Madras HC: Reassessment Notices Issued After April 2021 for AY 2015–16 Legally Unsustainable

The Madras High Court has dealt a significant blow to the tax department's attempt at reopening old assessments, ruling that any reassessment notice for Assessment Year 2015-2016 issued on or after April 1, 2021, is barred by limitation and inherently unsustainable.

A Division Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan delivered the judgment while hearing an appeal against a Single Judge's order that had previously upheld the Revenue's right to initiate such proceedings.

Revenue Concedes on Limitation Timeline

During the proceedings, the Additional Solicitor General appearing for the Revenue fairly admitted that the statutory boundaries for such notices had been settled by the Supreme Court. The Revenue acknowledged that for Assessment Year 2015-2016, the benefit of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) would not extend to notices issued after the April 2021 cut-off.

The Court noted that the specific legal position for this assessment year was explicitly recorded in Union of India v. Rajeev Bansal ( "2024 SCC Online SC 2693": 2024 CaseBase(SC) 945). The Revenue conceded that the controversy was squarely governed by this precedent, leading to the conclusion that the impugned notices could not survive the test of limitation.

Court Quashes Delayed Reassessment Exercise

The High Court observed that the first notice in the present dispute was issued on April 12, 2021, and a subsequent notice under Section 148A(b) of the Income Tax Act, 1961 was issued as late as March 31, 2022. Since all these actions were taken after the prescribed deadline, the Court found the entire exercise to be void.

The Court, in its reasoning, observed: "Since all these steps pertaining to the Assessment Year 2015-2016 were taken well after the cut-off date of 1.4.2021, the entire reassessment exercise is clearly out of time and completely unsustainable in law."

The Court has following directions:

"The appeal is allowed. The impugned order passed by the learned Single Judge dated 3.6.2026 is set aside. The notices dated 12.4.2021 and 31.3.2022 as well as the order dated 2.5.2022 are hereby quashed."

Background:

The appellant, an educational academy, challenged the reassessment notices issued for the Assessment Year 2015-2016. Initially, a learned Single Judge had dismissed the writ petition on June 3, 2026, holding that the proceedings were within the period of limitation. The appellant then moved the Division Bench through a Letters Patent Appeal. The primary argument rested on the fact that the notices were issued after the cut-off date established by the Supreme Court for that specific assessment cycle. Given the binding nature of the apex court's ruling in the Rajeev Bansal case, the High Court set aside the Single Judge’s order and quashed the reassessment proceedings.

Case Details:
Case No.: W.A.No.1925 of 2026
Case Title: Shanmugha Arts, Science Technology and Research Academy v. ACIT (Exemptions) and Others
Appearances:
For the Petitioner(s): Mr. Shankaranarayanan, Senior Counsel for M/s.G.Vardini Karthik
For the Respondent(s): Mr.N.Venkataraman, Additional Solicitor General Assisted by Mr.V.J.Arul Raj, Senior Standing Counsel

Source: 2026 CaseBase(MAD) 367