Validity of re-assessment notice dated 31 March 2021 challenged; prior judgment quashed notices from 1 April 2021 onward for procedural noncompliance

Challenge concerns applicability of a prior judgment quashing reassessment notices for non-compliance with procedural amendments introduced by the Finance Act, 2021; the judgment invalidated notices issued on or after 1 April 2021 for failure to follow the mandatory procedure, while notices issued before 1 April 2021 remain unaffected. The court noted omission that a notice dated 31 March 2021 for Assessment Year 2015-16 had not been brought to its attention and issued notice for clarification as to whether the earlier judgment applies to that notice, leaving the legal effect of pre-1 April notices intact.

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Issues: Whether the Court's judgment dated 15 December 2021 quashing notices under Section 148 of the Income-tax Act, 1961 applies to the reassessment notice dated 31 March 2021 (i.e., whether notices issued on or after 1 April 2021 only are affected).

Analysis: The Court had earlier quashed notices issued under Section 148 of the Income-tax Act, 1961 which were issued on or after 1 April 2021 on the ground that the respondents had not followed the mandatory procedure introduced by the Finance Act, 2021. The present application sought clarification because the notice dated 31 March 2021 was not drawn to the Court's attention previously. The Court examined the temporal application of the Finance Act, 2021 requirement and delineated the cut-off date for notices affected by the procedural defect.

Conclusion: The earlier judgment quashing Section 148 notices applies only to notices issued on or after 1 April 2021; notices issued prior to 1 April 2021 (including the notice dated 31 March 2021) were not quashed. The clarification application is disposed of accordingly, resulting in a partial favourable outcome for the assessee.

Ratio Decidendi: The mandatory procedural requirements introduced by the Finance Act, 2021 affect the validity of reassessment notices only prospectively from 1 April 2021; non-compliance renders notices issued on or after that date liable to be quashed.

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