In a recent ruling, the Delhi High Court ruled that income tax reassessments cannot be initiated after three years from the end of the relevant assessment year, regardless of whether the reassessment is under the old regime or the new framework introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The case arose when the Nationalist Congress Party received a reassessment notice for the Assessment Year 2015-16, which the court found to be time-barred.

The department issued the notice after April 1, 2021, claiming that the amendments under TOLA allowed for such reassessments. Read More: Centre to SC: Games of Skill with Stakes Are Gambling, Must Face 28% GST on Full Entry Amount The court disagreed and quashed the notice, stating that neither the original provisions of the Income Tax Act nor the amended provisions permit reassessment beyond three years in the absence of compelling new evidence. The court’s ruling provides clarity that any reassessment notice served after the statutory deadline of three years is invalid. Tax Audit Deadline Is Near! Are you prepared? – Click Here

The court referred to the Supreme Court’s ruling in Union of India v. Rajeev Bansal (2024), which held that reassessment notices for years before AY 2016–17, if issued after April 1, 2021, are not legally sustainable. The Delhi High Court also reaffirmed its decision in the Makemytrip case, where it had earlier quashed reassessment notices issued beyond the permissible timeframe, establishing a consistent precedent. Read More: Income Tax Return Filing: Complete ITR Form 3 Checklist for AY 2025-26 The court observed that this time limit must be respected to maintain legal certainty and avoid unnecessary litigation.

The ruling applies to both the old reassessment law and the post-2021 amended regime, providing uniform protection to taxpayers under any version of the law. This decision is likely to impact a large number of pending and future reassessment cases across the country. It ensures that taxpayers cannot be subjected to reassessment beyond the three-year limit unless there is concrete, new information justifying such action.