Income Tax Act | Reassessment Cannot Be an Endless Sword – Gujarat High Court Quashes Income Tax Notice as Time-Barred

“When the Clock Runs Out, Revenue Cannot Hit Reset” – In a decisive judgment delivered Gujarat High Court Bench of Justice Bhargav D. Karia and Justice Pranav Trivedi quashed the reassessment proceedings initiated against the petitioner, Sheetal Dhamreshbhai Patel, holding that the notice dated 29.07.2022 issued under Section 148 of the Income Tax Act, 1961, was time-barred.

The Court categorically declared that the reassessment process was "vitiated by limitation", relying squarely on the binding precedents of the Supreme Court in Union of India v. Ashish Agarwal and Union of India v. Rajeev Bansal.

“A Notice Issued Beyond the Surviving Period of Limitation Is Non-Est in Law” – High Court Applies Apex Court Ruling in Rajeev Bansal

At the heart of the dispute was whether the reassessment notice dated 29.07.2022, issued for the Assessment Year 2013-14, was valid in light of the Supreme Court’s judgment in Rajeev Bansal, which clarified the limitation framework post-Ashish Agarwal.

The High Court observed: “It is evident that only one day was available for issuing the reassessment notice after granting the mandatory 14 days for reply under Section 148A(b) following the Ashish Agarwal judgment. The last permissible date was 17.06.2022, yet the notice was issued on 29.07.2022. It is patently time-barred.”

“The Clock Started Ticking the Day Ashish Agarwal Was Delivered” – Court Rejects Revenue’s Defence

Relying on the precise exposition of the limitation mechanism laid out in Rajeev Bansal, the Court remarked:

“The effect of the legal fiction created in Ashish Agarwal was that it suspended the clock only until supply of information and filing of reply. Once the assessee responded, the Revenue had to act within the surviving time. The assessing officer cannot stretch the limitation beyond what is statutorily permitted.”

The Court cited paragraph 110 to 114 of Rajeev Bansal, which conclusively held that reassessment notices issued beyond the surviving period are “time-barred and liable to be set aside.”

“Pan-India Binding Effect Cannot Be Ignored” – High Court Reminds Revenue

The Court reiterated that the directions in Ashish Agarwal and Rajeev Bansal are binding not just on the parties but apply “PAN INDIA”, extending to all High Courts, Tribunals, and assessing authorities.

“This Court cannot ignore the legal position that has now been conclusively settled by the Hon’ble Supreme Court. Any notice issued beyond the surviving limitation period is void.”

The Facts in Brief

• The petitioner filed her return for AY 2013-14 on 8 July 2014.

• A notice under Section 148 was issued on 30.06.2021, invoking extensions under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

• Following the Supreme Court’s ruling in Ashish Agarwal (21 May 2022), the Revenue issued a show-cause notice under Section 148A(b) on 26 May 2022, and passed an order under Section 148A(d) on 29 July 2022, followed by a fresh notice under Section 148 on the same date.

• The petitioner challenged this as time-barred.

“TOLA Cannot Override The Limitation Forever” – Court Explains The Limitation Computation

The High Court dissected the limitation computation in line with the Supreme Court’s directions:

“From the date of the Ashish Agarwal judgment (21 May 2022), 14 days were granted for reply. Once that period ended on 19 June 2022, only the residual time remained. Since the original notice was dated 30 June 2021, only one day was left. Therefore, the last date for a valid notice was 17 June 2022. The notice dated 29 July 2022 is unequivocally time-barred.”

“A Notice Without Jurisdiction Is A Nullity” – Court Quashes Entire Proceedings

The Court noted the Revenue’s inability to controvert this legal position. It bluntly observed:

“As per the decision in Rajeev Bansal, the notice dated 29.07.2022 is time-barred, and consequently, the earlier notice dated 30.06.2021 also stands invalid.”

Petition Allowed, Notices Quashed

“In the result, the petition succeeds. The impugned notice dated 29.07.2022 as well as notice dated 30.06.2021 are hereby quashed and set aside. Rule is made absolute.”

The Court concluded without imposing any costs but left no ambiguity in its ruling — the reassessment was declared without jurisdiction, void ab initio, and time-barred.

Date of Decision: 24 June 2025