'Ashish Agarwal' Judgment Can’t Be Read As Mandating Continuance Of Notices Not Forming Subject Matter Of Challenge Or Vacation Of Assessments: Delhi HC

The Delhi High Court observed that the judgment of the Supreme Court in the case of Union of India and Ors. v. Ashish Agarwal (2023), cannot be read as mandating a continuance or reinvention of notices which have not formed subject matter of challenge or a vacation of assessments.

The Court observed thus in a writ petition filed by Genpact India Private Limited against the reassessment action pertaining to Assessment Year (AY) 2015-16 initiated pursuant to an order passed under the Income Tax Act, 1961 (ITA).

A Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja emphasised, “Ashish Agarwal had mandated a revival of notices which had been struck down by various High Courts and modified the judgments rendered in respect of those notices. Consequent to the decision of the Supreme Court, those judgments came to be modified with the notices being revived and ordained to be treated as having been issued under Section 148A(b). We are thus of the firm opinion that the said decision cannot be read as mandating a continuance or reinvention of notices which had not formed subject matter of challenge or a vacation of assessments which may have been made.”

The Bench said that the accused had not instituted any legal proceedings before any court to assail the notice, nor was it a party to the batch of writ petitions which came to be ultimately allowed by the Court in terms of its judgment in the case of Man Mohan Kohli v. Assistant Commissioner of Income Tax and Anr (2021). It added that there was no declaration of invalidity which came to be rendered in respect of the notice issued to the accused.

Advocate Sachit Jolly appeared for the petitioner while SSC Gaurav Gupta appeared for the respondents.

In this case, the principal ground on which the reassessment action was challenged before the Court was of the same infracting the First Proviso to Section 149(1) of the ITA and being barred by the prescription of limitation which applies. It was the submission of the counsel for the petitioner/accused that a reassessment action for AY 2015- 16 could have been initiated only up to March 31, 2022. It was thus contended that the action for reassessment which was commenced pursuant to the Section 148A(b) notice cannot be countenanced and is liable to be quashed.

From the side of the respondents, it was the contention that the reassessment action was commenced pursuant to a notice referable to Section 148 of ITA. According to the counsel, since the respondents were obliged to undertake a course correction in light of the decision rendered in Ashish Agarwal case, the subsequent notice under Section 148A(b) was issued and would be deemed to be in continuation and substitution of the original Section 148 notice.

The High Court in view of the above facts, elucidated, “We consequently find ourselves unable to read Ashish Agarwal as a decision which deprived the assessee of the right to question the initiation of reassessment on grounds based on the First Proviso to Section 149(1). We also find ourselves unable to construe those directions as being intended to reinvent the wheel or reverse those proceedings in respect of which no challenge had ever been mounted. Viewed in light of the above, we find ourselves unable to recognise the notice dated 27 May 2022 as a continuation of the original Section 148 notice.”

The Court further said that, although the petitioner neither assailed the original notice nor obtained a declaration of invalidity, it was the respondents who chose to commence proceedings afresh by issuing the notice.

“Regard must also be had to the fact that once an assessee had chosen to flow along with a notice issued in accordance with the erstwhile regime, participate in those proceedings by filing a return or suffer an assessment, it would have been legally impermissible for it to assail the reassessment action subsequently on grounds which were taken note of in Man Mohan Kohli or Ashish Agarwal”, it observed.

While parting with the judgment, the Court noted that, although the petitioner had while responding to the original Section 148 notice alluded to the amended statutory regime which had come into existence and had placed the Assessing Officer (AO) on notice of an obligation to follow the procedure as prescribed under Section 148A, however, no legal challenge seeking to impugn the action commenced by virtue of the notice was ever instituted.

“The reassessment action also did not come to be interdicted by any order or injunction passed by a court. This was, therefore, clearly not a case where the subsequent notice under section 148A(b) could be countenanced to be in continuance or substitution of the original notice. The substitution of original notices was one which Ashish Agarwal had provisioned for in respect of notices which had been impugned before various High Courts and had come to be quashed”, it also remarked.

The Court said that no fetter operated upon the AO to take remedial steps and follow or adopt the procedure as prescribed by Section 148A prior to March 31, 2022 even though the AO was duly apprised and placed on notice of the aspects, it failed to take any corrective action.

“We also find that the petitioner had merely asserted that the notice of 30 June 2021 was liable to be withdrawn as opposed to being placed in abeyance. In fact it had been submitted on its behalf that in case the notice of 30 June 2021 was proposed to be proceeded with, they should be provided the reasons underlying the formation of opinion that income had escaped assessment. It had also furnished a return pursuant to that notice. We thus find ourselves unable to sustain the action impugned before us”, it concluded.

Accordingly, the High Court allowed the petition and quashed the impugned notice, order, and proceedings.

Cause Title- Genpact India Private Limited v. Assistant Commissioner of Income Tax (Neutral Citation: 2023:DHC:6849-DB)

Appearance:

Petitioner: Advocates Sachit Jolly, Disha Jham, Soumya Singh, Rishabh Malhotra, Devansh Jain, Raghav Dutt, Aditya Rathore, and Abhudaya Shankar.

Respondents: SSC Gaurav Gupta, Advocates Shivendra Singh and Yojit Pareek.

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