TaxTMI 
TaxTMI 
2024 (9) TMI 655
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....pplies. It was the submission of Mr. Jolly, learned counsel for the writ petitioner, that a reassessment action for AY 2015-16 could have been initiated only up to 31 March 2022. It was thus contended that the action for reassessment which was commenced pursuant to the Section 148A (b) notice dated 27 May 2022 cannot be countenanced and is liable to be quashed. 3. From the side of the respondents, it was the contention of Mr. Gupta that the reassessment action was commenced pursuant to a notice referable to Section 148 of the Act dated 30 June 2021. According to learned counsel, since the respondents were obliged to undertake a course correction in light of the decision rendered by the Supreme Court in Union of India and Ors. vs. Ashish Agarwal (2023) 1 SCC 617, the subsequent notice under Section 148A (b) came to be issued and would be deemed to be in continuation and substitution of the original Section 148 notice. According to Mr. Gupta, when viewed in the aforesaid light, it would be apparent that the action stands saved by virtue of the directions framed by the Supreme Court. It is the aforenoted contentions which fall for our consideration. 4. For the purposes of disposal o....
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....at the aforesaid share transfer was a ploy to avoid tax. 9. The AO also took note of ERKS subsequently amalgamating with Genpact India pursuant to a Scheme of Arrangement which came to be sanctioned by the High Court of Hyderabad and Telangana in terms of an order dated 17 August 2015. The respondents also picked up aspects pertaining to repayments made by ERKS in respect of Non-Convertible Debentures as well as interest thereon over the course of several years. It was in this connection alleged that funds were remitted in the form of principal payment of liabilities and a declaration of dividend thus avoided. This, according to the respondents, resulted in deviation of taxes and dividend payout being camouflaged as principal payments. It was thus alleged that since no dividend distribution tax had been deducted, the petitioner had evaded taxes which were otherwise liable to be paid. 10. Although the reasons forming the basis for the belief that income chargeable to tax for AY 2015-16 had escaped assessment may have been originally drawn, the same have not been placed on our record. However, we proceed on the basis that the original Section 148 notice was premised on the aforesai....
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....eme Court. It was those set of appeals which formed the subject matter of Ashish Agarwal. 16. While disposing of those appeals, the Supreme Court firstly took note of the salutary amendments to the reassessment procedure which had come to be introduced by Finance Act, 2021. This becomes evident from a reading of paragraphs 20, 21 and 22 of the report and which are reproduced hereinbelow: "20. Therefore, all safeguards are provided before notice under Section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per Section 148-A (a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under Section 148-A (b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. 21. Substituted ....
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....ve been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of the IT Act, the High Courts ought to have passed an order construing the notices issued under the unamended Act/unamended provision of the IT Act as those deemed to have been issued under Section 148-A of the IT Act as per the new provision Section 148-A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of Sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of Sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law." 18. Proceeding further and in its quest to salvage the situation and carve out an equitable solution, the Supreme Court proposed that the judgments of the various High Court be modified in the following terms:- "25. Therefore, we propose ....
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....rs of the Revenue in issuing approximately 90,000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. 27. Therefore, we have proposed to pass the present order with a view to avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA. 28. In view of the above and for the reasons stated above, the present appeals are allowed in part. The impugned common judgments and orders [Ashok Kumar Agarwal v. Union of India, 2021 SCC OnLine All 799] passed by the High Court of Judicature at Allahabad in WT....
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....ar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that the present order shall also govern the pending writ petitions, pending before various the High Courts in which similar notices under Section 148 of the Act issued after 1-4-2021 are under challenge. 30. The impugned common judgments and orders [Ashok Kumar Agarwal v. Union of India, 2021 SCC OnLine All 799] passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only." 20. As is apparent from a reading of the aforesaid passages of the judgment in Ashish Agarwal, the Supreme Court duly noticed the streamlined procedure which had come to be introduced by Section 148A and which has also adopted various salutary safeguards insofar as assessees were concerned. It also took note of the substituted Section 149 and the additional safeguards which had come to be adopted in that provision as it stood in its amended form. 21. On an ov....
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.... objection proceeded along the following lines. 25. Section 149 in its amended form reads as follows:- "149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021: ..........................." 26. In terms of the First Proviso appen....
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.... or the Supreme Court itself. The directions in Ashish Agarwal were, as noted above, intended to resolve the impasse which ensued in light of the conflicting views expressed by different High Courts, the assessees being deprived of the salutary safeguards which Finance Act, 2021 had introduced in respect of reassessment as well as the element of public interest which warranted the Revenue being enabled to take curative action and thus saving the reassessment notices which had been struck down by High Courts. 31. However, and undisputedly, the petitioner had not instituted any legal proceedings before any court to assail the notice dated 30 June 2021 nor was it a party to the batch of writ petition which came to be ultimately allowed by this Court in terms of its judgment in Man Mohan Kohli. There was thus no declaration of invalidity which came to be rendered in respect of the notice issued to the petitioner. There was in our case no judgment rendered inter partes which may have struck down the reassessment notice as being invalid or contrary to the statutory regime which came into effect from 01 April 2021. The notice of 30 June 2021 thus remained unscathed and unimpacted. Conseq....
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....bsequently on grounds which were taken note of in Man Mohan Kohli or Ashish Agarwal. The law would expect and require an objection along those lines being taken and raised at the outset and at the first available opportunity. This more so since that challenge would have been only in respect of the statutory obligation of the respondents to comply with the procedure prescribed by clauses (b) and (d) of Section 148A. The right to assail the reassessment on other grounds such as absence of material, change of opinion, a failure to form the requisite opinion would, in any case, survive. We consequently find ourselves unable to accept the submissions addressed by the respondents in this regard. 35. We note that while dealing with a similar challenge to a reassessment action which had been commenced post 01 April 2021 and where the assessee had failed to adopt or pursue a legal recourse to that action as well as the right of the respondents to recommence action on a purported reading of Ashish Agarwal had formed subject matter of our consideration in Anindita Sengupta vs. Assistant Commissioner of Income Tax, Circle 61(1) 2024 SCC OnLine Del 2296. While dealing with the asserted right o....
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....ndered by our Court in Man Mohan Kohli perhaps constituted the solitary exception in the sense of having left a window open to the respondents to draw proceedings afresh. A majority of the High Courts', however, do not appear to have made such a provision or provide the Revenue with a right of recourse. The Supreme Court was thus faced with a peculiar and an unprecedented situation where the Revenue was rendered remediless to assess escaped income even though material may have merited such an action being pursued solely on account of a misinterpretation of the correct legal position. It was these factors which clearly appear to have weighed upon the Supreme Court to mould and sculpt a procedure which would strike a just balance between competing interests. 24. In order to carve out an equitable solution which would redress the deadlock, the Supreme Court invoked its powers conferred by Article 142 of the Constitution and ordained that all such notices would be treated as being under Section 148A (b) and for proceedings to be taken forward in accordance with law thereafter. The direction so framed thus enabled the assessee to question the assumption of jurisdiction under Secti....
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....s......". Our view of the judgment being confined to proceedings at the stage of notice is further fortified from the Supreme Court providing in para 8 of the report that "The respective impugned Section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the Income Tax Act as substituted by Finance Act, 2021 and treated to be show cause notices in terms of Section 148A (b)." As would be manifest from the aforesaid extract, the emphasis clearly was on the notices which formed the subject matter of challenge before various High Courts' and the aim of the Supreme Court being to salvage the process of reassessment. This is further evident from the Supreme Court observing that the AO would thereafter proceed to pass orders referable to Section 148A (d). We consequently find ourselves unable to construe Ashish Agarwal as an edict which required completed assessments to be invalidated and reopened. Ashish Agarwal cannot possibly be read as mandating the hands of the clock being rewound and reversing final decisions which may have come to be rendered in the interregnum. 26. Regard must also be had to the undisputed fact that the p....
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....essee may have chosen to desist from adopting or pursuing a legal recourse to assail the commencement of reassessment under the erstwhile regime. 37. The ambit of the First Proviso to Section 149 (1) was an aspect which had arisen for our consideration in Manju Somani vs. Income-tax Officer and Ors. 2024 SCC OnLine Del 5292. Dealing with a similar challenge based on the prescription of limitation, we had in Manju Somani held as under:- "12. As is manifest from the above, the proviso to section 149 clearly bids us to go back in point of time and examine whether a proposed reassessment pertaining to a period prior to April 1, 2021 would sustain based on the time frames as they existed prior to the promulgation of the Finance Act, 2021. The proviso embodies a negative command restraining the respondents from issuing a notice under section 148 in respect of an assessment year prior to April 1, 2021, if the period within which such a notice could have been issued in accordance with the provisions as they existed prior thereto had elapsed. This is manifest from the provision using the expression "no notice under section 148 shall be issued" if the time limit specified in the relevant ....