Indian Courts Clarify Tax Reassessment Limitation Rules

The Gujarat High Court ruled that, for assessments reopened after a search, the search assessment year must be included when calculating the extended ten‑year block under Explanation 1 to Section 153A of the Income‑Tax Act. The Court held that the notice issued for Assessment Year 2015‑16 was beyond the permissible period because the ten‑year block should only extend to AY 2016‑17.

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the date a taxpayer’s reply is received determines the start of the surviving limitation period under Section 148. In the case of Scarlet Tradelink Private Limited, the Tribunal found that the 56‑day surviving period expired on 10 August 2022, making a notice issued on 27 August 2022 barred by limitation.