2022 (10) TMI 570 - HC - Income Tax

Supreme Court clarifies Income Tax Act notices, sets procedural guidelines for assessing officers nationwide.

The Supreme Court modified judgments of various High Courts regarding challenges to the legality and validity of notices issued under the Income Tax Act. ... Reopening of assessment u/s 147 - Notice u/s 148A(d) - proceedings initiated by passing order u/s 148A(d) of the Act and issuing notice u/s 148 of the Act in the new regime - as argued procedure laid down under Section 148A of the Act has not been followed, which has rendered the impugned notice null and void - HELD THAT:- The writ petition stands disposed of in terms of the judgment of Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] as held if it is determined by the AO that the impugned notice was handed over to the postal office on or after 1st of April, 2021, for despatch the said notice will be construed as notice under Section 148A(b). Issues:Challenge to the legality and validity of the notice dated 07.04.2021 issued under Section 148 of the Income Tax Act, 1961.Analysis:Issue 1: Challenge to the legality and validity of the noticeThe petitioner challenged the notice issued under Section 148 of the Income Tax Act, 1961, on the grounds that the procedure laid down under Section 148A of the Act was not followed. The petitioner argued that the new provisions inserted by the Finance Act, 2021, aimed to protect the rights of the assessee and ensure public interest. The Supreme Court observed that the benefit of the new provisions should be made available even for proceedings related to past assessment years if the notice was issued after 01.04.2021. However, the Court noted that judgments of various High Courts could potentially lead to no reassessment proceedings at all, which would frustrate the purpose of reassessment. Therefore, the Court proposed modifications to allow reassessment proceedings to continue under the substituted provisions of sections 147 to 151 of the IT Act, subject to compliance with procedural requirements and defenses available to the assessee.Issue 2: Modification of judgments by the Supreme CourtThe Supreme Court allowed the Civil Appeals in part and modified the judgments of various High Courts. The impugned notices issued under unamended Section 148 of the IT Act were deemed to have been issued under Section 148A of the IT Act as substituted by the Finance Act, 2021. The assessing officers were directed to provide information and material to the assessees within a specified timeframe for them to reply. The requirement of conducting an enquiry with prior approval was dispensed with as a one-time measure. Assessing officers were instructed to pass orders as per Section 148A(d) and continue with reassessment proceedings under the substituted provisions of the IT Act, subject to all procedural requirements and defenses available to the assessee.Issue 3: Applicability of the Supreme Court's decisionThe Supreme Court clarified that its decision would be binding nationwide on cases where similar notices were set aside by High Courts or were pending adjudication. The decision was passed under Article 142 of the Constitution of India to avoid further appeals and burden on the Court. The order was applicable to pending writ petitions challenging notices issued after 01.04.2021. The judgment of the Supreme Court was implemented through an instruction issued by the Central Board of Direct Taxes (CBDT), ensuring compliance with the decision in all relevant cases.Conclusion:The writ petition was disposed of in accordance with the judgment of the Supreme Court, and all contentions were kept open. The miscellaneous applications pending were closed without any costs imposed. The decision of the Supreme Court in Ashish Agarwal was binding nationwide and provided clarity on the procedure for reassessment proceedings under the amended provisions of the Income Tax Act, 1961.