Instead Of Quashing 90000 Reassessment Notices Issued U/s 148 Of IT Act, Construe Them To Be Issued U/s. 148A – SC

A two-judge Bench of Justice MR Shah and Justice BV Nagarathna were adjudicating upon an appeal filed against the order of the Allahabad High Court. The High Court had quashed and set aside the reassessment notices issued by the Revenue after 1^st April 2021 under the unamended Section 148 of the Income Tax Act.

Senior Advocate Mr. CA Sundaram appeared for the Assessee before the Apex Court.

The Supreme Court Bench has also issued various directions concerning these reassessment notices which were also the subject matter of 9000 Writ Petitions filed before various High Courts. All the other High Courts had also taken a similar stance and set aside the reassessment notices.

The Apex Court passed the following directions upon referring to legal provisions and taking into consideration the contentions of both the parties –

i) The notices issued under Section 148 of the Income Tax Act to the assesses shall be deemed to be issued under Section 148 of the IT Act as substituted by the Finance Act 2021 and treated to be show-cause 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) Requirement of conducting any enquiry with the prior approval of the specified authority under Section 148A(a) be dispensed with as one-time measure vis-à-vis those notices issued under Section 148 of the unamended Act from 1^st April 2021 till date including those quashed by the High Court;

iii) The AOs shall pass orders in terms of Section 148A(d) after following due procedure as required under Section 148A(b); and

iv) All the defenses 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.

The Court also added that in order to avoid filing further appeals with approximately 9000 appeals against the similar judgments and orders passed by various High Courts, it has passed this order.

The Bench further also clarified that the order would have PAN INDIA applicability and not just on the impugned order of the High Court.

In this context, the Court further noted -

"The present order 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 01.04.2021 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. 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."

The Court while passing the order was of the opinion that the order would strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the Revenue officers in issuing approximately 90000 reassessment notices, the Revenue may not suffer as ultimately it is public exchequer which would suffer.

The Bench further also observed that new provisions substituted by the Finance Act 2021 are 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 the same being in the public interest.

The Court also held that the High Court 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 1^st April 2021.

However, on the other hand, while holding that the judgments of the High Courts would result in no reassessment proceedings at all, the Bench opined that Revenue could not be made remediless and the object and purpose of reassessment proceedings could not be frustrated.

In this context, the Court held –

"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, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so," the Court held.

Thus, accordingly, the Bench allowed the appeals in part and modified the impugned orders of the Allahabad High Court and all other High Courts.

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