The Delhi High Court has referred to a larger bench the question of whether income tax reassessment notices issued after expiry of limitation can be revived by invoking a 2012 amendment that allows a longer window in cases involving foreign assets.
A division bench of Justices Vibhu Bakhru and Tejas Karia passed the order on May 30, 2025.
“The view expressed in Brahm Datt may require reconsideration, by a larger bench,” the Court observed, referring to its 2018 judgment, which had held that time-barred assessments could not be reopened under the new law.
The ruling came in a batch of writ petitions filed by UK Paints (Overseas) Ltd, BJN Holdings (India) Ltd, and one, KS Dhingra. The petitioners challenged income tax reassessment notices issued under Section 148 of the Income Tax Act, 1961.
The notices under challenge, issued between 2014 and 2021, related to assessment years dating back to 1997–98. The Revenue authorities relied on Section 149(1)(c), introduced by the Finance Act, 2012, which permits reassessment up to 16 years after the relevant year if the escaped income pertains to foreign assets.
The petitioners argued that this provision could not apply to assessments already barred under an earlier six-year time limit. They relied on the Brahm Datt decision and Supreme Court rulings in KM Sharma v. ITO and SS Gadgil v. Lal & Co., which had held that limitation provisions cannot operate retrospectively unless expressly stated.
In Brahm Datt v. Assistant Commissioner of Income Tax (2018), the Delhi High Court had quashed a reassessment notice for AY 1998–99 issued under Section 148, holding that the extended 16-year window could not revive assessments already barred under the earlier income tax regime. The Court ruled that fiscal laws that impose tax burdens must be interpreted strictly, and that Section 149(1)(c) could not be given retrospective effect in the absence of clear legislative intent.
In contrast, the present bench took note of two provisions inserted by the 2012 Finance Act, namely the Explanation to Section 149(1) and Explanation 4 to Section 147. Both state that the amended provisions shall apply to “any assessment year beginning on or before” April 1, 2012. The Court said these clarifications indicate that Parliament intended that the extended timelines and reassessment powers to apply even to concluded assessments, provided they involved undisclosed foreign assets.
“In the present case… the amended provisions would also be applicable for ‘any assessment year’ beginning on or before 1st day of April 2012. The import of using the word ‘any’ is not restrictive,” the Court said.
The Court further noted that the Brahm Datt judgment did not examine these Explanations or the legislative intent as recorded in the Finance Bill.
“The decision in Brahm Datt has neither construed the import of the Explanation added to Section 149 nor the import of Explanation 4 added to Section 147… The legislative intent behind the amendments, as reflected in the Notes to Clauses of the Finance Bill, 2012, was also not brought to the Court’s attention,” it observed.
The bench also referred to the Supreme Court’s ruling in Jyoti Traders, which upheld a retrospective extension of time limits under a sales tax law. The High Court opined that the Jyoti Traders case shows that where legislative intent is clear, even a change in limitation can apply to past years.
Given the conflicting precedent and the constitutional implications of reopening concluded assessments, the Court concluded that the matter requires an authoritative determination by a larger bench of the Court.
The case will now be placed before the Chief Justice for the constitution of a larger bench.
The next hearing is scheduled for July 25, 2025.
Source #Bar and Bench
