The Supreme Court on Thursday ruled that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (TOLA) 2020, would continue to operate after March 2021 under which the income tax authorities can look book for reassessment of tax arrears/ evasion for up to six years.

“TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021,” a bench headed by Chief Justice of India D.Y. Chandrachud, said in a judgment.

The bench which included Justice J.B. Pardiwala and Justice Manoj Misra passed the verdict while setting aside the judgments passed by various high courts which had taken a contrary view.

In the wake of the amendment carried out to the Income Tax 2021 read with TOLA, the Income Tax Department can now go back as far as six years from the end of the relevant assessment if the authorities are of the view that the alleged escape or evasion is more than ₹50 lakh.

This decision provides significant relief to the revenue department and clarifies the scope of TOLA to the Income Tax Act. It reinforces the government’s ability to extend statutory deadlines during extraordinary circumstances like the Covid-19 pandemic.

“This SC order in the case of UOI v. Rajeev Bansal and others seems to be in line with the earlier order in the case of UOI vs Ashish Agarwal and it is in favour of revenue,” Narayan Jain, president All India Federation of Tax Practitioners, said. “The taxpayers whose case has been reopened for assessment years 2013-14 to 2017-18 will have adverse impact. Such problems could have been avoided.”

Rakesh Nangia, chairman, Nangia Andersen India, said: “The Supreme Court’s ruling today in the TOLA batch of re-assessment cases upheld the extension of reassessment timelines. Consequently, reassessment notices issued after March 31, 2021, under the old provisions of Section 148 of the Income Tax Act, will remain valid, affecting approximately 90,000 cases.”

The court clarified that the amended provisions of the Income Tax Act, effective from April 1, 2021, must be read alongside TOLA implying that the time limits for issuing reassessment notices, which were extended due to Covid-19-related disruptions, will apply retroactively for notices issued between April 1, 2021, and June 30, 2021.

Sanjay Sanghvi, partner, Khaitan & Co said: “The Supreme Court emphasises a harmonious interpretation of reassessment provisions and holds that reassessment proceedings initiated between 1 April 2021 to 30 June 2021 (that would otherwise have been time-barred by 31 March 2021 in the absence of TOLA) would be valid.

“This is on the basis that TOLA is deemed to substitute the limitation period under the old reassessment regime, which is to be considered under the new reassessment regime coming into force as on 1 April 2021. The ruling will serve as a guiding principle for statutory interpretation.”

According to Ved Jain, former president of the ICAI, proceedings for assessment years 2016-17 and 2017-18 will likely be invalid due to procedural errors.