Search Can’t Stretch Time: Gujarat High Court Quashes Income Tax Reopening Beyond 10-Year Limit in Search-Based Reassessment

“The long arm of the law can go up to this terminal point—and not one day beyond” –  In a landmark ruling on the interplay between reassessment timelines and search proceedings, the Gujarat High Court has quashed a notice issued under Section 148 of the Income Tax Act, 1961, ruling it barred by limitation under the statutory scheme applicable to search cases.

The Court categorically held that when a reassessment is rooted in a search conducted after 01.04.2021 and before 01.09.2024, the old regime under Sections 147 to 151, as it existed prior to the Finance (No.2) Act, 2024, must apply in light of Section 152(3). Accordingly, any reopening of earlier assessments must also conform to the limitations prescribed under Sections 153A and 153C as they stood prior to the Finance Act, 2021.

“The long arm of the law can go up to this terminal point—and not one day beyond,” the Bench observed, invoking the principle that search-based reassessment beyond the statutorily prescribed ten-year outer limit is jurisdictionally invalid.

“Notice For AY 2015-16 Issued in 2025 Is Ex Facie Beyond Statutory Limit”: High Court Applies Old Regime to Invalidate Section 148 Action

The petitioner, Ravindra Motibhai Prajapati, had challenged a notice dated 31.03.2025 issued under Section 148, seeking to reopen his AY 2015-16 assessment, based on documents seized during a search conducted on 09.05.2024 under Section 132. The Department alleged unaccounted cash consideration of ₹1.75 crores pertaining to a property transaction dating back to 2013, discovered in the form of a notarised agreement and cash notings.

Rejecting the Department’s contention that incriminating material permitted reopening, the Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi ruled:

“Even assuming existence of incriminating material… jurisdictional limitation under Section 149 read with Section 153A cannot be bypassed. Limitation goes to the root of authority.”

The Court emphasized that Section 149(1)(b), along with its first proviso, places an absolute bar on issuing notices for pre-01.04.2021 assessment years if reopening would have been barred under the old regime. Since AY 2015–16 fell outside the ten-year block reckoned from the end of AY 2025–26 (the year relevant to the FY of search), the notice was held void ab initio.

“Search May Trigger Reassessment, But Statutory Timeline Remains Sovereign”: Court Reiterates Interpretation of Section 153A & 149

The central question before the Court was whether a search-based reassessment under Section 148, concerning Assessment Year 2015–16, could be initiated in 2025 when the search occurred in FY 2024–25. The Court answered emphatically in the negative.

“Section 153A(1)(b) provides for reassessment of six years preceding the assessment year relevant to the year of search. But for ten-year outer limit cases, Explanation 1 clearly mandates that the period be reckoned from the end of the assessment year relevant to the previous year in which the search was conducted.”

Since the search took place in FY 2024–25, the relevant assessment year becomes AY 2025–26, and the ten-year block stretches back only till AY 2016–17. The attempt to reopen AY 2015–16—the eleventh year—was held jurisdictionally barred.

“The law mandates different computations for the six-year and ten-year blocks. The ten-year limit must run from the end of the relevant assessment year of search. There is no elasticity in this computation.

“Writ Jurisdiction Maintainable Where Lack of Jurisdiction Is Apparent”: High Court Allows Petition at Notice Stage

Addressing the maintainability of the writ at the notice stage, the Court reaffirmed that:

“Where lack of jurisdiction is apparent on the face of the record, the assessee need not wait for final reassessment orders. Writ jurisdiction under Article 226 is clearly attracted.”

The Court relied on its own earlier ruling in Special Civil Application No. 16615 of 2025, as well as authoritative decisions from the Delhi High Court (Ojjus Medicare Pvt. Ltd.) and Madras High Court (A.R. Safiullah), all of which had interpreted Explanation 1 to Section 153A and Section 149 similarly.

“Statutory Deadlines Are Not Elastic—Revenue Cannot Override Clear Provisions By Invoking Material Seized In Search”

Even though the Department claimed the discovery of unaccounted cash and notarised property agreements indicated concealment, the Court observed that even substantial incriminating evidence cannot cure a statutory jurisdictional defect.

“Plasticity may be the mantra in neuroscience, but not in taxing statutes… A provision that is free of ambiguity cannot be elastically construed,” the Court remarked, quoting with approval from the Madras High Court’s reasoning in A.R. Safiullah.

The ruling sharply reaffirms that Revenue authorities cannot unilaterally expand timelines for reopening based on the quantum or nature of evidence discovered during a search. The outer boundary of ten years is legislative and non-negotiable.High Court Reaffirms Legislative Bar On Reopening Older Assessments In Search Cases Post-2021

Allowing the petition, the Gujarat High Court ruled:

“The impugned notice dated 31.03.2025 issued under Section 148 of the Act for AY 2015–16 is beyond the permissible period of ten years under the combined reading of Sections 149 and 153A. It is, therefore, without jurisdiction and liable to be quashed and set aside.”

With this judgment, the High Court has delivered a clear precedent for cases where the search is conducted between 01.04.2021 and 01.09.2024, affirming that the old regime's limitation framework must strictly apply.

The ruling serves as an emphatic reminder that tax reassessment powers, particularly those following a search, must be exercised within the clear bounds of statutory timelines, irrespective of the nature of material found.

Date of Decision: 20 January 2026