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Supreme Court Validates Reassessment Notices Issued under section 148 after April 2021 || Deemed as Notices under section 148A

supreme-court-validates-notices-section-148-after-april-2021-deemed-as-notices-section-148a

In a path-breaking judgment in the case of Union of India & Others vs. Ashish Agarwal in Civil Appeal No. 3005/2022, the Supreme Court of India has declared that the reassessment notices issued under the erstwhile unamended section 148 of the Income-tax Act, 1961 (‘Act’) after 1st April 2021 and within 30th June 2021 are valid in law and shall be treated as notices issued under section 148A of the Act. This judgment is rendered on 04.05.2022.


With this decision, the Supreme Court has upheld the validity of all the reassessment notices issued under old section 148 of the Act after 31st March 2021. The Apex Court has exercised its extraordinary powers under Article 142 of the Constitution of India. Consequently, this order will be applicable to all the High Court judgments on the issue, as well as pending proceedings and therefore the present order shall be applicable to PAN INDIA.



This is perhaps for the first time the Supreme Court has exercised its powers under Article 142 of the Constitution of India in income-tax jurisprudence.

Snapshots of the Judgment

 

1. The notices issued under old section 148 on or after 1.4.2021 shall be deemed to be notices issued under section 148A(b) of the Act and shall be treated as show-cause notices.

 

2. Requirement of section 148A(a) requiring inquiry by the AO is dispensed with. The court, in fact, has held that inquiry under section 148A(a) is not mandatory.

 

3. The AO shall supply the reasons and other information or materials relied upon to the assessee within 30 days.

 

4. The assessee shall furnish the reply within two weeks therefrom.

 

5. The Assessing Officers shall thereafter pass orders in terms of section 148A(d).

 

6. Thereafter notices under new provisions of section 148 is again required to be issued, if considered fit.

 

7. All the defences available to the assessee and all the rights available to the assessing officers under the amended provisions shall continue to be available.

 

8. The Supreme Court agreed with the decision of the High Courts but observed that if the high courts' view is upheld then the revenue will be left remediless.

 

9. All the judgments and orders passed by various high courts quashing similar notices are substituted/modified with this order.

 

10. This Order shall be applicable to the whole country on PAN INDIA basis.


The revenue has filed the appeal before the Supreme Court against the order of the Allahabad High Court in Writ Tax No. 524/2021 and other allied writ tax petitions, by which the High Court has allowed the said writ petitions and has quashed several reassessment notices issued by the Revenue, issued under section 148 of the Act on the ground that the same are bad in law in view of the amendment by the Finance Act, 2021 which has amended Income Tax Act by introducing new provisions i.e. sections 147 to 151 w.e.f. 1st April, 2021.


Similar judgments and orders are passed by various other High Courts including High Court of Delhi; High Court of Rajasthan; High Court of Calcutta; High Court of Madras; High Court of Bombay.


Approximately 90,000 such reassessment notices under section 148 of the unamended Income Tax Act were issued by the Revenue after 01.04.2021, which were the subject matter of more than 9000 writ petitions before various High Courts across the country.


To cover the decisions of all the high courts across the country with this appeal and to lessen the burden of the Supreme Court from multiple appeals, the present appeal is taken and the Supreme Court has passed the Order by exercising the powers under Article 142 to govern all the judgements of the High Courts on the similar issue.


The Parliament introduced reformative changes to Sections 147 to 151 of the Act governing reassessment proceedings by way of the Finance Act, 2021, which was passed on 28th March, 2021. The substituted sections 147 to 149 and section 151 were made applicable from 01.04.2021.


Despite the substituted sections 147 to 151 of the Income Tax Act, 1961 by the Finance Act, 2021 coming into force on 1st April, 2021, the Revenue issued approximately 90,000 reassessment notices to the respective assessees under the erstwhile sections 148 to 151 thereof by relying on explanations in the Notifications dated 31st March, 2021 and 27th April, 2021. These notifications were issued under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.


The said reassessment notices were the subject matter of writ petitions before the various High Courts. The respective High Courts have held that all the respective reassessment notices issued under the erstwhile sections 148 to 151 of the Income Tax Act, 1961, are bad in law as the reassessment notices issued after 01.04.2021 are governed by the substituted sections 147 to 151 of the Income Tax Act, 1961, substituted by the Finance Act, 2021. Consequently, the respective High Courts have set aside all the reassessment notices issued under section 148 of the Income Tax Act, 1961 wherever assailed.


Under the substituted provisions of the Act vide Finance Act, 2021, no notice under section 148 of the Act can be issued without following the procedure prescribed under section 148A of the Act. Along with the notice under section 148, the assessing officer (AO) is required to serve the order passed under section 148A of the Act. section 148A of the Act is a new provision which is in the nature of a condition precedent. The introduction of section 148A of the Act can thus be said to be a game-changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation.


Prior to pre amended Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per GKN Driveshafts (India) Ltd.


The Court has also made intense discussion of the provisions of section 148A.


The Court has agreed to the observations made by the respective High Courts that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021.


However, it completely disagreed with judgements of several high courts which completely debars reassessment proceedings after quashing the notices.


Their Lordships have observed that even after the amendment, reassessment proceedings are permissible under the Finance Act, 2021 as per substituted sections 147 to 151 of Act.


It was further observed that the Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated.


In the view of their Lordships, the notices ought not to have been issued under the unamended provisions and ought to have been issued under the substituted provisions of sections 147 to 151 of the Act as per amended provisions by the Finance Act, 2021.


The Court further mentioned that the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced.


At the end, the Court has concluded the Order in the following words-


The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under: 


(i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be showcause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assesees can reply to the showcause notices within two weeks thereafter;


(ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a onetime measure visàvis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts.


Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required;


(iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted);


(iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.



Read the full text of the Supreme Court Judgment in the case of Union of India & Others vs. Ashish Agarwal in Civil Appeal No. 3005/2022 dated 04.05.2022 on Validating Notices issued under section 148/148A


IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3005/2022


Union of India & Ors. .. Appellant (S)


Versus


Ashish Agarwal .. Respondent (S)


M. R. Shah, J. 


Leave granted in SLP (C) Nos. 6448/2022, 5381/2022, 5079/2022, 6092/2022, 6534/2022, 6158/2022, 6316/2022, 6281/2022, 6545/2022, 6038/2022.


1. Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the High Court of Judicature at Allahabad in Writ Tax No. 524/2021 and other allied writ tax petitions, by which the High Court has allowed the said writ petitions and has quashed several reassessment notices issued by the Revenue, issued under section 148 of the Income Tax Act, 1961, on the ground that the same are bad in law in view of the amendment by the Finance Act, 2021 which has amended Income Tax Act by introducing new provisions i.e. sections 147 to 151 w.e.f. 1st April, 2021, the Revenue has preferred the present appeals.


2. Similar judgments and orders are passed by various other High Courts including High Court of Delhi; High Court of Rajasthan; High Court of Calcutta; High Court of Madras; High Court of Bombay, the particulars of which are as under:


At this stage, it is required to be noted that approximately 90,000 such reassessment notices under section 148 of the unamended Income Tax Act were issued by the Revenue after 01.04.2021, which were the subject matter of more than 9000 writ petitions before various High Courts across the country and by different judgments and orders, the particulars of which are as above, the High Courts have taken a similar view and have set aside the respective reassessment notices issued under section 148 on similar grounds.


2.1 The common judgment and order passed by the Allahabad High Court is the subject matter of the present appeals. Shri N. Venkataraman, learned ASG, stated at the bar that the Revenue is contemplating to prefer appeals against the similar judgments and orders passed by various High Courts. However, as the issue is common and there will be multiplicity of the proceedings and to lessen the burden of this Court and for the reasons stated hereinbelow, as we propose to pass an order in exercise of powers under Article 142 of the Constitution of India the present order shall govern all the other judgments and orders passed by various High Courts on the similar issue. Hence, we observe that the Revenue need not file separate individual appeals which may be more than 9000 in numbers.


2.2 In fact, we have heard Shri C.A. Sundaram, learned Senior Advocate, appearing on behalf of the respective assessee, who were before the Delhi High Court also.


3. While appreciating the controversy, a few facts and the relevant statutory provisions applicable pre 01.04.2021 and post 01.04.2021 are required to be referred to.


The procedure governing initiation of reassessment proceedings prior to coming into force of the Finance Act, 2021 was governed by the following provisions: “


Income escaping assessment


147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose

….


Download Supreme Court Judgment in the case of Union of India & Others vs. Ashish Agarwal in Civil Appeal No. 3005/2022 dated 04.05.2022 on Validating Notices issued under section 148/148A in PDF format

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