Court Invalidates Reassessment Notice for 2017-18 Due to Non-Compliance with Finance Act, 2021

The High Court invalidated the reassessment notice challenged by the petitioner for the assessment year 2017-18, citing non-compliance with the newly introduced provisions of the Finance Act, 2021, and the failure to follow the procedure under Section 148A inserted from 01.04.2021. The court emphasized that all reassessment notices issued post 01.04.2021 must adhere to the updated statutory framework, quashing the impugned notice and affirming the importance of complying with the revised reassessment procedures. Subordinate legislation attempting to apply pre-amendment provisions post-01.04.2021 was deemed unconstitutional and invalid.

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Issues:
Challenge to reassessment notice dated 22.05.2021 for assessment year 2017-18 based on old provisions of Income Tax Act, 1961; Non-compliance with Section 148A procedure inserted from 01.04.2021; Validity of reassessment notices issued post 01.04.2021; Interpretation of newly introduced provisions under Finance Act, 2021; Effect of notifications dated 31.03.2021 and 27.04.2021 by CBDT on reassessment provisions; Constitutionality of notifications and their impact on reassessment notices.

Issue 1: Challenge to Reassessment Notice:
The petitioner challenged a reassessment notice dated 22.05.2021 for the assessment year 2017-18, arguing that the assessing officer applied old provisions of the Income Tax Act, 1961, and did not follow the procedure under Section 148A inserted from 01.04.2021. The petitioner contended that all notices issued after 01.04.2021 must comply with the newly introduced provisions of the Finance Act, 2021, and failure to do so renders the notices invalid.

Issue 2: Interpretation of Newly Introduced Provisions:
The judgment analyzed the provisions of reassessment under the Finance Act, 2021, highlighting significant changes. It emphasized that the new scheme of reassessment introduced elaborate procedures under Section 148A, enabling Assessing Officers to inquire into material suggesting escaped income, issue notices to assesses, and make decisions based on available material. The judgment clarified that the new provisions were intended to apply to all notices issued after 01.04.2021, emphasizing the importance of complying with the updated statutory framework for reassessment.

Issue 3: Effect of CBDT Notifications on Reassessment Provisions:
The judgment scrutinized the impact of notifications dated 31.03.2021 and 27.04.2021 issued by the CBDT on reassessment provisions. It concluded that the explanations provided in these notifications, attempting to apply pre-amendment provisions of Section 148 for notices issued post 01.04.2021, exceeded the CBDT's jurisdiction. The judgment deemed these explanations as unconstitutional and invalid, emphasizing that subordinate legislation cannot alter the statutory provisions of the parent Act.

Conclusion:
The High Court quashed the impugned reassessment notice challenged by the petitioner, declaring it invalid and bad in law. The judgment aligned with previous decisions by other High Courts and emphasized that all reassessment notices issued post 01.04.2021 must adhere to the updated provisions introduced by the Finance Act, 2021. The court dismissed appeals by the revenue, affirming the invalidity of the notices and upholding the quashing of the reassessment notices.

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