The Delhi High Court has ruled that income tax assessments cannot be reopened after three years, no matter which reassessment rules apply — old or new.
The case involved a tax notice sent to the Nationalist Congress Party (NCP) for the year 2015–16. The court said the notice was issued too late and must be cancelled. It pointed to rules under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), which extend deadlines in some cases but do not allow reopening cases beyond the three-year limit.
The court relied on a 2024 Supreme Court ruling in Union of India v. Rajeev Bansal. In that case, the government agreed that any tax notice for assessment years before 2016–17, issued after April 1, 2021, would not be valid if it crossed the time limit set by law.
The court also referred to its earlier ruling in the Makemytrip case, which made the same point.
How does this ruling affect taxpayers?
This ruling helps taxpayers by limiting the time the tax department has to reopen old cases. Here’s how it affects them:
Greater certainty: Once three years have passed since a tax return was filed, individuals and businesses can feel more secure that their case won’t be reopened without strong, new evidence.
Protection from delayed notices: Taxpayers who get reassessment notices after this three-year limit can now challenge them more easily in court.
Applies to both regimes: Whether the reassessment was attempted under the old rules (before April 2021) or the new regime (after April 2021), the same time limit applies, thanks to this ruling.
Useful precedent: Courts are now more likely to strike down time-barred notices, using this judgment as a reference.
