In a groundbreaking ruling made by the Delhi High Court, it was established that the Income Tax Department is restricted from reopening income tax cases involving undisclosed income below ₹50 lakhs after a period of three years from the conclusion of the relevant assessment year. This judgment significantly shortens the window within which the department can scrutinize tax assessments, offering considerable relief to taxpayers.

Before this ruling, the Income Tax Department held the authority to reopen assessments for up to six years from the conclusion of the relevant assessment year, even for cases involving relatively modest amounts of undisclosed income.

The Delhi High Court’s decision aims to foster certainty and consistency in the tax system by restricting the timeframe for reopening assessments. This move is anticipated to be advantageous for a large segment of taxpayers, especially those with relatively lower incomes.