Last reviewed: 10 September 2026. For several assessment years now, taxpayers who received a reassessment notice have had a ready-made first line of defence: argue the notice was time-barred, or that it relied on the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA) to revive a power that had otherwise lapsed under the reassessment regime introduced by the Finance Act 2021. That systemic challenge — the “Ashish Agarwal” line of litigation — has now travelled up to the Supreme Court, which has upheld TOLA's applicability to extend reassessment timelines for the transition window in question, largely settling the point in Revenue's favour. That does not mean every reassessment notice is now safe from challenge; it means taxpayers and advisors need to know exactly which arguments still work and which no longer do.
How we got here: Finance Act 2021, TOLA, and the Ashish Agarwal litigation
Before the Finance Act 2021, reassessment under the Income-tax Act, 1961 operated under Sections 147/148 as they then stood. The Finance Act 2021 replaced that framework with a revamped procedure — a new Section 148A requiring the assessing officer to give the taxpayer an opportunity to respond before issuing a reassessment notice, and generally shorter limitation periods (broadly three years from the end of the relevant assessment year, extendable up to ten years where the escaped income is ₹50 lakh or more and involves an asset or certain entries located outside India). Separately, TOLA had extended various compliance timelines during the COVID period, including time limits under the erstwhile reassessment provisions. Between 1 April 2021 and 30 June 2021 — after the new regime had technically taken effect but before the department had updated its systems and procedures — a very large number of reassessment notices were issued under the old, pre-amendment law rather than the new Section 148A procedure. Taxpayers challenged these notices as invalid, since the old provisions under which they were issued had already been replaced. The dispute reached the Supreme Court, which fashioned a transitional solution (treating the old-law notices as if they were show-cause notices under the new Section 148A, giving taxpayers a further opportunity to respond) but left open the deeper question of whether TOLA's extension could be read into the new regime to save notices that would otherwise be time-barred. That deeper question has now been substantially resolved by the Supreme Court in Revenue's favour on the TOLA-applicability point specifically.
What the Supreme Court's TOLA ruling does — and does not — settle
The ruling upholds that TOLA's extension of the reassessment time limit validly applied to the transition window, meaning notices issued in that period cannot be struck down purely on the ground that TOLA could not be used to extend a limitation period under the new Finance Act 2021 regime. This closes off what had become the most commonly raised systemic objection — the blanket argument that an entire category of TOLA-period notices was void for want of jurisdiction on the limitation point alone. It is important to be precise about what this does not do. The ruling does not validate every individual notice issued in or around that period; it validates the department's ability to rely on TOLA for the specific limitation question. Every notice still has to independently satisfy the other conditions the law lays down for a valid reassessment — proper recording of “reasons to believe” or, under the current regime, “information suggesting escapement of income,” issuance to the correct and existing legal entity, approval from the correct sanctioning authority, and (where applicable) satisfaction of the ₹50-lakh threshold with the specific categories of asset or foreign entries required for the extended ten-year limitation to apply at all.
Grounds that still succeed for taxpayers
Because the TOLA point is now largely closed as a systemic challenge, advisors need to focus attention on the grounds that continue to succeed on a case-by-case basis. These include: reasons recorded that are vague, borrowed wholesale from information received without independent application of mind, or that do not disclose what income is alleged to have escaped assessment and why; notices issued in the name of an entity that had already amalgamated, merged, or ceased to exist by the date of the notice, which is treated as a fundamental jurisdictional defect rather than a curable irregularity; reassessment founded on material the assessing officer already had and considered during the original assessment, which risks falling foul of the change-of-opinion principle rather than being based on genuinely fresh material; approval granted by an authority other than the one prescribed for the relevant time gap since the original assessment; and, most directly relevant to TOLA itself, a year that remains outside even the TOLA-extended limitation period once the extension is correctly computed — TOLA extends specific timelines, it does not extend every year indefinitely.
Table: TOLA-era reassessment — what is settled vs what is still contested
| Issue | Status after the Supreme Court's TOLA ruling |
|---|---|
| Can TOLA extend the reassessment time limit for the Apr–Jun 2021 transition window? | Settled — yes, upheld by the Supreme Court |
| Is every notice issued in that window automatically valid? | No — each notice must still independently satisfy reasons-to-believe, correct entity, correct sanctioning authority |
| Can a notice still be challenged for inadequate “reasons to believe”? | Yes — unaffected by the TOLA ruling, decided on the specific reasons recorded |
| Can a notice to an amalgamated/non-existent entity still be quashed? | Yes — treated as a separate, fundamental jurisdictional defect |
| Does the extended 10-year limit apply automatically once TOLA is invoked? | No — it applies only where the ₹50-lakh threshold and the specified asset/foreign-entry conditions are independently satisfied |
Worked example: checking a notice received today
A company receives a reassessment notice in September 2026 for Assessment Year 2019-20, alleging escaped income of ₹62 lakh linked to an unexplained credit. The normal three-year limitation for that year (measured from the end of AY 2019-20, i.e. by 31 March 2023) has plainly expired, so the notice can only be valid if the extended limitation — available where escaped income is ₹50 lakh or more and involves an asset or specified foreign entries — genuinely applies, and if TOLA's extension correctly bridges any gap in the department's timeline for issuing it. The first checkpoint is factual: does the ₹62 lakh actually relate to an asset or a foreign entry falling within the categories the extended limitation is meant to cover, or is it a domestic unexplained credit that does not meet that specific description? If it does not, the notice is time-barred regardless of TOLA, because the extended ten-year window was never available for this kind of addition in the first place. The second checkpoint, only relevant if the first is satisfied, is whether the reasons recorded disclose genuine new material — for instance information received from a specific external source after the original assessment was completed — rather than a re-examination of facts already on record. A notice that fails either checkpoint remains challengeable notwithstanding the Supreme Court's TOLA ruling, because that ruling settles the TOLA-extension question, not these separate substantive requirements.
What should you do on receiving a 148/148A notice
Do not treat “the notice looks outside the normal three-year window” as, by itself, either a reason to panic or a reason to assume it is automatically invalid post-TOLA. Instead, work through the checklist methodically: confirm which assessment year is involved and what the normal limitation for that year is; check whether the department is relying on the ₹50-lakh/foreign-asset extended limitation, and if so, whether the underlying allegation genuinely fits that description; separately evaluate the reasons recorded for specificity and for whether they reflect fresh material rather than a change of opinion on facts already examined; and verify the notice is addressed to the correct, currently existing legal entity and has the correct level of sanctioning approval for the time elapsed since the original assessment. For years falling under the new Income-tax Act 2025 regime (FY 2026-27 onward, numbered under Sections 280-281), the same substantive checklist applies even though the section numbers and the TOLA history are no longer relevant, since that history was specific to the transition period under the old Act.
Frequently asked questions
Has the Supreme Court made all reassessment notices issued between April and June 2021 valid?
No. The Supreme Court has upheld that TOLA could validly extend the reassessment time limit for that transition window, closing off the blanket “all TOLA notices are void” argument. Each individual notice must still independently satisfy other requirements such as proper reasons recorded, correct sanctioning approval, and issuance to the correct entity.
Can I still challenge a reassessment notice on the ground that it is time-barred?
Yes, but the argument now needs to be more precise than “TOLA cannot apply.” You can still argue the specific year is time-barred if the extended 10-year limitation (available only for escaped income of ₹50 lakh or more involving specified assets or foreign entries) does not genuinely apply to your facts, or if TOLA's extension is miscomputed for your case.
What are “reasons to believe” and why do they matter for a reassessment notice?
These are the grounds the assessing officer must record, before issuing a reassessment notice, showing why income is believed to have escaped assessment. Vague, borrowed, or non-specific reasons — or reasons that merely revisit material already examined in the original assessment — remain a valid and commonly successful ground to challenge a notice, unaffected by the TOLA ruling.
Is a reassessment notice valid if issued to a company that has already merged into another entity?
Generally no. Courts have treated a notice issued to a non-existent or already-amalgamated entity as a fundamental jurisdictional defect rather than a curable procedural irregularity, and this ground continues to succeed independently of the TOLA litigation.
How does the Income-tax Act 2025 change reassessment procedure?
From FY 2026-27, the reassessment machinery is renumbered under Sections 280-281 of the Income-tax Act 2025, but the substance — reasons/information suggesting escapement, the faceless procedure, and approval requirements — largely carries forward. TOLA-era litigation remains relevant only to earlier assessment years assessed under the old numbering.
What should I do immediately after receiving a Section 148/148A notice?
Identify the assessment year and its normal limitation period, check whether an extended-limitation ground is being invoked and whether your facts genuinely fit it, scrutinise the reasons recorded for specificity and fresh material, and confirm the notice is addressed to the correct entity with proper sanctioning approval — ideally with a professional's review before responding within the given timeline.
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This article is general information for educational purposes, not an opinion on any specific case or a substitute for professional advice; the legal position summarised here can change, so please verify current status and consult a qualified professional before acting on your own facts.