Hon. Supreme Court Validates Section 148 Notices issued after 31st March 2021
Various High Courts had quashed reassessment notices issued u/s 148 of the act, on the ground that the same are bad in law in view of the new reassessment procedure, against such orders the Revenue had preferred an appeal before The Hon. Supreme Court.
Contention raised by the Revenue:
Approximately 90,000 reassessment notices have been issued under the old scheme of reassessment, various High Courts have quashed the reassessment notices under erstwhile 148 of the Income Tax Act, 1961.
Observations of Hon. Supreme Court:
i) Through the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings.
ii) The Old Scheme of reassessment gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as:
(a) no valid “reason to believe” ;
(b) no tangible/reliable material/information in possession of the AO leading to formation of belief that income has escaped assessment;
(c) no enquiry being conducted by the AO prior to the issuance of notice;
(d) reopening is based on change of opinion of the AO; and
(e) procedure laid down in GKN Driveshafts 1 SCC 72 not followed.
iii) Under the old scheme reopening was permissible for a maximum period up to six years which has been reduced to three years in the new scheme.
iv) Under the new scheme, no notice under section 148 of the IT Act can be issued without following the procedure prescribed under section 148A of the IT Act which has streamlined and simplified the procedure for reassessment.
v) It provides that before issuing any notice under section 148, the AO shall:
(a) Conduct an enquiry;
(b) provide an opportunity of being heard to the assessee;
(c) consider the reply of the assessee; and
(d) decide, on the basis of material available on record including reply of the assessee, as to whether it is a fit case for reopening or not;; and
(e) pass a specific order within the time stipulated.
vi) The judgments of the High Courts would result in no reassessment proceedings, The Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated.
vii) It is true that the impugned notice(s) ought to have been issued as per the new reassessment procedure
viii) It appears to be genuine non application of the amendments as the Revenue officers may have been under a bonafide belief that the amendments may not yet have been enforced.
ix) that instead of quashing the reassessment notices, the High Courts ought to have passed an order construing the notices issued under the old scheme as those deemed to have been issued under section 148A as per the new scheme and the Revenue ought to have been permitted to proceed further.
x) we modify the judgments passed by the respective High Courts as under:
(a) The respective impugned section 148 notices issued shall be deemed to have been issued u/s. 148A and treated to be show cause notices in terms of section 148A(b).
(b) AO shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter;
(c) The requirement of conducting enquiry u/s. 148A(a) be dispensed with as a onetime measure w.r.t 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;
(d) AO shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b);
(e) All the defences which may be available to the assessee u/s 149 or under the Finance Act, 2021 and in law are kept open;
(f) The present order shall modify judgments passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act
xi) This order will strike a balance between the rights of the Revenue as well as the assesses
xii) The Revenue may not suffer as ultimately it is the public exchequer which would suffer.
xiii) 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 all
judgments passed by various High Courts across the country and shall be applicable to PAN INDIA.
CA Milind Wadhwani
DISA(ICAI), FAFD(Cert.), CCCA(Cert.), Research (Ph.D.) Scholar
Mobile +91 9826273333
Mail ID: – MILIND.WADHWANI20@GMAIL.COM
Posted on: May 4th, 2022