Reassessment Notice Issued Beyond 'Surviving Time' Invalid: Gujarat High Court in Sahil Total Infratech Pvt. Ltd.

The High Court of Gujarat has reaffirmed the strict adherence to statutory time limits for income tax reassessment, quashing a notice that was deemed "time-barred." In a significant ruling for taxpayers, the Division Bench of Justice Bhargav D. Karia and Justice Pranav Trivedi set aside a notice under Section 148 of the Income Tax Act, 1961, holding that it was issued beyond the permitted "surviving time" stipulated by judicial precedent.

Case Background

The dispute involves M/S Sahil Total Infratech Pvt. Ltd., which challenged a reassessment notice dated July 31, 2022, pertaining to the Assessment Year 2016-2017. The tax authorities had initially issued a notice on June 30, 2021, under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, commonly referred to as TOLA.

Following the Supreme Court’s landmark judgment in Union of India v. Ashish Agarwal , such notices were transitionally treated as show-cause notices under Section 148A(b). The crux of the legal disagreement rested on whether the subsequent formal reassessment notice, issued in July 2022, fell within the valid legal timeframe permitted by the Supreme Court’s interpretation in the later decision of Union of India v. Rajeev Bansal (2024) .

Arguments Presented

The petitioner contended that the reassessment notice was invalid, arguing that the revenue authorities failed to account for the mandatory "surviving time" limits. The petitioner submitted that the counting of this timeline must reflect the period between the initial TOLA notice and the subsequent supply of information by the Assessing Officer.

The respondent, represented by the Office of the Assistant Commissioner of Income Tax, attempted to justify the proceedings; however, upon review of the dates—the information provision on May 27, 2022, and the issuance of the impugned notice on July 31, 2022—it became clear the notice had exceeded the cut-off date of June 16, 2022, calculated by the court.

Legal Analysis and Precedent

The High Court relied heavily on the directives established in Rajeev Bansal (2024) , which mandates that reassessment notices must be issued within the time limit surviving under the Income Tax Act read with TOLA. The Court clarified that the "surviving time" is the remaining period of limitation available to the department after accounting for the stay period imposed by the transition to the new regime.

The Bench highlighted that the Assessing Officer provided the necessary information to the assessee on May 27, 2022. Granting the standard 15-day window for a reply, the statutory deadline for the department to issue the reassessment order and notice expired on June 16, 2022. Because the notice was issued on July 31, 2022, the Court found it definitively time-barred.

Key Observations

The judgment underscores the finality of the Supreme Court's guidance on tax recovery limits:

• "The Assessing Officers were required to issue the reassessment notice under section 148 of the new regime within the time limit surviving under the Income-tax Act read with the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020."
• "All notices issued beyond the surviving period are time barred and liable to be set aside."
• "The impugned notices issued under section 148 of the Act are accordingly quashed and set aside being invalid having been issued beyond the ‘surviving time’."

Court's Decision

In its final order, the High Court quashed the July 31, 2022, notice and set aside all consequential proceedings, including the order passed under Section 148A(d). This ruling provides definitive relief to the petitioner and serves as a crucial reminder to tax authorities that procedural timelines under TOLA and the new regime cannot be bypassed, reinforcing the protection of taxpayers against belated tax reassessment efforts.