The Delhi High Court has ruled that income tax assessments cannot be reopened after three years, regardless of whether the reassessment is under the old or new tax regime. The case centered on a reassessment notice sent to the Nationalist Congress Party (NCP) for the financial year 2015–16, which the court deemed invalid due to being issued beyond the permissible time limit. The ruling emphasized that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) allows certain deadline extensions but does not override the three-year cap on reopening assessments.
Court Ruling Reinforces 3-Year Limit on Tax Reassessments, Boosts Taxpayer Protection
The court supported its decision by referencing the 2024 Supreme Court judgment in Union of India v. Rajeev Bansal, where the government acknowledged that any reassessment notice for periods before 2016–17, issued after April 1, 2021, would be invalid if it breached statutory time limits. Additionally, the Delhi High Court cited its own previous decision in the Makemytripcase, which upheld the same principle.
This ruling significantly benefits taxpayers by providing legal clarity and protection. It brings greater certainty, ensuring that once three years have passed since filing a tax return, taxpayers are generally safe from reassessment unless compelling new evidence emerges.
Uniform Reassessment Deadline Strengthens Legal Shield for Taxpayers
It also protects individuals and businesses from delayed or time-barred tax notices, offering a stronger legal basis to contest such actions. Importantly, the ruling applies uniformly to both old and new reassessment regimes, reinforcing that the statutory limitation cannot be bypassed. As a result, courts are now more likely to strike down reassessment notices that violate this timeline, establishing a strong precedent in favour of taxpayers.
Summary:
The Delhi High Court ruled that income tax reassessments cannot be reopened after three years, regardless of the tax regime. Citing key judgments, the court invalidated a notice to NCP, reinforcing taxpayer protection, legal clarity, and uniformity in deadlines under both old and new reassessment provisions.
