Ten-Year Limitation Bars Reopening Assessment For AY 2015-16: Gujarat High Court

The Gujarat High Court on 5 January held that a notice to reopen an assessment is barred by limitation if issued beyond ten years from the end of the relevant assessment year

A Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi was hearing a case which included four different but legally identical writ applications. It clarified that under Section 153A(b) of the Income Tax Act, 1961, the “relevant assessment year” must be computed backwards from the end of the search year. The Court emphasised that Sections 147 to 151, as they stood prior to the Finance Act (No. 2), 2024, govern such instances.

The case arose after a search under Section 153A conducted between 1 April 2021 and 1 September 2024 against the petitioner, a diamond job-work businessman. During the search, the Income Tax Department sought to reopen the assessment for Financial Year 2015-16 through a notice under Section 148.

Challenging the notice as time-barred, the petitioner submitted that reopening is permissible only up to ten years from the end of the assessment year. The Department contended that the escapement of income related to AY 2015-16 and, if ten years were counted excluding AY 2024-25, the notice fell within the limitation period.

In contrast, the Income Tax Department argued that the reopening notice was valid because the undisclosed income for AY 2015-16, when counted excluding AY 2024-25, fell within the ten-year limitation period.

The High Court noted that the date of search fell on 9 May 2024, in FY 2024-25, making the assessment year 2025-26. Counting ten years backwards from the end of the search year, AY 2015-16 falls outside the permissible period for reopening.

The Bench observed:

“Thus, the year under consideration, namely, Assessment Year 2015-16, for which the impugned notice has been issued under Section 148 of the Act, would fall beyond the period of ten years prescribed under the statute as it stood immediately before the commencement of the Finance Act, 2021, and hence, on this count, the impugned notice can be said to be barred by limitation.”

The Court relied on judicial precedents, including Delhi High Court in Ojjus Medicare and Madras High Court in A.R. Safiullah, noting it had “no convincing reason to take a divergent view”. It also confirmed that the Department lacked jurisdiction to issue the notice, as the relevant assessment year was beyond the statutory ten-year limit.

Accordingly, the High Court allowed the petitions.

For Respondent: Senior Standing Counsel Maunil G Yagnik