Supreme Court Saves Over 90,000 Income Tax Reassessment Notices Issued After 2021 Amendment By Deeming Them As Notices Under Section 148A

The Supreme Court, on Wednesday, directed that reassessment notices under Section 148 of the unamended Income Tax Act which were issued beyond 01.04.2021 (the effective date of amendment of the said provision by the Finance Act, 2021) to be deemed to have been issued under Section 148A of the IT Act as substituted by the Finance Act, 2021 and be construed as show cause notices in terms of section 148A(b). While deciding an appeal against an order of the Allahabad High Court which had set aside the reassessment notices issued by the Revenue after 01.04.2021, under unamended Section 148 of the Income Tax Act, a Bench comprising Justices M.R. Shah and B.V. Nagarathna passed a slew of directions in respect of such reassessment notices. After 01.04.2021, about 90,000 reassessment notices were issued by the Revenue under Section 148 of the unamended Income Tax Act ("IT Act"). Such issuance was challenged in more than 9000 writ petitions before various High Courts across the country. Taking a similar view, various High Courts had set aside the said reassessment notices. After hearing submissions and on perusal of statutory provisions and Government notifications, the Bench partly allowed the appeals and exercising power under Article 142 of the Constitution of India directed the orders of the High Court to be modified as under - The notices issued under unamended Section 148, shall be deemed to have been issued under Section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be showcause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assesees can reply to the showcause notices within two weeks thereafter; The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a onetime measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise, holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required; The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted); All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available. Order to have Pan-India effect; not just to impugned judgmentsThe Court clarified that the above directions will have a pan-India effect and not just on the impugned judgments. This means, the directions will govern all other similar notices issued under the previous regime."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"."The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge".Directions issued to strike balance between revenue interest and rights of assesseeThe Bench was of the opinion that the above-enumerated modifications would strike a balance between the rights of the Revenue as well as the assesses. It noted that revenue cannot be made to suffer in the present case when it had issued the 90,000 notices bonafide and moreover, if the Revenue is penalised the public exchequer would ultimately suffer.The Parliament introduced reformative changes...

Supreme Court Saves Over 90,000 Income Tax Reassessment Notices Issued After 2021 Amendment By Deeming Them As Notices Under Section 148A

Sohini Chowdhury

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