Notice under Section 148 of Income Tax Act for AY 2015-16 Held Time-Barred as Ten-Year Limitation Period Computed from AY 2026-27 Extends Only up to AY 2017-18
In a significant decision delivered on October 7, 2026, the Delhi High Court (Division Bench comprising Justices Dinesh Mehta and Dr. Aditi Choudhary) quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961 for the assessment year (AY) 2015-16. The Court held that the notice was barred by limitation under Section 149 of the Income Tax Act.
The petition was filed by Rita Kumari challenging the notice dated March 31, 2026, issued by the Assistant Commissioner of Income Tax, Central Circle 27. The notice sought to reassess the petitioner's income for AY 2015-16 following a search and seizure operation under Section 132 conducted on March 2, 2022, at the premises of Gaursons Group and its associates.
The crux of the petitioner's argument, advanced by Senior Counsel Sachit Jolly, was that the limitation period for issuing a reassessment notice under Section 149 begins from the relevant assessment year corresponding to the financial year in which the notice is issued. Since the notice was issued in FY 2025-26, it corresponded to AY 2026-27. Counting backward the statutory ten-year limitation period from AY 2026-27, the outer limit for reassessment could extend only up to AY 2017-18. Hence, issuing a notice for AY 2015-16 was beyond the permissible period and therefore time-barred.
The Court agreed with this interpretation and illustrated the calculation through a tabular format, confirming that the tenth year backward from AY 2026-27 is AY 2017-18, and not AY 2015-16. Since the escaped income was alleged to exceed Rs. 50 lakh, the ten-year limitation under Section 149 applied. The Court emphasized that the notice issued for AY 2015-16 fell outside this period, rendering it invalid.
The Income Tax Department, represented by Senior Standing Counsel Gaurav Gupta, did not contest the factual matrix regarding the limitation period. The Court, after hearing both sides, allowed the writ petition, quashing the reassessment notice dated March 31, 2026. Pending applications related to the matter were also disposed of.
This judgment reiterates the strict adherence to the limitation period prescribed under the Income Tax Act for issuing reassessment notices, protecting taxpayers from arbitrary or belated tax demands. It clarifies that for reassessment notices issued in a particular financial year, the relevant assessment year for limitation calculation is the one corresponding to that financial year and not the year to which the income relates.
Bottom Line:
Income Tax Act, 1961 - Reassessment notice under Section 148 issued on 31.03.2026 for AY 2015-16 held barred by limitation under Section 149 - For computing outer ten-year period, relevant assessment year would be AY 2026-27 and limitation could extend only up to AY 2017-18 - Notice quashed.
Statutory provision(s):
Income Tax Act, 1961 - Sections 132, 148, 149; Constitution of India, 1950 - Article 226
