In a significant ruling on reassessment proceedings under the Income-tax Act, the High Court of Gujarat in the case of Dimpal Hemang Desai v. Income-tax Officer held that reassessment notices issued for Assessment Year (AY) 2015-16 after 1 April 2021 were barred by limitation under the amended reassessment provisions and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

The judgment follows the legal principles laid down by the Supreme Court in Union of India v. Rajeev Bansal and provides important clarity regarding the validity of reassessment notices issued under the new reassessment regime.

Background of the Case

The Income-tax Department initiated reassessment proceedings against the assessee for AY 2015-16 by issuing notices under:

• Section 148 of the Income-tax Act, 1961

• Section 148A(b) after the amended reassessment provisions became effective from 01.04.2021

Subsequently, the department passed a reassessment order dated 25.03.2026 under:

• Section 147

• Read with Section 250

• Read with Section 144B of the Income-tax Act

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The assessee challenged the reassessment proceedings before the Gujarat High Court on the ground that the notices issued after 01.04.2021 were time-barred under the amended law.

Legal Framework After Finance Act, 2021

The Finance Act, 2021 substantially amended the reassessment provisions under Sections 147 to 151 of the Income-tax Act with effect from 01.04.2021.

Key changes included:

• Introduction of Section 148A procedure before issuing notice under Section 148

• Revised limitation periods for reopening assessments

• Requirement of prior inquiry and opportunity of hearing

Under the amended regime, notices for older assessment years became subject to stricter limitation conditions.

The issue of limitation was also impacted by TOLA, which extended certain statutory timelines during the COVID-19 period.

Gujarat High Court’s Observations

The Gujarat High Court observed that for AY 2015-16, reassessment notices issued on or after 01.04.2021 were not legally sustainable under the amended reassessment framework.

The Court held that:

• The reassessment notices were barred by limitation

• TOLA did not extend limitation beyond what was permissible under the amended law

• The issue was squarely covered by the Supreme Court’s ruling in Union of India v. Rajeev Bansal

The Court further noted that once the initiation itself was invalid, all consequential proceedings including reassessment orders also became unsustainable.

Court’s Decision

Accordingly, the High Court:

• Quashed the notices issued under Sections 148 and 148A

• Set aside the reassessment proceedings

• Quashed the reassessment order passed under Section 147 read with Sections 250 and 144B

• Allowed the writ petition in favour of the assessee

Significance of the Ruling

This judgment is highly relevant for taxpayers who received reassessment notices for AY 2015-16 and similar years after 01.04.2021.

The ruling reinforces that:

• Reassessment notices must strictly comply with amended limitation provisions

• TOLA cannot be interpreted to indefinitely extend reassessment timelines

• Notices issued beyond statutory limitation are liable to be quashed

Taxpayers facing similar reassessment proceedings should review the validity of notices in light of the amended provisions and judicial precedents.

Conclusion

The Gujarat High Court’s decision in Dimpal Hemang Desai v. Income-tax Officer provides important relief to taxpayers by reaffirming limitation safeguards under the amended reassessment regime. The ruling also strengthens legal certainty regarding the interplay between TOLA and the Finance Act, 2021 amendments.

Taxpayers dealing with reassessment notices issued after 01.04.2021 should carefully examine whether such proceedings are legally maintainable.

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