The Supreme Court while dealing with notices passed under the impugned Section 148 of the IT Act observed that should have been deemed to be issued under Section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show cause notices in terms of section 148A(b). The Bench further observed that the new provisions substituted by the Finance Act 2021 were remedial and benevolent in nature and were substituted with the objective to protect the rights and interests of the assessee and the same was in the interest of the public.
A Division Bench of Justice MR Shah and Justice B.V. Nagarthana while dealing with the impugned common judgment and order passed by the High Court of Allahabad whereby the High Court allowed the instituted writ petitions and quashed the revenue notice on the ground that the same were bad in law with the advent of the amendment by the Finance Act, 2021, which amended the Income Tax Act by introducing new provisions i.e. Sections 147 to 151 w.e.f from April1, 2021, observed that notices issued under the impugned Section 148 should have been deemed to be issued under Section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show cause notices in terms of section 148A(b).
Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the High Court of Allahabad whereby the High Court allowed the instituted writ petitions and quashed the revenue notice on the ground that the same were bad in law with the advent of the amendment by the Finance Act, 2021, which amended the Income Tax Act by introducing new provisions i.e. Sections 147 to 151 w.e.f from April1, 2021, the Revenue preferred the present appeals.
It was noted by this Court that approximately 90,000 such reassessment notices under section 148 of the unamended Income Tax Act were issued by the Revenue after April 1, 2004 which were the subject matter of more than 9000 writ petitions before various High Courts across the country and by different judgments and orders, the High Courts have took a similar view and set aside the respective reassessment notices issued under section 148 on similar grounds.
Despite the substituted sections 147 to 151 of the Income Tax Act, 1961 by the Finance Act, 2021 coming into force on 1st April, 2021, according to ASG, the Revenue issued approximately 90,000 reassessment notices to the respective assessees under the erstwhile sections 148 to 151 thereof by relying on explanations in the Notifications dated 31st March, 2021 and 27th April, 2021. The said reassessment notices were the subject matter of writ petitions before the various High Courts.
The Apex Court observed that it was not a disputed fact that by substitution of Sections 147 to 151 of the Income Tax Act, by the Finance Act 2021 was a radical and reformative change, however it also gave rise to several litigations and reopening were inter alia challenged on the grounds namely, no valid (1) “reason to believe” (2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer and ors was not followed, the Court submitted.
On the other hand, the Apex Court t further reanalyzed the amendments made to the IT Act and reiterated that the new provisions substituted by the Finance Act 2021 were remedial and benevolent in nature and were substituted with the objective to protect the rights and interests of the assessee and the same was in the interest of the public. Thus, in the words of the Court it was submitted that “ 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”.
Meanwhile the Court also noted that, at the same time, the judgments of several High Courts would result in no reassessment proceedings at all even if the same is permissible under the Finance Act, 2021. It was further observed that due to 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 view of the same, the Court opined that the same should have not been issued under the unamended Act and should have been issued under the substituted provisions of Sections 147 to 151 of the Act as per the Finance Act, 2021. It was further observed that there was genuine non- application of the amendments as the officers of the Revenue must be under the impression that the amendments may not have been enforced.
The Court in view of the same observed that some leverage should have been given by the High Court with respect to the same. Thus, the Top Court was of the opinion that 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 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.
In light of the same, the Court observed that the notices
issued under the impugned Section 148 to the respective assesses, which
was the subject matter in the present appeals, should have been deemed
to be issued under Section 148A of the IT Act as substituted by the
Finance Act, 2021 and construed or treated to be show cause
notices in terms of section 148A (b). It was further observed
that the assessing officer shall, within thirty days from today
provide to the respective assesses information and material
relied upon by Revenue, so that the assessee can reply to the show cause
notices within two weeks thereafter.
In addition to this it was observed that the requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A (a) was dispensed with as a onetime measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from April 1, 2004 till date, including those which have been quashed by the High Courts.
The Court further submitted that the same 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 April1, 2004 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. In the words of the Court “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 the 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 April 1, 2004 are under challenge”.
Accordingly, the present appeals were partly allowed.
Case name: UNION OF INDIA AND ORS Vs. ASHISH AGARWAL
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