(1)(b) limits the retrospectivity of that provision
with respect to the time limits specified under Section 149(1)(b) of
the old regime.
52. In Ashish Agarwal (supra), this Court held that the benefit of the
new regime must be provided for the reassessment conducted
for the past periods. The increase of the monetary threshold from
Rupees one lakh to Rupees fifty lakh is beneficial for the assesses.
Mr Venkataraman has also conceded on behalf of the Revenue that
all notices issued under the new regime by invoking the six year time
limit prescribed under Section 149(1)(b) of the old regime will have
to be dropped if the income chargeable to tax which has escaped
assessment is less than Rupees fifty lakhs.
53. The position of law which can be derived based on the above
discussion may be summarized thus: (i) Section 149(1) of the
new regime is not prospective. It also applies to past assessment
years; (ii) The time limit of four years is now reduced to three
years for all situations. The Revenue can issue notices under
Section 148 of the new regime only if three years or less have
elapsed from the end of the relevant assessment year; (iii) the
proviso to Section 149(1)(b) of the new regime stipulates that the
Revenue can issue reassessment notices for past assessment
years only if the time limit survives according to Section 149(1)(b)
of the old regime, that is, six years from the end of the relevant
assessment year; and (iv) all notices issued invoking the time limit
under Section 149(1)(b) of the old regime will have to be dropped
if the income chargeable to tax which has escaped assessment is
less than Rupees fifty lakhs.
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ii. TOLA can extend the time limit till 31 June 2021
54. The proviso to Section 149(1)(b) of the new regime uses the
expression “beyond the time limit specified under the provisions of
clause (b) of sub-section (1) of this section, as they stood immediately
before the commencement of the Finance Act, 2021.” Thus, the
proviso specifically refers to the time limits specified under Section
149(1)(b) of the old regime. The Revenue accepts that without
application of TOLA, the timelimit for issuance of reassessment
notices after 1 April 2021 expires for assessment years 2013-2014,
2014-2015, 2015-2016, 2016-2017, and 2017-2018 in the following
manner:
(i) for the assessment years 2013-2014 and 2014-2015, the six
year period expires on 31 March 2020 and 31 March 2021
respectively; and
(ii) for the assessment years 2016-2017 and 2017-2018, the three
year period expires on 31 March 2020 and 31 March 2021
respectively.
a. Finance Act 2021 substituted the old regime
55. In Shamrao V Parulekar v. District Magistrate, Thana, 108 a
Constitution Bench of this Court was called upon to decide the validity
of the detention of the petitioner under the Preventive Detention
Amendment Act 1950.109 The Detention Act 1950 was due to expire
on 1 April 1951, but the legislation was amended to prolong its life
by another year till 1 April 1952. The petitioner was detained on 15
November 1951 and his detention would have expired on 1 April
1952 with the expiration of the enactment. However, the Detention
Act 1950 was amended in 1952, further prolonging its application
for six months till 1 October 1952. The issue before this Court was
whether the prolonging of the Detention Act 1950 also prolonged
the detention of the petitioner.
56. Justice Vivian Bose, writing for the Constitution Bench, held that the
detention continued until the expiry of the Detention Act 1950 on 1
October 1952. The learned Judge further observed:

108 [1956] 1 SCR 644 : (1952) 2 SCC 1
109 “Detention Act 1950”
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“7. The rule is that when a subsequent Act amends an
earlier one in such a way as to incorporate itself, or a
part of itself, into the earlier, then the earlier Act must
thereafter be read and construed (except where that
would lead to a repugnancy, inconsistency or absurdity)
as if the altered words had been written into the earlier
Act with pen and ink and the old words scored out so that
thereafter there is no need to refer to the amending Act
at all. […] Bearing this in mind it will be seen that the
1950 Act remains the 1950 Act all the way through
even with its subsequent amendments. Therefore,
the moment the 1952 Act was passed and Section 2
came into operation, the Act of 1950 meant the 1950
Act as amended by Section 2, that is to say, the 1950
Act now due to expire on 1-10-1952.”
(emphasis supplied)
The principle which emanates from Shamrao V Parulekar (supra)
is that after an amendment, the legislation has to be read along with
the amended provisions.
57. The legislative practice of amendment by substitution is often used by
the legislatures. The process of substitution of a statutory provision
generally involves two steps: first, the existing rule is deleted;
and second, the new rule is brought into existence in its place.110
The deletion effectively repeals the existing provision.111 Thus, an
amendment by substitution results in the repeal of an earlier provision
and its replacement by a new provision.112 The repealed provision
will cease to operate from the date of repeal and the substituted
provision will commence operation from the date of its substitution.113
After the substitution, the legislation must be read and construed as
if the altered words have been written into the legislation “with pen
and ink and the old words scored out.”114 Therefore, after amendment

110 Koteswar Vittal Kamath v. K Rangappa Baliga & Co. (1969) 1 SCC 255 [8]
111 Bhagat Ram Sharma v. Union of India, 1988 Supp SCC 30 [17]
112 State of Rajasthan v. Mangilal Pindwal (1996) 5 SCC 60 [9]
113 Pernod Ricard India (P) Ltd v. State of Madhya Pradesh, 2024 SCC OnLine SC 566 [13]
114 G V Krishnamraju v. Union of India (2019) 17 SCC 590 [18]; Ram Narain v. Simla Banking & Industrial
Co. Ltd, 1956 SCC OnLine SC 1. [It was observed: 7. […] whenever an amended Act has to be applied
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by substitution any reference to a legislation must be construed as
the legislation as amended by substitution.
58. In Shyam Sunder v. Ram Kumar,115 a Constitution Bench of this Court
was called upon to decide the extent of retrospective operation of an
amendment by substitution. In that case, the Haryana Amendment
Act 1995 substituted Section 15 of the Punjab Pre-emption Act by
taking away the right of a co-sharer to pre-empt a sale during the
pendency of an appeal. This Court observed that according to Order
20 Rule 14(1) of the Code of Civil Procedure 1908, the right of pre-
emption becomes a vested right and can only be taken away by a
known method of law. As regards the retrospective operation of a
substituted provision, it was held that “where a repeal of provisions
of enactment is followed by fresh legislation by an amending Act,
such legislation is prospective in operation and does not affect
substantive or vested rights of the parties unless made retrospective
either expressly or by necessary intendment.”116 This Court held that
the language used by the legislature indicated that it was introduced
with prospective effect and could not affect the accrued rights of the
co-sharers. The decision of this Court in Shyam Sunder (supra) is
an authority for the proposition that an amendment by substitution
can have a retrospective effect and affect the vested rights of the
parties if the provision is made retrospective either expressly or by
necessary intendment.
59. Parliament has often used the legislative process of amendment
by substitution in the context of reassessment provisions under
the Income Tax Act.In S C Prashar v. Vasantsen Dwarkadas,117
a Constitution Bench of this Court had to decide on the validity of
the notices issued under Section 34 of the Income Tax Act 1922.
In 1948, Section 34 of the Income TaxAct 1922 was substituted by

subsequent to the date of the amendment the various unamended provisions of the Act have to be read
along with the amended provisions as though they are part of it. This is for the purpose of determining
what the meaning of any particular provision of the Act as amended is, whether it is in the unamended
part or in the amended part. But this is the not the same thing as saying that the amendment itself must
be taken to have been in existence as from the date of the earlier Act. That would be imputing to the
amendment retrospective operation which could only be done if such retrospective operation is given by
the amending Act either expressly or by necessary implication.”]
115 [2001] Supp. 1 SCR 115 : (2001) 8 SCC 24
116 Shyam Sunder (supra) [28]
117 [1964] 1 SCR 29
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a new provision which provided the following time limits: (i) eight
years from the end of the year if there was omission or failure on
the part of an assessee to make a return or disclose fully and truly
all material facts necessary for assessment; and (ii) four years for
all other cases. Justice M Hidayatullah (as the learned Chief Justice
then was), writing for himself and Justice Raghubar Dayal, observed
that the substituted provision was meant to enable the reassessment
of income which had escaped assessment for past periods. It was
further observed that the substituted provision “meant to operate
retrospectively eight years in some cases and four years in others.”118
Justice A K Sarkar (as the learned Chief Justice then was) also
observed that no notice could be issued under the 1948 amendment
“for a year from the end of which eight years had expired.”119
60. The above principles can be applied as follows to the factual situation
in the present appeals: (i) The Finance Act 2021 substituted Sections
147 to 151 of the Income Tax Act with effect from 1 April 2021;
(ii) Sections 147 to 151 of the old law ceased to operate from 1 April
2021; (iii) After 1 April 2021, any reference to the Income Tax Act
means the Income Tax Act as amended by the Finance Act 2021; (iv)
The time limits prescribed for issuing reassessment notices under
Section 149operate retrospectively for three years for all situations
and six years in case the escaped assessment amounts to or is
likely to amount to more than Rupees fifty lakhs.
61. TOLA is a legislation enacted by Parliament. The assesses have
neither challenged the legislative competence of Parliament to enact
TOLA nor have they challenged the vires of the legislation. Section 3(1)
of TOLA provides for the relaxation of “any time limit” prescribed under
the specified Acts for completion or compliance of “any proceeding
or passing of any order or issuance of any sanction, intimation,
notification, sanction, or approval.” The expression “any” has been
interpreted by this Court to mean “all” or “every”.120 The context in
which the word “any” appears has to be construed after taking into
consideration the scheme and the purpose of the enactment.121

118 S C Prashar (supra) 107
119 S C Prashar (supra) 86
120 LDA v. M K Gupta (1994) 1 SCC 243 [4]; Raj Kumar Shivhare v. Directorate of Enforcement (2010) 4
SCC 772 [24];
121 Vivek Narayan Sharma v. Union of India (2023) 3 SCC 1 [132]
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62. The purpose of Section 3(1) of TOLA is to provide relaxation of time
limits prescribed under the specified Acts, which fell for completion
or compliance from 20 March 2020 to 31 March 2021. TOLA was
enacted in the backdrop of the COVID-19 pandemic, which impeded
the functioning of the government at all levels. The imposition of
national and local lockdowns created difficulties for the common
people, including litigants and assesses, to comply with their legal
obligations. The COVID-19 pandemic and the ensuing lockdowns
required legislatures across the world to dynamically adapt their laws
and policies to redress the difficulties faced by persons, entities, and
governmental authorities.122 The World Bank identified that persons
and business entities faced severe financial situations characterised
by a lack of cash or easily convertible-to-cash assets. It suggested that
this would impact revenue collection because individuals and entities
would not be in a position to pay the assessed taxes. Therefore, the
World Bank advised deferral of tax filings and payment deadlines
to allow individuals and business entities to cope with the crisis.123
Many countries across the world have extended deadlines for filing
tax returns.124
63. TOLA extended the time limits for completion or compliance of
certain actions under the specified Act, which fell for completion
during the COVID-19 outbreak. The use of the expression “any” in
Section 3(1) indicates that the relaxation applies to “all” or “every”
action whose time limit falls for completion from 20 March 2020 to
31 March 2021. Section 3(1) is only concerned with the performance
of actions contemplated under the provisions of the specified Acts.
Consequently, the amendment or substitution of a provision under
the specified Acts will not affect the application of TOLA, so long
as the action contemplated under the provision falls for completion
during the period specified by TOLA, that is, 20 March 2020 to 31
March 2021.

122 Cary Coglianese and Neysun Mahboubi, ‘Administrative Law in a Time of Crisis: Comparing National
Responses to COVID-19’ (2021) 73(1) Administrative Law Review 1, 10.
123 Cebreiro Gomez, et al, COVID-19: Revenue Administration Implications – Potential Tax Administration
and Customs Measures to Respond to the Crisis, World Bank Group (2022) 19
124 See International Monetary Fund, Policy Responses to COVID-19 https://www.imf.org/en/Topics/imf-
and-covid19/Policy-Responses-to-COVID-19
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64. When enacting a statute, the legislature often endeavours to ensure
that the provisions of one legislation do not conflict with provisions of
another legislation.125 The purpose of the Income Tax Act is to levy tax
on income and raise revenues for the functioning of the Government.
On the other hand, the purpose of TOLA is to provide relaxation
of the time for completion of any actions or proceedings falling for
completion within a particular period. Thus, the two enactments
operate in separate and distinct fields. This Court must ensure that
the provisions of the two enactments are interpreted harmoniously
unless there is an irreconcilable conflict between them.

b. Reading TOLA into Section 149
65. Section 3(1) of TOLA applies to the action of “issuance of any notice”
under the Income Tax Act. The relaxation provided under Section 3(1)
of TOLA will apply to the issuance of a reassessment notice under
Section 148 of the Income Tax Act. TOLA did not amend the time limits
of four years and six years from the end of the relevant assessment
years as specified under the Income Tax Act. It merely provided a
relaxation of the time period for issuance of a reassessment notice
under Section 148. TOLA has no application in situations where the
time limit specified under Section 149 expired before 20 March 2020.
The effect of TOLA is that at the time of issuance of a reassessment
notice under Section 148, the Revenue has to determine two things:
(i) the time limit specified under Section 149; and (ii) the extent of
relaxation provided by TOLA and its notifications for issuance of
notices. Thus, although TOLA did not amend Section 149 of the
Income Tax Act, it has to be read with Section 149to determine the
time limit for issuance of a notice. This was the legislative intent
behind the enactment of TOLA. For instance, the six year time limit
for assessment year 2013-2014 under Section 149(1)(b) of the old
regime expired on 31 March 2020. TOLA extended the period for
issuing notice until 30 June 2021,given the difficulties that arose
because of the COVID-19 pandemic.
66. Section 3(1) of TOLA allowed the Central Government to specify by
notification “such other date after the 31st day of March, 2021” as
the time limit for completion or compliance of any action under the

125 In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the
Indian Stamp Act 1899, 2023 INSC 1066 [159]
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specified Acts. The provision also empowered the Central Government
to specify different dates for completion or compliance of different
actions. The notifications dated 31 March 2021 and 27 April 2021
extend the operation of TOLA by providing an extended time limit
for completing actions under the Income Tax Act till 30 June 2021.
67. Section 2(1)(b)(ii) of TOLA defines ‘specified Act’ to include the
Income Tax Act. After 1 April 2021, Section 2(1)(b)(ii) must be read
to mean the Income Tax Act as amended by the Finance Act 2021.
The substitution of Sections 147 to 151 will not affect the purpose of
TOLA, which is,to provide relaxation of the time limit for completion
or compliance of any actions falling for completion between 20 March
2020 and 31 March 2021. TOLA will continue to apply to the Income
Tax Act after 1 April 2021 if any action or proceeding specified under
the substituted provisions of the Income Tax Act falls for completion
between 20 March 2020 and 31 March 2021.
68. After 1 April 2021, the Income Tax Act has to be read along with the
substituted provisions. The substituted provisions apply retrospectively
for past assessment years as well. On 1 April 2021, TOLA was still in
existence, and the Revenue could not have ignored the application
of TOLA and its notifications. Therefore, for issuing a reassessment
notice under Section 148 after 1 April 2021, the Revenue would
still have to look at: (i) the time limit specified under Section 149
of the new regime; and (ii) the time limit for issuance of notice as
extended by TOLA and its notifications. The Revenue cannot extend
the operation of the old lawunder TOLA, but it can certainly benefit
from the extended time limit for completion of actions falling for
completion between 20 March 2020 and 31 March 2021.
69. For instance, Section 149(1)(a) of the new regime specified the time
limit of three years from the end of the relevant assessment year
for reopening of the assessment. For assessment year 2017-2018,
the three year period expired on 31 March 2021. The expiry of time
fell within the time period contemplated by Section 3 of TOLA read
with its notifications. Resultantly, the Revenue had time until 30 June
2021 to issue a reassessment notice for assessment year 2017-
2018 under Section 149(1)(a). This harmonious reading gives effect
to the legislative intention of both the Income Tax Act and TOLA.
Moreover, Sections 147 to 151 are machinery provisions. Therefore,
they must be given an interpretation that is consistent with the object
and purpose of the Income Tax Act.
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70. In Income-tax Officer v. Vikram Sujitkumar Bhatia,126 a two-Judge
Bench of this Court had to decide whether Section 153C of the
Income Tax Act, as amended by the Finance Act 2015, would apply
to searches conducted before 1 June 2015 (the date of coming into
force of the amendment). This Court observed that since Section
153C is a machinery provision, it should be interpreted in a manner
to effectuate the object and purpose of the statute. It was observed
that the object and purpose of Section 153C was the assessment
of the income of any other person. It was held that if the amended
provision is made applicable prospectively, it will frustrate the object
and purpose of Section 153C.
71. Section 3(1) of TOLA contains a non obstante clause: “notwithstanding
anything contained in the specified Act.” The legislative intention of
including the non obstante clause is to remove any obstacles which
may come in the way of the operation of the extension of the time
limit till 31 March 2021 or such other date after 31 March 2021
specified by the Central Government. The purpose is to ensure
that the full benefit of the relaxation should be provided to both the
assesses and the Revenue to tide over the difficulties caused by
the COVID-19 pandemic.
72. The non obstante clause in Section 3(1) has to be read as controlling
the provisions of the specified Acts, including the provisions of the
Income Tax Act.127 In the context of the issuance of a reassessment
notice, the non obstante clause will override the provisions of the
Income Tax Act in case of any direct conflict or inconsistency.
Section 3(1) overrides Section 149 only to the extent of relaxing
the time limit for issuance of reassessment notice under Section
148. The time limit for issuance of a reassessment notices, which
fall for completion between 20 March 2020 and 31 March 2021,has
been extended till 30 June 2021. However, the non obstante clause
under Section 3(1) of TOLA will operate neither to extend the time
limit of three years from the end of the relevant assessment year
under Section 149(1)(a) of the new regime nor to extend the time
limit of six years from the end of the relevant assessment years
under Section 149(1)(b) of the old regime. The non obstante clause

126 (2023) 453 ITR 417
127 M P V Sundararamier v. State of Andhra Pradesh, 1958 SCC OnLine SC 22
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ensures that the Revenue has additional time beyond the statutory
stipulated time limit to complete or comply with the formalities
given the administrative difficulties that arose due to the COVID-19
pandemic.

iii. Sanction of the specified authority
73. Section 151 imposes a check upon the power of the Revenue to
reopen assessments. The provision imposes a responsibility on
the Revenue to ensure that it obtains the sanction of the specified
authority before issuing a notice under Section 148. The purpose
behind this procedural check is to save the assesses from harassment
resulting from the mechanical reopening of assessments.128 A table
representing the prescription under the old and new regime is set
out below:

Regime Time limits Specified authority
Section 151(2) Before expiry of four Joint Commissioner
of the old years from the end of the
regime relevant assessment year
Section 151(1) After expiry of four years Principal Chief
of the old from the end of the Commissioner or
regime relevant assessment year Chief Commissioner or
Principal Commissioner
or Commissioner
Section 151(i) Three years or less than Principal Commissioner
of the new three years from the end or Principal Director or
regime of the relevant assessment Commissioner or Director
year
Section 151(ii) More than three years Principal Chief
of the new have elapsed from the end Commissioner or
regime of the relevant assessment Principal Director General
year or Chief Commissioner or
Director General

74. The above table indicates that the specified authority is directly
co-related to the time when the notice is issued. This plays out as
follows under the old regime:

128 Srikrishna Private Ltd v. ITO (1996) 9 SCC 534 [4]
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(i) If income escaping assessment was less than Rupees one
lakh: (a) a reassessment notice could be issued under Section
148 within four years after obtaining the approval of the Joint
Commissioner; and (b) no notice could be issued after the
expiry of four years; and
(ii) If income escaping was more than Rupees one lakh: (a) a
reassessment notice could be issued within four years after
obtaining the approval of the Joint Commissioner; and (b) after
four years but within six years after obtaining the approval of
the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner.
75. After 1 April 2021, the new regime has specified different authorities
for granting sanctions under Section 151. The new regime is beneficial
to the assesse because it specifies a higher level of authority for
the grant of sanctions in comparison to the old regime. Therefore,
in terms of Ashish Agarwal (supra), after 1 April 2021, the prior
approval must be obtained from the appropriate authorities specified
under Section 151 of the new regime. The effect of Section 151 of
the new regime is thus:
(i) If income escaping assessment is less than Rupees fifty
lakhs: (a) a reassessment notice could be issued within
three years after obtaining the prior approval of the Principal
Commissioner, or Principal Director or Commissioner or
Director; and (b) no notice could be issued after the expiry
of three years; and
(ii) If income escaping assessment is more than Rupees fifty lakhs:
(a) a reassessment notice could be issued within three years
after obtaining the prior approval of the Principal Commissioner,
or Principal Director or Commissioner or Director; and (b) after
three years after obtaining the prior approval of the Principal
Chief Commissioner or Principal Director General or Chief
Commissioner or Director General.
76. Grant of sanction by the appropriate authority is a precondition for the
assessing officer to assume jurisdiction under Section 148 to issue a
reassessment notice. Section 151 of the new regime does not prescribe
a time limit within which a specified authority has to grant sanction.
Rather, it links up the time limits with the jurisdiction of the authority to
grant sanction. Section 151(ii) of the new regime prescribes a higher
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level of authority if more than three years have elapsed from the end of
the relevant assessment year. Thus, non-compliance by the assessing
officer with the strict time limits prescribed under Section 151 affects
their jurisdiction to issue a notice under Section 148.
77. Parliament enacted TOLA to ensure that the interests of the
Revenue are not defeated because the assessing officer could
not comply with the pre-conditions due to the difficulties that arose
during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the
time limit for compliance with actions that fall for completion from
20 March 2020 to 31 March 2021. TOLA will accordingly extend
the time limit for the grant of sanction by the authority specified
under Section 151. The test to determine whether TOLA will apply
to Section 151 of the new regime is this: if the time limit of three
years from the end of an assessment year falls between 20 March
2020 and 31 March 2021, then the specified authority under Section
151(i) has an extended time till 30 June 2021 to grant approval.
In the case of Section 151 of the old regime, the test is: if the
time limit of four years from the end of an assessment year falls
between 20 March 2020 and 31 March 2021, then the specified
authority under Section 151(2) has time till 31 March 2021 to grant
approval. The time limit for Section 151 of the old regime expires
on 31 March 2021 because the new regime comes into effect on
1 April 2021.
78. For example, the three year time limit for assessment year 2017-2018
falls for completion on 31 March 2021. It falls during the time period
of 20 March 2020 and 31 March 2021,contemplated under Section
3(1) of TOLA. Resultantly, the authority specified under Section 151(i)
of the new regime can grant sanction till 30 June 2021.
79. Under Finance Act 2021, the assessing officer was required to obtain
prior approval or sanction of the specified authorities at four stages:
a. Section 148A(a) – to conduct any enquiry, if required, with
respect to the information which suggests that the income
chargeable to tax has escaped assessment;
b. Section 148A(b) – to provide an opportunity of hearing to the
assessee by serving upon them a show cause notice as to why
a notice under Section 148 should not be issued based on the
information that suggests that income chargeable to tax has
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escaped assessment. It must be noted that this requirement
has been deleted by the Finance Act 2022;129
c. Section 148A(d) – to pass an order deciding whether or not it
is a fit case for issuing a notice under Section 148; and
d. Section 148 – to issue a reassessment notice.
80. In Ashish Agarwal (supra), this Court directed that Section
148 notices which were challenged before various High Courts
“shall be deemed to have been issued under Section 148-A of
the Income Tax Act as substituted by the Finance Act, 2021 and
construed or treated to be show-cause notices in terms of Section
148-A(b).” Further, this Court dispensed with the requirement of
conducting any enquiry with the prior approval of the specified
authority under Section 148A(a). Under Section 148A(b), an
assessing officer was required to obtain prior approval from
the specified authority before issuing a show cause notice.
When this Court deemed the Section 148 notices under the old
regime as Section 148A(b) notices under the new regime, it
impliedly waived the requirement of obtaining prior approval from
the specified authorities under Section 151 for Section 148A(b). It
is well established that this Court while exercising its jurisdiction
under Article 142, is not bound by the procedural requirements
of law.130
81. This Court in Ashish Agarwal (supra) directed the assessing officers
to “pass orders in terms of Section 148-A(d) in respect of each of the
assesses concerned.” Further, it directed the assessing officers to
issue a notice under Section 148 of the new regime “after following
the procedure as required under Section 148-A.”Although this Court
waived off the requirement of obtaining prior approval under Section
148A(a) and Section 148A(b), it did not waivethe requirement for
Section 148A(d) and Section 148. Therefore, the assessing officer
was required to obtain prior approval of the specified authority
according to Section 151 of the new regime before passing an
order under Section 148A(d) or issuing a notice under Section 148.

129 Section 45, Finance Act 2022
130 Allahabad High Court Bar Association v. State of U P (2024) 6 SCC 267 [27.3]
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These notices ought to have been issued following the time limits
specified under Section 151 of the new regime read with TOLA,
where applicable.

F. Section 148 notices issued in June-September 2022

i. Scope of Article 142
82. Article 142 empowers this Court to pass such decree or make such
order as is necessary for doing complete justice in any cause or matter
pending before it.131 The discretionary jurisdiction exercised by this
Court under Article 142 is of the widest amplitude.132 The Constitution
has left it to the judicial discretion of this Court to decide the scope
and limits of its jurisdiction to render substantial justice in matters
coming before it.133 The expression “any cause or matter” mentioned
under Article 142 includes every kind of proceeding pending before
this Court.134 Article 142 allows this Court to give precedence to equity
over law, provided the exercise of the discretion is consistent with
constitutional provisions and after due consideration of substantive
provisions instatutory law.135
83. In Prem Chand Garg v. The Excise Commissioner,136 Justice P B
Gajendragadkar (as the learned Chief Justice then was), speaking
for the majority, observed that the order made by this Court under
Article 142 “must not only be consistent with the fundamental rights
guaranteed by the Constitution, but it cannot even be inconsistent
with the substantive provisions of the relevant statutory laws.”
However, in Union Carbide Corpn.Ltd. v. Union of India,137 Justice
Venkatachaliah (as the learned Chief Justice then was), speaking for
the majority, clarified Prem Chand Garg (supra) by observing that

131 Article 142, Constitution. [It reads:
“142(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order
as is necessary for doing complete justice in any cause or matter pending before it, and any decree so
passed or order so made shall be enforceable throughout the territory of India in such manner as may
be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in
such manner as President may by order prescribe.”
132 Jose Da Costa v. Bascora Sadasiva Sinai Narcornim (1976) 2 SCC 917 [37]
133 Ganga Bishan v. Jai Narain (1986) 1 SCC 75 [5]
134 Delhi Judicial Service Association v. State of Gujarat (1991) 4 SCC 406 [50]
135 Shilpa Sailesh v. Varun Sreenivasan, 2023 SCC OnLine SC 544 [12]
136 [1963] Supp. 1 SCR 885 : 1962 SCC OnLine SC 37
137 [1991] Supp. 1 SCR 381 : (1991) 4 SCC 584 [83]
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ordinary laws cannot limit the constitutional powers of this Court under
Article 142. The learned Judge further observed that in exercising its
jurisdiction under Article 142, this Court will “take note of the express
prohibitions in any substantive statutory provision based on some
fundamental principles of public policy and regulate the exercise of
its power and discretion accordingly.”
84. In Supreme Court Bar Association v. Union of India, 138 a
Constitution Bench held that the powers under Article 142 cannot
be exercised to supplant substantive law applicable to the
matter pending before this Court. In Allahabad High Court Bar
Association v. State of Uttar Pradesh,139 a Constitution Bench laid
down the following parameters for the exercise of the jurisdiction
under Article 142:
“27.1. The jurisdiction can be exercised to do complete
justice between the parties before the Court. It cannot be
exercised to nullify the benefits derived by a large number
of litigants based on judicial orders validly passed in their
favour who are not parties to the proceedings before this
Court;
27.2. Article 142 does not empower this Court to ignore
the substantive rights of the litigants; and
27.3. While exercising the jurisdiction under Article 142 of the
Constitution of India, this Court can always issue procedural
directions to the courts for streamlining procedural aspects
and ironing out the creases in the procedural laws to ensure
expeditious and timely disposal of cases. This is because,
while exercising the jurisdiction under Article 142, this
Court may not be bound by procedural requirements
of law. However, while doing so, this Court cannot
affect the substantive rights of those litigants who are
not parties to the case before it. The right to be heard

138 [1998] 2 SCR 795 : (1998) 4 SCC 409 [47. […] It, however, needs to be remembered that the powers
conferred on the Court by Article 142 being curative in nature cannot be construed as powers which
authorise the Court to ignore the substantive rights of a litigant while dealing with a cause pending
before it. This power cannot be used to “supplant” substantive law applicable to the case or cause under
consideration of the Court. Article 142, even with the width of its amplitude, cannot be used to build a
new edifice where none existed earlier, by ignoring express statutory provisions dealing with a subject
and thereby to achieve something indirectly which cannot be achieved directly.]
139 Allahabad High Court Bar Association v. State of U P (2024) 6 SCC 267
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before an adverse order is passed is not a matter of
procedure but a substantive right.”
(emphasis supplied)
85. In M Siddiq v. Suresh Das,140 a Constitution Bench observed
that Article 142 embodies the concept of justice, equity, and good
conscience. This Court further observed that Article 142 empowers
the court to pass an order which accords with justice:
“1026. The extraordinary constitutional power to pass any
decree or an order which, in the opinion of this Court is
necessary for doing complete justice embodies the idea
that a court must, by necessity, be empowered to craft
outcomes that ensure a just outcome. When a court is
presented before it with hard cases, they follow an
interpretation of the law that best fits and justifies the
existing legal landscape — the Constitution, statutes,
rules, regulations, customs and common law. Where
exclusive rule-based theories of law and adjudication
are inadequate to explain either the functioning of the
system or create a relief that ensures complete justice,
it is necessary to supplement such a model with
principles grounded in equitable standards. The power
under Article 142 however is not limitless. It authorises the
Court to pass orders to secure complete justice in the case
before it. Article 142 embodies both the notion of justice,
equity and good conscience as well as a supplementary
power to the Court to effect complete justice.”
(emphasis supplied)
86. The exercise of the jurisdiction under Article 142 is meant to
supplement the existing legal framework to do complete justice
between the parties.141 In a given circumstance, this Court can
supplement a legal framework to craft a just outcome when strict
adherence to a source of law and exclusive rule-based theories
create inequitable results.142

140 [2019] 18 SCR 1 : (2020) 1 SCC 1 [1023]
141 Vinay Chandra Mishra, In re (1995) 2 SCC 584 [46]; Delhi Development Authority v. Skipper Construction
Co. (P) Ltd. (1996) 4 SCC 622 [16]
142 M Siddiq (supra) [1019]; [1026]
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87. The directions issued by this Court under Article 142 cannot be
considered as a ratio because they are issued based on the peculiar
facts and circumstances of the cause or matter before this Court.143
In State v. Kalyan Singh,144 this Court observed that a judgment
has two components: (a) declaration of law; and (b) directions. In
Bir Singh v. Mukesh Kumar,145 it was held that what is binding on
all courts under Article 141146 is the declaration of law, and not the
directions issued under Article 142.147
88. This Court has exercised its jurisdiction under Article 142 in tax
matters where the actions of the Revenue are not in accordance
with the law.148 In Whirlpool of India Ltd. v. CIT,149 this Court
directed the Income Tax Officer to give effect to the order of the
Income Tax Appellate Tribunal by disallowing a particular deduction.
In CIT v. Greenworld Corporation,150 the issue before this Court
was whether a Commissioner of Income Tax151 appropriately issued
directions under Section 263 of the Income Tax Act to an assessing
officer to reopen assessments. It was held that the facts of the case
did not merit the CIT to issue directions to the assessing officer.
Consequently, this Court termed the reassessment notice issued
by the assessing officer to be illegal and exercised its jurisdiction

143 J & K Public Service Commission v. Narinder Mohan (1994) 2 SCC 630 [11].
144 (2017) 7 SCC 444. [22. […] It is important to notice that Article 142 follows upon Article 141 of the
Constitution, in which it is stated that the law declared by the Supreme Court shall be binding on all
courts within the territory of India. Thus, every judgment delivered by the Supreme Court has two
components — the law declared which binds courts in future litigation between persons, and the doing
of complete justice in any cause or matter which is pending before it.]
145 (2019) 4 SCC 197 [30]
146 Article 141, Constitution of India. [It reads:
“141. Law declared by Supreme Court to be binding on all courts – The law declared by the Supreme
Court shall be binding on all courts within the territory of India.”]
147 Also see State of Punjab v. Rafiq Masih (2014) 8 SCC 883 [12]. [12. […] The Court has compartmentalized
and differentiated the relief in the operative portion of the judgment by exercise of powers under Article
142 of the Constitution as against the law declared. The directions of the Court under Article 142 of the
Constitution, while moulding the relief, that relax the application of law or exempt the case in hand from
the rigour of the law in view of the peculiar facts and circumstances do not comprise the ratio decidendi
and therefore lose its basic premise of making it a binding precedent. This Court in the qui vive has
expanded the horizons of Article 142 of the Constitution by keeping it outside the purview of Article 141 of
the Constitution and declaring it a direction of the Court that changes its complexion with the peculiarity
in the facts and circumstances of the case.”]
148 See Prashanti Medical Services & Research Foundation v. Union of India (2020) 14 SCC 785 [30]
149 (2000) 9 SCC 62
150 [2009] 8 SCR 175 : (2009) 7 SCC 69
151 “CIT”
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under Article 142 to direct the reopening of the assessment by an
appropriate assessing authority.

ii. The scope of Ashish Agarwal extended to all the
reassessment notices issued between 1 April 2021 and
30 June 2021 under the old regime
89. In Ashish Agarwal (supra), this Court: (i) upheld the judgments of
the High Courts; and (ii) deemed the notices issued under Section
148 of the old regime as show cause notices issued under Section
148A(b) of the new regime. By agreeing with the judgments of the
High Courts, this Court laid down the law that the provisions of the
new regime will be applicable for all the reassessment notices issued
under Section 148 after 1 April 2021. As a result of this holding,
all the reassessment notices issued in terms of Section 148 of the
old regime would have been declared invalid. Therefore, this Court
deemed the reassessment notices issued under the old regime after
1 April 2021 as show cause notices issued under Section 148A(b)
of the new regime.
90. In Ashish Agarwal (supra), this Court rendered its decision on the
premise that the Revenue issued approximately ninety thousand
notices under the old regime and all of them were the subject matter
of writ petitions before the High Courts:
“4. At this stage, it is required to be noted that approximately
90,000 such reassessment notices under Section 148
of the unamended Income Tax Act were issued by the
Revenue after 1-4-2021, which were the subject-matter
of more than 9000 writ petitions before various High
Courts across the country and by different judgments and
orders, the particulars of which are as above, the High
Courts have taken a similar view and have set aside the
respective reassessment notices issued under Section
148 on similar grounds.”
Further, this Court directed that its directions “shall be applicable
PAN INDIA”:
“29. The present order shall be applicable PAN INDIA
and all judgments and orders passed by the different High
Courts on the issue and under which similar notices which
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were issued after 1-4-2021 issued under Section 148 of
the Act are set aside and shall be governed by the present
order and shall stand modified to the aforesaid extent. The
present order is passed in exercise of powers under
Article 142 of the Constitution of India so as to avoid
any further appeals by the Revenue on the very issue
by challenging similar judgments and orders, with a
view not to burden this Court with approximately 9000
appeals. We also observe that the present order shall also
govern the pending writ petitions, pending before various
the High Courts in which similar notices under Section
148 of the Act issued after 1-4-2021 are under challenge.”
(emphasis supplied)
The purpose of this Court in deeming the reassessment notices
issued under the old regime as show cause notices under the new
regime was two-fold: (i) to strike a balance between the rights of
the assesses and the Revenue which issued approximately ninety
thousand reassessment notices after 1 April 2021 under the old
regime; and (ii) to avoid any further appeals before this Court by the
Revenue on the same issue by challenging similar judgments and
orders of the High Courts (arising from approximately nine thousand
writ petitions).
91. Ashish Agarwal (supra) was primarily concerned with the validity
of the reassessment notices issued between 1 April 2021 and 30
June 2021 under the old regime. The scope of the directions in
Ashish Agarwal (supra) applied PAN INDIA, including all the ninety
thousand reassessment notices issued under the old regime during
the period 1 April 2021 and 30 June 2021, as is evident from the
following observation of this Court:
“26. There is a broad consensus on the aforesaid aspects
amongst the learned ASG appearing on behalf of the
Revenue and the learned Senior Advocates/learned
counsel appearing on behalf of the respective assessees.
We are also of the opinion that if the aforesaid order
is passed, it will strike a balance between the rights
of the Revenue as well as the respective assessees
as because of a bona fide belief of the officers of
the Revenue in issuing approximately 90,000 such
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notices, the Revenue may not suffer as ultimately it
is the public exchequer which would suffer.”
(emphasis supplied)
92. This Court specifically mentioned that its directions would also apply
to three categories: (i) the judgment and order passed by the High
Court of Judicature at Allahabad; (ii) all judgments and orders passed
by the different High Court on the issue where notices issued under
Section 148 of the old regime after 1 April 2021 were set aside;
and (iii) writ petitions pending before various High Courts in which
notices under Section 148 of the old regime issued after 1 April
2021 are under challenge.152 The Court mentioned the above three
categories to clarify that the general nature of its directions will also
give a quiet us to the matters that have already been adjudicated or
are pending adjudication before judicial forums. The operation of the
directions cannot be limited to the above three categories, especially
when this Court has specifically held that “the present order shall
be applicable PAN INDIA.”
93. In Ashish Agarwal (supra), this Court was aware of the fact that
it could not have used its jurisdiction under Article 142 to affect the
vested rights of the assesses by deeming Section 148 notices under
the old regime as Section 148 notices under the new regime. Hence,
it deemed the reassessment notices issued under the old regime
as show cause notices under Section 148A(b) of the new regime.
Further, the Court directed the Revenue to provide all the relevant
material or information to the assesses and thereafter allowed the
assesses to respond to the show cause notice by availing all the
defences, including those available under Section 149. Thus, the Court
balanced the equities between the Revenue and the assesses by
giving effect to the legislative scheme of reassessment as contained
under the new regime. It supplemented the existing legal framework
of the procedure of reassessment under the Income Tax Act with a
remedy grounded in equitable standards.

iii. Effect of the legal fiction
94. Before we proceed, we need to bear in mind three important periods:

152 Ashish Agarwal (supra) [27] and [29]
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i. The period up to 30 June 2021 – this period is covered by the
provisions of the Income Tax Act read with TOLA;
ii. The period from 1 July 2021 to 3 May 2022 – the period before
the decision of this Court in Ashish Agarwal (supra); and
iii. The period after 4 May 2022 – the period after the decision of
this Court in Ashish Agarwal (supra). This period is covered by
the directions issued by this Court in Ashish Agarwal (supra)
and the provisions of the Income Tax Act read with TOLA.
a. Third proviso to Section 149
95. The third proviso to Section 149 reads thus:
“Provided also that for the purposes of computing the period
of limitation as per this section, the time or extended time
allowed to the assessee, as per show-cause notice issued
under clause (b) of section 148A or the period during which
the proceeding under section 148A is stayed by an order
or injunction of any court, shall be excluded.”
96. The third proviso excludes the following periods to calculate the
period of limitation: (i) the time allowed to the assessee under
Section 148A(b); and (ii) the period during which the proceedings under
Section 148A are “stayed by an order or injunction of any court.”
97. A legal fiction is a supposition of law that a thing or event exists even
though, in reality, it does not exist.153 The word “deemed” is used
to treat a thing or event as something, which otherwise it may not
have been, with all the attendant consequences.154 The effect of a
legal fiction is that “a position which otherwise would not obtain is
deemed to obtain under the circumstances.”155 In K Prabhakaran v.
P Jayarajan,156 Chief Justice R C Lahoti, speaking for the majority,
observed that:
“39. […] While pressing into service a legal fiction it
should not be forgotten that legal fictions are created only

153 Gajraj Singh v. STAT (1997) 1 SCC 650 [22]
154 CIT v. Calcutta Stock Exchange, 1959 SCC OnLine SC 126 [5]; Sudha Rani Garg v. Jagdish Kumar
(2004) 8 SCC 329 [11]
155 Gajraj Singh (supra) [22]
156 [2016] 3 SCR 390 : (2005) 1 SCC 754
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for some definite purpose and the fiction is to be limited
to the purpose for which it was created and should not
be extended beyond that legitimate field. A legal fiction
presupposes the existence of the state of facts which may
not exist and then works out the consequences which
flow from that state of facts. Such consequences have
got to be worked out only to their logical extent having
due regard to the purpose for which the legal fiction has
been created. Stretching the consequences beyond what
logically flows amounts to an illegitimate extension of the
purpose of the legal fiction.”
98. A legal fiction is created for a definite purpose and it should be
limited to the purpose for which it is enacted or applied. It is a
well-established principle of interpretation that the courts must give
full effect to a legal fiction by having due regard to the purpose
for which the legal fiction is created.157 The consequences that
follow the creation of the legal fiction “have got to be worked out
to their logical extent.”158 The court has to assume all the facts and
consequences that are incidental or inevitable corollaries to giving
effect to the fiction.159
99. In Ashish Agarwal (supra), this Court created a legal fiction by
deeming the Section 148 notices issued under the old regime as
show cause notices under Section 148A(b) of the new regime. The
purpose of the legal fiction was to enable the Revenue “to proceed
further with the reassessment proceedings as per the substituted
provisions” of the Income Tax Act. Accordingly, all the reassessment
notices issued under the old regime were deemed to always have
been show cause notices issued under Section 148A(b) of the
new regime. The fiction replaced Section 148 notices with Section
148A(b) notices with effect from the date when the notices under
Section 148 of the old regime were issued between 1 April 2021 and
30 June 2021, as the case may be. This ensured the continuance
of the reassessment process initiated by the Revenue from 1 April
2021 to 30 June 2021 under the old regime.

157 State of Maharashtra v. Laljit Rajshi Shah (2000) 2 SCC 699 [6].
158 Bengal Immunity Company Ltd v. State of Bihar, 1955 SCC OnLine SC 2
159 Industrial Supplies (P) Ltd. v. Union of India (1980) 4 SCC 341 [25]
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100. Importantly, this Court in Ashish Agarwal (supra) did not quash the
reassessment notices issued under Section 148 of the old regime.
In Shree Chamundi Mopeds Ltd. v. Church of South India Trust
Association,160 a three-Judge Bench of this Court explained the
distinction between quashing an order and staying the operation of
an order thus:
“10. […] Quashing of an order results in the restoration
of the position as it stood on the date of the passing of
the order which has been quashed. The stay of operation
of an order does not, however, lead to such a result. It
only means that the order which has been stayed would
not be operative from the date of the passing of the stay
order and it does not mean that the said order has been
wiped out from existence.”
The reassessment proceedings erroneously initiated by the
Revenue under the old regime were not wiped out from existence.
Consequently, the Revenue was not required to start the procedure
of reassessment afresh after the decision of this Court in Ashish
Agarwal (supra).
101. Under Section 148A(b), the assessing officer has to comply with two
requirements: (i) issuance of a show cause notice; and (ii) supply of
all the relevant information which forms the basis of the show cause
notice. The supply of the relevant material and information allows
the assessee to respond to the show cause notice. The deemed
notices were effectively incomplete because the other requirement
of supplying the relevant material or information to the assesses
was not fulfilled. The second requirement could only have been
fulfilled by the Revenue by an actual supply of the relevant material
or information that formed the basis of the deemed notice.
102. While creating the legal fiction in Ashish Agarwal (supra), this Court
was cognizant of the fact that the assessing officers were effectively
inhibited from performing their responsibility under Section 148A until
the requirement of supply of relevant material and information to the
assesses was fulfilled. This Court lifted the inhibition by directing the

160 [1997] 3 SCR 931 : (1992) 3 SCC 1
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assessing officers to supplythe assesses with the relevant material
and information relied upon by the Revenue within thirty days from the
date of the judgment. Thus, during the period between the issuance
of the deemed notices and the date of judgment in Ashish Agarwal
(supra), the assessing officers were deemed to have been prohibited
from proceeding with the reassessment proceedings.
103. In VLS Finance Limited v. Commissioner of Income Tax,161 a
two-Judge Bench of this Court was called upon to interpret Explanation
1 to Section 158BE of the Income Tax Act. Section 158BE provides
the time limit for completion of block assessments. Explanation
1 to the provision excludes“period during which the assessment
proceedings is stayed by an order or injunction of any court” from
the period of limitation. This Court held that the exclusion of the
period of limitation has to be computed “rationally and practically”
in the following terms:
“18. As a general rule, therefore, when there is no stay
of the assessment proceedings passed by the court,
Explanation 1 to Section 158-BE of the Act may not
be attracted. However, this general statement of legal
principle has to be read subject to an exception in order
to interpret it rationally and practically. In those cases
where stay of some other nature is granted than the
stay of the assessment proceedings but the effect
of such stay is to prevent the assessing officer from
effectively passing assessment order, even that kind
of stay order may be treated as stay of the assessment
proceedings because of the reason that such stay
order becomes an obstacle for the assessing officer
to pass an assessment order thereby preventing the
assessing officer to proceed with the assessment
proceedings and carry out appropriate assessment.”
(emphasis supplied)
104. Section 11-A of the Land Acquisition Act 1894 mandated the Collector
to make an award under Section 11 within two years from the date
of publication of the declaration. The explanation to the provision

161 [2016] 3 SCR 390 : (2016) 12 SCC 32
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allowed exclusion of “the period during which any action or proceeding
to be taken in pursuance of the said declaration is stayed by an
order of a court.”This Court has consistently interpreted the phrase
“stay of action or proceedings” to mean any type of order passed
by a court, which, in one way or another, prohibits or prevents the
authorities from passing an award.162 Therefore, any order of a court
that prevents or prohibits an authority from passing an order can be
treated as a stay order.
105. A direction issued by this Court in the exercise of its jurisdiction
under Article 142 is an order of a court. The third proviso to Section
149 of the new regime provides that the period during which the
proceedings under Section 148A are stayed by an order or injunction
of any court shall be excluded for computation of limitation. During
the period from the date of issuance of the deemed notice under
Section 148A(b) and the date of the decision of this Court in Ashish
Agarwal (supra), the assessing officers were deemed to have been
prohibited from passing a reassessment order. Resultantly, the show
cause notices were deemed to have been stayed by order of this
Court from the date of their issuance (somewhere from 1 April 2021
till 30 June 2021) till the date of decision in Ashish Agarwal (supra),
that is, 4 May 2022.
106. In Ashish Agarwal (supra), this Court directed the assessing
officers to provide relevant information and materials relied upon
by the Revenue to the assesses within thirty days from the date of
the judgment. A show cause notice is effectively issued in terms of
Section 148A(b) only if it is supplied along with the relevant information
and material by the assessing officer. Due to the legal fiction, the
assessing officers were deemed to have been inhibited from acting in
pursuance of the Section 148A(b) notice till the relevant material was
supplied to the assesses. Therefore, the show cause notices were
deemed to have been stayed until the assessing officers provided
the relevant information or material to the assesses in terms of the
direction issued in Ashish Agarwal (supra). To summarize, the
combined effect of the legal fiction and the directions issued by this

162 Abhey Ram v. Union of India (1997) 5 SCC 421 [9]; Indore Development Authority v. Manoharlal (2020)
4 SCC (Civ) 496 [301]; Maharashtra Vidarbha Irrigation Development Corporation v. Mahesh (2022) 2
SCC 772 [39].
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Court in Ashish Agarwal (supra) is that the show cause notices
that were deemed to have been issued during the period between
1 April 2021 and 30 June 2021 were stayed till the date of supply of
the relevant information and material by the assessing officer to the
assessee. After the supply of the relevant material and information
to the assessee, time begins to run for the assesses to respond to
the show cause notices.
107. The third proviso to Section 149 allows the exclusion of time allowed
for the assesses to respond to the show cause notice under Section
149A(b)to compute the period of limitation. The third proviso excludes
“the time or extended time allowed to the assessee.” Resultantly, the
entire time allowed to the assessee to respond to the show cause
notice has to be excluded for computing the period of limitation.
In Ashish Agarwal (supra), this Court provided two weeks to the
assesses to reply to the show cause notices. This period of two
weeks is also liable to be excluded from the computation of limitation
given the third proviso to Section 149. Hence, the total time that is
excluded for computation of limitation for the deemed notices is: (i)
the time during which the show cause notices were effectively stayed,
that is, from the date of issuance of the deemed notice between 1
April 2021 and 30 June 2021 till the supply of relevant information
or material by the assessing officers to the assesses in terms of the
directions in Ashish Agarwal (supra); and (ii) two weeks allowed to
the assesses to respond to the show cause notices.
b. Interplay of Ashish Agarwal with TOLA
108. The Income Tax Act read with TOLA extended the time limit for issuing
reassessment notices under Section 148, which fell for completion
from 20 March 2020 to 31 March 2021, till 30 June 2021. All the
reassessment notices under challenge in the present appeals were
issued from 1 April 2021 to 30 June 2021 under the old regime.
Ashish Agarwal (supra) deemed these reassessment notices under
the old regime as show cause notices under the new regime with
effect from the date of issuance of the reassessment notices. The
effect of creating the legal fiction is that this Court has to imagine as
real all the consequences and incidents that will inevitably flow from
the fiction.163 Therefore,the logical effect of the creation of the legal

163 East End Dwellings Co. Ltd. v. Finsbury Borough Council, [1952] AC 109. [Lord Asquith, in his concurring
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fiction by Ashish Agarwal (supra) is that the time surviving under
the Income Tax Act read with TOLA will be available to the Revenue
to complete the remaining proceedings in furtherance of the deemed
notices, including issuance of reassessment notices under Section
148 of the new regime. The surviving or balance time limit can be
calculated by computing the number of days between the date of
issuance of the deemed notice and 30 June 2021.
109. If this Court had not created the legal fiction and the original
reassessment notices were validly issued according to the provisions
of the new regime, the notices under Section 148 of the new regime
would have to be issued within the time limits extended by TOLA.
As a corollary, the reassessment notices to be issued in pursuance
of the deemed notices must also be within the timelimit surviving
under the Income Tax Act read with TOLA. This construction gives
full effect to the legal fiction created in Ashish Agarwal (supra) and
enables both the assesses and the Revenue to obtain the benefit
of all consequences flowing from the fiction.164
110. The effect of the creation of the legal fiction in Ashish Agarwal
(supra) was that it stopped the clock of limitation with effect from the
date of issuance of Section 148 notices under the old regime [which
is also the date of issuance of the deemed notices]. As discussed in
the preceding segments of this judgment, the period from the date
of the issuance of the deemed notices till the supply of relevant
information and material by the assessing officers to the assesses
in terms of the directions issued by this Court in Ashish Agarwal
(supra)has to be excluded from the computation of the period of
limitation. Moreover, the period of two weeks granted to the assesses
to reply to the show cause notices must also be excluded in terms
of the third proviso to Section 149.
111. The clock started ticking for the Revenue only after it received the
response of the assesses to the show causes notices. After the
receipt of the reply, the assessing officer had to perform the following

opinion, observed: “If you are bidden to treat an imaginary state of affairs as real, you must surely, unless
prohibited from doing so, also imagine as real the consequences and incidents which, if the putative
state of affairs had in fact existed, must inevitably have flowed from or accompanied it.”]
164 See State of A P v. A P Pensioners Association (2005) 13 SCC 161 [28]. [This Court observed that the
“legal fiction undoubtedly is to be construed in such a manner so as to enable a person, for whose benefit
such legal fiction has been created, to obtain all consequences flowing therefrom.”]
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responsibilities: (i) consider the reply of the assessee under Section
149A(c); (ii) take a decision under Section 149A(d) based on the
available material and the reply of the assessee; and (iii) issue a notice
under Section 148 if it was a fit case for reassessment. Once the
clock started ticking, the assessing officer was required to complete
these procedures within the surviving time limit. The surviving time
limit, as prescribed under the Income Tax Act read with TOLA, was
available to the assessing officers to issue the reassessment notices
under Section 148 of the new regime.
112. Let us take the instance of a notice issued on 1 May 2021 under
the old regime for a relevant assessment year. Because of the legal
fiction, the deemed show cause notices will also come into effect from
1 May 2021. After accounting for all the exclusions, the assessing
officer will have sixty-one days [days between 1 May 2021 and 30
June 2021] to issue a notice under Section 148 of the new regime.
This time starts ticking for the assessing officer after receiving the
response of the assessee. In this instance, if the assessee submits
the response on 18 June 2022, the assessing officer will have sixty-
one days from 18 June 2022 to issue a reassessment notice under
Section 148 of the new regime. Thus, in this illustration, the time
limit for issuance of a notice under Section 148 of the new regime
will end on 18 August 2022.
113. In Ashish Agarwal (supra), this Court allowed the assesses to
avail all the defences, including the defence of expiry of the time
limit specified under Section 149(1).In the instant appeals, the
reassessment notices pertain to the assessment years 2013-2014,
2014-2015, 2015-2016, 2016-2017, and 2017-2018. To assume
jurisdiction to issue notices under Section 148 with respect to the
relevant assessment years, an assessing officer has to: (i) issue
the notices within the period prescribed under Section 149(1) of the
new regime read with TOLA; and (ii) obtain the previous approval of
the authority specified under Section 151. A notice issued without
complying with the preconditions is invalid as it affects the jurisdiction
of the assessing officer. Therefore, the reassessment notices issued
under Section 148 of the new regime, which are in pursuance of the
deemed notices, ought to be issued within the time limit surviving
under the Income Tax Act read with TOLA. A reassessment notice
issued beyond the surviving time limit will be time-barred.
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G. Conclusions
114. In view of the above discussion, we conclude that:
a. After 1 April 2021, the Income Tax Act has to be read along
with the substituted provisions;
b. TOLA will continue to apply to the Income Tax Act after 1 April
2021 if any action or proceeding specified under the substituted
provisions of the Income Tax Act falls for completion between
20 March 2020 and 31 March 2021;
c. Section 3(1) of TOLA overrides Section 149 of the Income Tax
Act only to the extent of relaxing the time limit for issuance of
a reassessment notice under Section 148;
d. TOLA will extend the time limit for the grant of sanction by the
authority specified under Section 151. The test to determine
whether TOLA will apply to Section 151 of the new regime is this:
if the time limit of three years from the end of an assessment
year falls between 20 March 2020 and 31 March 2021, then
the specified authority under Section 151(i) has extended time
till 30 June 2021 to grant approval;
e. In the case of Section 151 of the old regime, the test is: if the
time limit of four years from the end of an assessment year
falls between 20 March 2020 and 31 March 2021, then the
specified authority under Section 151(2) has extended time till
31 March 2021 to grant approval;
f. The directions in Ashish Agarwal (supra) will extend to all
the ninety thousand reassessment notices issued under the
old regime during the period 1 April 2021 and 30 June 2021;
g. The time during which the show cause notices were deemed
to be stayed is from the date of issuance of the deemed notice
between 1 April 2021 and 30 June 2021 till the supply of
relevant information and material by the assessing officers to
the assesses in terms of the directions issued by this Court in
Ashish Agarwal (supra), and the period of two weeks allowed
to the assesses to respond to the show cause notices; and
h. The assessing officers were required to issue the reassessment
notice under Section 148 of the new regime within the time limit
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surviving under the Income Tax Act read with TOLA. All notices
issued beyond the surviving period are time barred and liable
to be set aside;
115. The judgments of the High Courts rendered in Union of India v.
Rajeev Bansal,165 Keenara Industries Pvt. Ltd. v. ITO, Surat,166
J M Financial and Investment Consultancy Services Pvt. Ltd. v.
ACIT,167 Siemens Financial Services Pvt. Ltd. v. DCIT,168 Geeta
Agarwal v. ITO,169 Ambika Iron and Steel Pvt Ltd v. PCIT,170
Twylight Infrastructure Pvt Ltd v. ITO,171 Ganesh Dass Khanna v.
ITO,172 and other judgments of the High Courts which relied on these
judgments, are set aside to the extent of the observations made in
this judgment.
116. The appeals filed by the Revenue are accordingly allowed. The
appeals filed by the assesses will be governed by reasons discussed
in this judgment.
117. The transfer petitions are disposed of.
118. Pending application(s), if any, stand disposed of.

Result of the case: Matters disposed of.

†
Headnotes prepared by: Ankit Gyan

165 Writ Tax No. 1086 of 2022 (Allahabad High Court)
166 R/Special CA No. 17321 of 2022(High Court of Gujarat)
167 WP No. 1050 of 2022 (High Court of Judicature at Bombay)
168 [2023] 457 ITR 647 (High Court of Judicature at Bombay)
169 DB Civil Writ Petition No. 14794 of 2022 (High Court of Judicature at Rajasthan)
170 WP(C) No. 20919 of 2021 (High Court of Orissa)
171 WP(C) No. 16524/2022 (High Court of Delhi)
172 [2024] 460 ITR 546 (High Court of Delhi)