The above judgement has been passed on 04.05.2022 by Hon’ble Supreme Court in case of Union of India & Ors. Versus Ashish Agarwal CIVIL APPEAL NO. 3005/2022 wherein aggrieved by the judgement of Hon’ble Allahbad High Court, Revenue was under appeal before Hon’ble Supreme Court.
The SLP was filed before Hon’ble Supreme Court in this matter in Feb 2022.
Read earlier High Court order’s to understand the background and facts of the matter:
In the start of the judgement it was mentioned by the court that there were in total 90,000 such notices issued under section 148 after 01.04.2021 which were part of 9000 writ petitions filed in various parts of the country.
Therefore to remove difficulty so that the revenue don’t have to file appeal in all the cases, Hon’ble Supreme Court invoked Article 142 of the Constitution of India on the present case.
What is Article 142 of Constitution of India?
Hon’ble Supreme court is the Apex court of India however, it only has the power to interpret the law and pass a judgement on the matter before them whereas the power to frame law is with the parliament.
However sometimes to provide complete justice by Hon’ble Supreme court article 142 is used by them wherein they have the legislative power also and can frame law.
So similar power has also been used in this case. Relevant extract of Article 142 of Constitution is as under:
“(1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament.
(2) Subject to the provisions of any law made in this behalf by Parliament the Supreme Court shall, as respects the whole of the territory of India, have all and every power to make any order for the purpose of securing the attendance of any person, the discovery or production of any documents, or the investigation or punishment of any contempt of itself.”
Thus, after using this article revenue will not have to file cases in each writ petition and all the cases would be govern by this judgement.
In the judgement Hon’ble Supreme Court has discussed Section 147, 148, 149 and 151 of the Income Tax Act as they stood before the amendment by Finance Act, 2021, Relaxation Act, 2020 and Section 147, 148, 148A, 149 and 151 of the Income Tax Act after amendment by Finance Act, 2021.
Judgement of Hon’ble Supreme Court:
It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act (IT Act) by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings.
Prior to Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in the case of GKN Driveshafts (India) Ltd. (2003) 1 SCC 72.
However, by way of section 148A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under section 148, the assessing officer shall (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the show cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under section 148 of the IT Act and (v) the AO is required to pass a specific order within the time stipulated.
Substituted section 149 is the provision governing the time limit for issuance of notice under section 148 of the IT Act. The substituted section 149 of the IT Act has reduced the permissible time limit for issuance of such a notice to three years and only in exceptional cases ten years.
Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided section 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.
The judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 of the IT Act. The Revenue cannot be made remediless.
It is true that due to a bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced w.e.f. 01.04.2021, under the unamended section 148.
In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021. There appears to be genuine nonapplication of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced.
Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A.
Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under:
(i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be showcause notices in terms of section 148A(b). The respective assessing officers 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;
(ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a onetime measure visàvis 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;
(iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees;
(iv) All the defences which may be available to the assessee under section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and;
(v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not.
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 impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under:
(i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts 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;
(ii) 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 visàvis 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 as observed hereinabove 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;
(iii) 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);
(iv) 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.
Key Takeaways from the above mentioned Supreme Court in relation to 148 notices issued after 01.04.2021:
- The order issued by Hon’ble Supreme court is issued under Article 142 of the constitution and hence applicable PAN India. However, it is still confusing whether the above judgement will only be applicable to those assessee who have filed Writ petition or all the assessee irrespective of whether Writ was filed or not.
- The Supreme court has not completely reversed judgement of High courts, as high courts have also mentioned that AO were free to issue notice under new section 148 wherever available and similarly Apex court has also mentioned that AO can only conduct enquiry under new provisions and as a remedy Supreme court has instead of quashing earlier notice just deemed the already issued under section 148 as show cause notice u/s 148A(b) and have kept all the remedial measures open for assessee in the new reassessment proceedings law wherein assessee can still challenge such 148 notice.
- Further, AO needs to provide information or material relied upon to the assessee within 30 days from the date of this order i.e. till 02.06.2022 and assessee shall reply to it within 2 weeks from the date of receipt of information. This timeline shall become a part of law as order has been issued under article 142 and accordingly assessee while replying to notices needs to check whether the above timelines are followed or not.
- The requirement for conducting an enquiry has been done away with as a one time measure for such cases and as such they were not mandatory.
- After assessee submits response to show cause notice, AO needs to pass order u/s 148A(d) and then if the objections filed by assessee are not found suitable it needs to issue notice u/s 148 against which assessee needs to file Income Tax return. It is to be noted that assessee needs to again file Income tax return even if it has already filed Income Tax return.
- It has been mentioned that all defenses available under new law will be available to the assessee and specifically defense of time line under section 149 of the Income Tax Act. Thus, all the assessee should consider first proviso to section 149(1) and if the notice u/s 148 could not be issued at that time i.e. between 01.04.2021 to 30.06.2021 under the old provision, no notice can be issued now. Considering this notice for AY 2013-14 and AY 2014-15 even cannot be issued under new 148 section even after the judgement by Hon’ble Supreme Court as 6 years have lapsed after 01.04.2021. Similarly for AY 2015-16 also the above defense can be taken as 6 years lapsed on 31.03.2022 and 148 notice will be issued now i.e. in June 2022 and for remaining years one can check the application of limitation of 3 years and 10 years prescribed by the law under the new provision.
- Also, one needs to check whether the information based on which the reassessment has been initiated is a part of criterion of flagged in accordance with the risk management strategy as it is important requirement.
To download the Full Judgement CLICK HERE.
Guidance on above article by:
CA Naman Maloo (C.A., B.Com)
He is currently working as Partner – Direct Tax with a renowned firm in Jaipur having experience in dealing Assessments, Tax Audit, Tax planning for NRI, Business planning and consultation.
E-mail: firstname.lastname@example.org | LinkedIn: Naman Maloo
Disclaimer: The views presented in the above article are personal views of our team and the expert (based on information available on public domain) and has no legal binding. For any legal opinion consult a tax professional.
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