Reassessment notices under the old regime were redirected into the amended procedure, with section 148A safeguards and defences preserved.

Reassessment notices issued on or after 01.04.2021 under the unamended regime could not survive after substitution of sections 147 to 151 by the Finance Act, 2021, because the new scheme introduced mandatory pre-notice safeguards, inquiry where required, a hearing opportunity, reasoned decision-making, and revised time-limits and sanction requirements. The SC held that such old-form notices had to be dealt with under the substituted framework rather than sustained as issued. Exercising Article 142, it directed that the notices be treated as section 148A(b) show-cause notices, required supply of relied-upon material, and permitted the reassessment process to continue under the amended procedure with all statutory and legal defences kept open.

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Issues: (i) Whether reassessment notices issued on or after 01.04.2021 under the unamended provisions could survive after substitution of sections 147 to 151 of the Income-tax Act, 1961 by the Finance Act, 2021; (ii) Whether such notices ought to be treated as notices under section 148A(b) and the reassessment process permitted to continue under the substituted regime.

Issue (i): Whether reassessment notices issued on or after 01.04.2021 under the unamended provisions could survive after substitution of sections 147 to 151 of the Income-tax Act, 1961 by the Finance Act, 2021.

Analysis: The substituted reassessment scheme introduced by the Finance Act, 2021 was held to be a remedial and beneficial change intended to simplify reassessment procedure, reduce litigation, and protect assessee rights. The new regime introduced a mandatory pre-notice procedure, including inquiry where required, opportunity of hearing, consideration of the reply, a reasoned order, and fresh time-limits and sanction requirements. The notices issued after 01.04.2021 under the old framework were therefore inconsistent with the substituted law.

Conclusion: The unamended section 148 notices issued after 01.04.2021 could not stand as such and had to be dealt with under the substituted reassessment framework.

Issue (ii): Whether such notices ought to be treated as notices under section 148A(b) and the reassessment process permitted to continue under the substituted regime.

Analysis: Instead of annulling all proceedings, the Court invoked Article 142 to preserve the reassessment machinery while ensuring compliance with the amended safeguards. The impugned notices were directed to be treated as show-cause notices under section 148A(b), the Revenue was required to supply the relied-upon material, and the Assessing Officers were directed to complete the section 148A process and thereafter proceed in accordance with the substituted provisions. The assessees were left free to raise all available statutory and legal defences.

Conclusion: The notices were deemed to be section 148A(b) show-cause notices and the reassessment proceedings were permitted to continue under the substituted law.

Final Conclusion: The common High Court judgments quashing the reassessment notices were modified, the matters were partly allowed, and the reassessment exercises were salvaged by routing them through the amended statutory procedure with all defences kept open.

Ratio Decidendi: Reassessment notices issued after the substitution of sections 147 to 151 by the Finance Act, 2021 must be dealt with under the new statutory scheme, and where old-form notices were issued bona fide during the transition, they may be treated as section 148A(b) notices so that proceedings continue in conformity with the amended safeguards.

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