Reassessment under amended Sections 147, 148 and 148A quashed for invalid notice issued without mandatory procedure

The ITAT Delhi set aside the reassessment framed u/s 147 on the ground of invalid initiation under the amended reassessment regime. The notice u/s 148, though digitally signed on 31.03.2021, was issued/uploaded on the ITBA portal on 01.04.2021, making it a notice governed by the Finance Act, 2021 amendments as clarified by the SC in Ashish Agarwal. Consequently, the AO was required to comply with the mandatory procedure u/ss 148 and 148A, including enquiry u/s 148A(a), opportunity of hearing u/s 148A(b), and order u/s 148A(d) with prior approval. As these requirements were not followed, the reassessment was held void and the assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a notice under section 148 of the Income-tax Act, 1961, digitally signed on 31.03.2021 but issued through the ITBA portal on 01.04.2021 is governed by the unamended section 148 or by the amended regime under sections 148 and 148A inserted by the Finance Act, 2021 with effect from 01.04.2021.

1.2 If governed by the amended regime, whether non-compliance with the mandatory procedure prescribed under sections 148 and 148A renders the reassessment order under section 147 invalid and void ab initio.

1.3 Whether section 292BB can cure the defect arising from non-following of the amended procedural requirements under sections 148 and 148A.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Applicability of amended sections 148 and 148A and validity of reassessment

Legal framework

2.1 The judgment notes that by Finance Act, 2021, sections 148 and 148A were amended/inserted with effect from 01.04.2021. Under the amended scheme, before issuing notice under section 148, the Assessing Officer must: (i) conduct enquiry, if required, under section 148A(a); (ii) provide an opportunity of being heard to the assessee under section 148A(b); and (iii) pass an order under section 148A(d) with prior approval of the specified authority. The Court also relies on the decision of the Supreme Court in Ashish Agarwal (138 taxmann.com 64) for the proposition that notices issued on or after 01.04.2021 are to be construed within the framework of the amended provisions.

Interpretation and reasoning

2.2 The Tribunal records that the notice under section 148 is digitally signed by the Assessing Officer on 31.03.2021, but the ITBA portal reflects its issuance on 01.04.2021. It emphasizes that the statutory requirement under section 148 is to "issue notice", and therefore the relevant date is the date of issuance, not merely the date of digital signature.

2.3 The date of issuance is determined from the Income Tax Business Application portal, which shows 01.04.2021 as the date the notice was uploaded in the e-filing portal of the assessee. The Departmental Representative could not produce any material to demonstrate that the notice was in fact issued on 31.03.2021, i.e., on the same date it was digitally signed.

2.4 Proceeding on this factual matrix, the Tribunal holds that since the notice under section 148 is issued on 01.04.2021, it must be construed as issued under the amended provisions, i.e., section 148 read with section 148A as inserted by the Finance Act, 2021, in accordance with the law laid down by the Supreme Court in Ashish Agarwal.

2.5 The Tribunal then examines the actual procedure followed by the Assessing Officer and finds that the Assessing Officer proceeded under the unamended law and did not comply with the requirements of the newly inserted section 148A. In particular, there was no enquiry under section 148A(a), no opportunity of being heard under section 148A(b), and no order passed under section 148A(d) with prior approval of the specified authority before issuance of notice under section 148.

2.6 On these facts, the Tribunal concludes that the mandatory "due process under amended law" has not been followed. Since the jurisdiction to reopen under section 147 post 01.04.2021 is conditioned upon strict adherence to the procedure set out in sections 148 and 148A, the reassessment proceedings conducted under the old regime are held to be legally unsustainable.

Conclusions

2.7 The notice under section 148, having been issued on 01.04.2021, is governed by the amended provisions of sections 148 and 148A.

2.8 The Assessing Officer's failure to follow the mandatory procedure laid down in sections 148 and 148A renders the reassessment under section 147 invalid.

2.9 The reassessment order dated 29.03.2022 passed under sections 143(3)/147 is quashed as bad in law and void ab initio; the principal legal ground challenging the validity of reassessment is allowed, and other legal and merits grounds are left unadjudicated as infructuous.

Issue 3: Applicability of section 292BB

Legal framework

2.10 The Department relied on section 292BB to contend that any defect in the notice would be cured.

Interpretation and reasoning

2.11 The Tribunal implicitly rejects this contention by treating the defect not as a mere technical irregularity in service or form of notice but as a foundational jurisdictional lapse-namely, non-compliance with the mandatory pre-condition procedures prescribed by the amended sections 148 and 148A.

2.12 Since the Assessing Officer proceeded entirely under the old regime despite the notice being issued within the amended regime, the defect goes to the root of the assumption of jurisdiction for reassessment and is not curable under section 292BB.

Conclusions

2.13 Section 292BB does not cure the defect arising from failure to follow the mandatory procedure under the amended sections 148 and 148A; the reassessment remains invalid.

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