LI Network
Published on: November 18, 2023 at 12:25 IST
The Delhi High Court has clarified that in serious tax evasion cases involving concealment of income exceeding Rs. 50 lakhs, an extended limitation period of 10 years will apply.
Justices Rajiv Shakdher and Girish Kathpalia ruled on the issue, emphasizing that notices under Section 148 of the Income Tax Act, 1961, beyond the standard three-year limit can only be issued in specific cases, such as those with evidence of concealed income exceeding Rs. 50 lakhs.
The court addressed the challenge raised by the petitioners regarding the sustainability of notices issued under Section 148.
The petitioners argued that the standard three-year limitation (Section 149(1)(a)) should apply if the alleged escaped income is below Rs. 50 lakhs.
They contended that applying the extended limitation period (Section 149(1)(b)) beyond three years but within 10 years requires fulfilling conditions, including the income exceeding Rs. 50 lakhs, which was not the case here.
The court considered the Finance Minister’s speech and the Memorandum, noting the reduction in the time limit for reopening assessments from six years to three years.
It highlighted that the extended period of 10 years was reserved for “serious tax evasion cases” involving evidence of concealed income exceeding Rs. 50 lakhs. The court concluded that orders and notices concerning the assessment years 2016–17 and 2017–18 could not be sustained.
This decision provides clarity on the application of limitation periods in tax evasion cases, aligning with the legislative intent to reduce litigation and facilitate ease of doing business.
Case Title: Ganesh Dass Khanna Versus ITO
