Gujarat HC Quashes Reassessment Notices for AY 2015-16 as Time-Barred Under Amended Law

In a significant relief for taxpayers, the High Court of Gujarat has held that reassessment notices issued for AY 2015-16 after 1 April 2021 were barred by limitation under the amended reassessment provisions of the Income-tax Act read with TOLA.

The ruling came in the case of Dimpal Hemang Desai v. Income-tax Department, R/Special Civil Application No. 6101 of 2026.

Background of the Case

The Income-tax Department initiated reassessment proceedings against the assessee for AY 2015-16 by issuing notices under Sections 148 and 148A(b) after the reassessment framework introduced by the Finance Act, 2021 came into effect from 1 April 2021.

Subsequently, the department passed a reassessment order under Section 147 read with Sections 250 and 144B on 25 March 2026.

The assessee challenged the validity of the notices before the Gujarat High Court, contending that the reassessment proceedings were barred by limitation under the amended provisions and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

Key Legal Position

The Finance Act, 2021 substituted the reassessment provisions under Sections 147 to 151 of the Income-tax Act with effect from 1 April 2021.

Under the amended Section 149:

• Reassessment notices generally cannot be issued after 3 years from the end of the relevant assessment year
• Extended limitation up to 10 years is permitted only in specified cases involving escaped income represented in the form of assets exceeding prescribed thresholds

The controversy in several cases revolved around whether TOLA validly extended limitation periods for reassessment notices issued after the new regime came into force.

The Supreme Court in Union of India v. Rajeev Bansal clarified the interaction between TOLA and the amended reassessment regime. The Court held that reassessment notices issued beyond the surviving limitation period under the Income-tax Act read with TOLA would be invalid.

Gujarat High Court’s Decision

Relying on the Supreme Court ruling in Rajeev Bansal, the Gujarat High Court held that:

• For AY 2015-16, notices issued on or after 1 April 2021 were time-barred
• The reassessment proceedings initiated under Sections 148 and 148A could not survive
• The consequential reassessment order dated 25 March 2026 was also liable to be quashed

Accordingly, the Court allowed the writ petition and set aside all reassessment notices and consequential proceedings.

Practical Impact for Taxpayers

This judgment is important for taxpayers who have received reassessment notices for older assessment years after 1 April 2021.

Taxpayers should carefully examine:

• The assessment year involved
• The date of issue of notice under Section 148 or 148A
• Whether the notice falls within the permissible limitation period under amended Section 149
• Applicability of the Supreme Court ruling in Rajeev Bansal

Businesses and individuals facing reassessment proceedings for older years may have valid grounds to challenge notices issued beyond statutory timelines.

Conclusion

The Gujarat High Court ruling reinforces that reassessment proceedings must strictly comply with the limitation framework prescribed under the amended Income-tax Act and TOLA. The decision provides significant protection to taxpayers against time-barred reassessment actions.

For expert guidance on this topic, contact your tax professional today.