The Supreme Court on Wednesday ruled in favour of the Income Tax Department regarding the re-assessment controversy. It held that all notices issued under old Section 148 will be deemed to have been issued under Section. 148A.
This ruling has been made on the special review petition filed by the Centre after three High Courts — Delhi, Allahabad and Rajasthan — quashed the notices running into hundreds, while the Chhatishgarh High Court held them correct.
A division bench of Justices M R Shah and B V Nagarathna said the Income-tax Officer would follow the procedure laid down in line with amendments made in the Finance Act, 2021. Defence will be available to both the Tax Department and Assessee under amended Section 149.
In exercise of the power under Article 142 of the Constitution, all High Court orders stand modified and this judgment of Supreme Court to substitute the same. The Income Tax Department will not be required to file any more appeals, thus saving filing of more than 9,000 appeals. The apex court ruling will apply to all pending writs in different High Courts.
Earlier this year, after the Delhi and Allahabad High Courts, the Rajasthan High Court quashed assessment notices issued under Section 148 of the Income Tax Act after April 1, 2021, and also upheld the single judge bench ruling in a similar matter.
“In our understanding, by virtue of notifications dated March 31, 2021, and April 1, 2021, issued by CBDT, substitution of reassessment provisions framed under the Finance Act, 2021, were not deferred nor could they have been deferred. The date of such amendments coming into effect remained April 1, 2021,” a division bench of Justices Samir Jain and Akil Kureshi had said. Further, it termed the notices impugned in the respective petitions as invalid and bad in law. “The same are quashed and set aside,” it said.
Substitution of provisions
Moving against reassessment notices, the petitioners had contended that since the notices were issued after April 1, 2021, the same could be done only in line with the provisions contained in the Act effective from the date. They submitted that since in the present cases notices were issued under the old provisions, which have already been substituted, they are invalid. There were petitions by the Income Tax Department against the ruling of a single judge bench, which had quashed some of the notices earlier.
The litigation involves the substitution of provisions related with Sections 147 (income escaping assessment), 148 (issue of notice where income has escaped assessment), 149 (time limit for notice) and 151 (sanction for issue of notice) through Finance Act 2021. The act also inserted a new Section 148 A, which prescribes conducting an inquiry, providing opportunity before issue of notice under Section 148.
In 2020, the government had extended the due date for issue of notices from March 31 to June 30, 2020. Similarly, in 2021, the date was first extended to April 31 and then to June 30, 2021. In petitions before the High Courts, it was argued that taxation and other laws (Relaxation and Amendment of Certain Provisions) Act, 2020, authorise the Centre to only extend the time limits and nothing more. It was further stated that the Income Tax Department cannot indirectly extend the operation of the old provisions of the Act beyond March 31, 2021, under the guise of a clarification under delegated legislation.
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