2022 (6) TMI 752 - HC - Income Tax

Supreme Court: Notices under Income Tax Act amended, allowing for reassessment

The Supreme Court held that notices issued under Section 148 of the Income Tax Act post 01.04.2021 but under the unamended provision should be deemed ... Validity of Reopening of assessment - Scope of new provision section 148A - Validation of notices after quashed by various High Courts - conducting of enquiries or issuance of show-cause notice or passing of order under section 148A - impugned notices have been challenged in the present batch of writ petitions on the ground that the procedure laid down under Section 148A of the Act has not been followed, which has rendered the impugned notices null and void - HELD THAT:- As decided in UNION OF INDIA & ORS. VERSUS VERSUS ASHISH AGARWAL [2022 (5) TMI 240 - SUPREME COURT] judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151. Finally the Civil Appeals were allowed in part and judgments of the various High Courts have been modified and substituted. In v iew of the decision of the Apex court, the present batch of writ petitions would stand disposed of in terms of the judgment of the Supreme Court in Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT]. Issues involved:Challenge to the legality and validity of notices issued under Section 148 of the Income Tax Act, 1961 post 01.04.2021 but issued under the unamended provision of Section 148.Analysis:The writ petitions challenged the notices issued by the assessing officer under Section 148 of the Income Tax Act, 1961, post 01.04.2021, but issued under the unamended provision of the Act. The petitioners contended that the procedure laid down under Section 148A of the Act, inserted by a recent amendment effective from 01.04.2021, was not followed. Section 148A mandates the assessing officer to conduct an inquiry with the approval of the specified authority before issuing any notice under Section 148, provide an opportunity of hearing to the assessee, consider the assessee's reply, and decide whether it is a fit case for reopening before issuing a notice under Section 148. The petitioners argued that the failure to follow the procedure under Section 148A rendered the impugned notices null and void.The Supreme Court, after analyzing the provisions of the Act from Sections 147 to 151, particularly Section 148A, observed that the new provisions substituted by the Finance Act, 2021 aimed to protect the rights and interests of the assessee and were in public interest. The Court agreed with various High Courts that the benefit of the new provisions should be available for proceedings relating to past assessment years if the Section 148 notice was issued on or after 01.04.2021. However, to prevent a complete halt in reassessment proceedings, the Court proposed modifications to the judgments of the High Courts. The Court directed that the impugned Section 148 notices issued under the unamended Act should be deemed to have been issued under Section 148A of the Act as per the new provision, allowing the Revenue to proceed with reassessment under the substituted provisions of Sections 147 to 151, subject to compliance with procedural requirements and defenses available to the assessee.The Supreme Court clarified that its decision was applicable nationwide and binding on all similar cases where notices issued under Section 148 after 01.04.2021 had been set aside by High Courts or were pending adjudication. The Court passed the order under Article 142 of the Constitution of India to avoid further appeals by the Revenue and to streamline the process. The Court's decision was to govern pending writ petitions challenging similar notices issued post 01.04.2021. The Central Board of Direct Taxes issued instructions for implementing the Supreme Court's judgment, which the Court duly noted. Consequently, the writ petitions were disposed of in line with the Supreme Court's judgment in Ashish Agarwal, with no order as to costs.