2021 (12) TMI 603 - HC - Income Tax

Court Invalidates Income Tax Re-Assessment Notice, Emphasizes New Procedural Requirements

Sushil Gupta Versus Assistant Commissioner Of Income Tax, Circle 6, Rajasthan And Union Of India

The court quashed the re-assessment notice issued under Section 148 of the Income Tax Act, finding it invalid due to non-compliance with the new ... Reopening of assessment u/s 147 - Period of limitation - scope of procedure prescribed under Section 148A - according to the petitioners notice is barred by limitation and that the respondent before issuing the notice under Section 148 of the Act has not followed the mandatory procedure prescribed under Section 148A of the Act as prescribed by the Finance Act, 2021 and applicable w.e.f. 01.04.2021 before issuance of notice under Section 148 - HELD THAT:- The issue involved in the present writ petitions is squarely covered by the decision of the Allahabad High Court in the matter of Ashok Kumar [2021 (10) TMI 517 - ALLAHABAD HIGH COURT]which in my view is a correct view and has been taken after considering the judgment passed by the Single Bench of Chhatisgarh High Court in the matter of Palak Khatuja [2021 (9) TMI 199 - CHHATTISGARH HIGH COURT] which has been relied upon by respondents’ counsel and therefore the present petitions deserve to succeed. Accordingly, the writ petitions are allowed. The reassessment notice issued to the petitioners under Section 148 of the Income Tax Act is quashed. Issues Involved:1. Validity of re-assessment notice under Section 148 of the Income Tax Act, 1961.2. Applicability of procedural requirements under Section 148A of the Income Tax Act, 1961.3. Interpretation of the Finance Act, 2021 in relation to the Enabling Act and Notifications issued thereunder.4. Jurisdictional issues concerning the initiation of re-assessment proceedings post-01.04.2021.Issue-wise Detailed Analysis:1. Validity of Re-assessment Notice under Section 148 of the Income Tax Act, 1961:The petitioner challenged the re-assessment notice issued under Section 148 on the grounds that it was barred by limitation. The court referred to the judgment of the Allahabad High Court in Ashok Kumar Agarwal vs. Union of India, which held that the old provisions of the Act were substituted by new provisions effective from 01.04.2021. Without any saving clause, the old provisions could not be presumed to continue beyond 31.03.2021. Therefore, any re-assessment notice issued after 01.04.2021 must comply with the new provisions.2. Applicability of Procedural Requirements under Section 148A of the Income Tax Act, 1961:The petitioner contended that the mandatory procedure prescribed under Section 148A, introduced by the Finance Act, 2021, was not followed before issuing the notice under Section 148. The court agreed, citing the Allahabad High Court's decision, which emphasized that after 01.04.2021, re-assessment proceedings must adhere to the new procedural requirements, including those under Section 148A. The lack of compliance with these requirements rendered the re-assessment notice invalid.3. Interpretation of the Finance Act, 2021 in Relation to the Enabling Act and Notifications Issued Thereunder:The court analyzed the interplay between the Finance Act, 2021, and the Enabling Act. The Allahabad High Court's judgment clarified that the Finance Act, 2021, substituted the old provisions of Sections 147, 148, 149, and 151 with new provisions, effective from 01.04.2021. The Enabling Act and its notifications could not override this substitution. The court concluded that the Enabling Act only extended timelines for proceedings validly initiated under the old provisions before 01.04.2021. Thus, any re-assessment notice issued after this date must comply with the new provisions.4. Jurisdictional Issues Concerning the Initiation of Re-assessment Proceedings Post-01.04.2021:The court emphasized that jurisdiction for re-assessment must be validly assumed by the assessing authority, evidenced by a jurisdictional notice under Section 148. Since the re-assessment notices in question were issued after 01.04.2021, they fell under the new provisions introduced by the Finance Act, 2021. The court held that the assessing authorities could not initiate re-assessment proceedings under the old provisions post-01.04.2021, as jurisdiction had not been validly assumed under the new law.Conclusion:The court allowed the writ petition, quashing the re-assessment notice issued to the petitioner under Section 148. It left open the possibility for the assessing authority to initiate re-assessment proceedings in accordance with the amended provisions of the Act, ensuring compliance with the new procedural requirements. This decision aligns with the Allahabad High Court's interpretation, which the court found to be correct and comprehensive.