Union of India & Ors. VS Ashish Agarwal

Union of India & Ors. VS Ashish Agarwal - Supreme Court Case 2022

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3005/2022
Union of India & Ors.             ..Appellant (S)
Versus
Ashish Agarwal                            ..Respondent (S)
With 
Civil Appeal No. 3006/2022
With 
Civil Appeal No. 3009/2022
With 
Civil Appeal No. 3007/2022
With 
Civil Appeal No. 3008/2022
With 
Civil Appeal No. 3010/2022
With 
Civil Appeal No. 3013/2022
With 
1
Civil Appeal No. 3011/2022
With 
Civil Appeal No. 3012/2022
With 
Civil Appeal No. 3014/2022
With
Civil Appeal No. 3015/2022
With 
Civil Appeal No. 3016/2022
With 
Civil Appeal No. 3017/2022
With 
Civil Appeal No. 3019/2022
With 
Civil Appeal No. 3020/2022
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 6448/2022)
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 5381/2022)
With 
2
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 5079/2022)
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 6092/2022)
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 6534/2022)
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 6158/2022)
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 6316/2022)
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 6281/2022)
With 
    Civil Appeal No.                    /2022
(arising out of SLP(C) No. 6545/2022)
With 
    Civil Appeal No.                /2022
(arising out of SLP(C) No. 6038/2022)
J U D G M E N T 
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M. R. Shah, J.
Leave granted in  SLP  (C) Nos. 6448/2022, 5381/2022,
5079/2022,   6092/2022,   6534/2022,   6158/2022,
6316/2022, 6281/2022, 6545/2022, 6038/2022.   
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
common judgment and order passed by the High Court of
Judicature at Allahabad in Writ Tax No. 524/2021 and
other allied writ tax petitions, by which the High Court has
allowed the said writ petitions and has quashed several
reassessment notices issued by the Revenue, issued under
section 148 of the Income Tax Act, 1961, on the ground
that the same are bad in law in view of the amendment by
the Finance Act, 2021 which has amended Income Tax Act
by  introducing  new  provisions  i.e. sections   147  to  151
w.e.f.   1st  April,   2021,   the   Revenue   has   preferred   the
present appeals. 
2. Similar judgments and orders are passed by various other
High Courts including High Court of Delhi; High Court of
Rajasthan; High Court of Calcutta; High Court of Madras;
4
High Court of Bombay, the particulars of which are as
under: ­
Sl. No.  Particulars 
1. Ashok Kumar Agarwal Vs. UOI (Allahabad HC)
Judgment passed by the Hon’ble High Court of Allahabad
at Allahabad in Writ Tax No. 524/2021 dated 30.09.2021
  
2. Bpip  Infra   Pvt.   Ltd.  Vs.  Income   Tax  Officer  &  Others
(Rajasthan HC)
Judgment   in   S.B.   Civil   Writ   Petition   No.   13297/2021
passed by the Hon’ble High Court of Rajasthan at Jaipur
dated 25.11.2021 
3. Mon Mohan Kohli Vs. ACIT (Delhi HC)
Judgment passed by the Hon’ble High Court of Delhi in
W.P.(C) No. 6176/2021 dated 15.12.2021
4. Bagaria   Properties   &   Investment   Pvt.   Ltd.   Vs.   UOI
(Calcutta HC)
Judgment passed by the Hon’ble High Court of Calcutta
in W.P.O No. 244/2021 dated 17.01.2022
5. Manoj Jain Vs. UOI (Calcutta HC)
5
Judgment passed by the Hon’ble High Court of Calcutta
in W.P.A. No. 11950 of 2021 dated 17.01.2022 
6. Sudesh Taneja Vs. ITO (Rajasthan HC)
Judgment passed by the Hon’ble High Court of Rajasthan
in   D.B.   Civil   Writ   Petition   No.   969   of   2022   dated
27.01.2022
7. Vellore Institute of Technology Vs. CBDT (Madras HC)
Judgment passed by the Hon’ble High Court of Madras in
W.P. No. 15019/2021 dated 04.02.2022.   
8. Tata Communications Transformation Services Vs. ACIT
(Bombay HC)
Judgment passed by the Hon’ble High Court of Bombay
in Writ Petition No. 1334 of 2021 dated 29.03.2022
At   this   stage,   it   is   required   to   be   noted   that
approximately   90,000   such   reassessment   notices   under
section 148 of the unamended Income Tax Act were issued
by the Revenue after 01.04.2021, which were the subject
matter of more than 9000 writ petitions before various
High Courts across the country and by different judgments
6
and orders, the particulars of which are as above, the High
Courts have taken a similar view and have set aside the
respective reassessment notices issued under section 148
on similar grounds. 
2.1 The common judgment and order passed by the Allahabad
High Court is the subject matter of the present appeals.
Shri N. Venkataraman, learned ASG, stated at the bar that
the Revenue is contemplating to prefer appeals against the
similar   judgments   and   orders   passed   by   various   High
Courts. However, as the issue is common and there will be
multiplicity of the proceedings and to lessen the burden of
this Court and for the reasons stated hereinbelow, as we
propose   to   pass   an   order   in   exercise   of   powers   under
Article 142 of the Constitution of India the present order
shall govern all the other judgments and orders passed by
various   High   Courts   on   the   similar   issue.   Hence,   we
observe that the Revenue need not file separate individual
appeals which may be more than 9000 in numbers. 
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2.2 In fact, we have heard Shri C.A. Sundaram, learned Senior
Advocate, appearing on behalf of the respective assessee,
who were before the Delhi High Court also.            
3. While appreciating the controversy, a few facts and the
relevant   statutory   provisions   applicable   pre   01.04.2021
and post 01.04.2021 are required to be referred to. 
The   procedure   governing   initiation   of   reassessment
proceedings prior to coming into force of the Finance Act,
2021 was governed by the following provisions: ­ 
“Income escaping assessment­ 
147. If the Assessing Officer has reason to believe that any
income chargeable to tax has escaped assessment for any
assessment   year,   he   may,   subject   to   the   provisions   of
sections 148 to 153, assess or reassess such income and
also any other income chargeable to tax which has escaped
assessment and which comes to his notice subsequently in
the   course   of   the   proceedings   under   this section,   or
recomputed the loss or the depreciation allowance or any
other allowance, as the case may be, for the assessment year
concerned (hereafter in this section and in sections 148 to
153 referred to as the relevant assessment year):
Provided that where an assessment under sub­section (3) of
section 143 or this section has been made for the relevant
assessment year, no action shall be taken under this section
after the expiry of four years from the end of the relevant
assessment year, unless any income chargeable to tax has
escaped assessment for such assessment year by reason of
the failure on the part of the assessee to make a return
under section 139 or in response to a notice issued under
sub­section (1) of section 142 or section 148 or to disclose
8
fully   and   truly   all   material   facts   necessary   for   his
assessment, for that assessment year: 
Provided further that nothing contained in the first proviso
shall apply in a case where any income in relation to any
asset   (including   financial   interest   in   any   entity)   located
outside India, chargeable to tax, has escaped assessment for
any assessment year: 
Provided   also   that   the   Assessing   Officer   may   assess   or
reassess   such   income,   other   than   the   income   involving
matters   which   are   the   subject   matters   of   any   appeal,
reference or revision, which is chargeable to tax and has
escaped assessment. 
Explanation 1.—Production before the Assessing Officer of
account   books   or   other   evidence   from   which   material
evidence could with due diligence have been discovered by
the   Assessing   Officer   will   not   necessarily   amount   to
disclosure within the meaning of the foregoing proviso. 
Explanation   2.—For   the   purposes   of   this   section,   the
following shall also be deemed to be cases where income
chargeable to tax has escaped assessment, namely :—
(a) where no return of income has been furnished by the
assessee although his total income or the total income of any
other person in respect of which he is assessable under this
Act during the previous year exceeded the maximum amount
which is not chargeable to income­tax; 
(b) where a return of income has been furnished by the
assessee but no assessment has been made and it is noticed
by the Assessing Officer that the assessee has understated
the   income   or   has   claimed   excessive   loss,   deduction,
allowance or relief in the return; 
(ba) where the assessee has failed to furnish a report in
respect of any international transaction which he was so
required under section 92E; 
(c) where an assessment has been made, but— 
(i) income chargeable to tax has been underassessed;
or 
(ii) such income has been assessed at too low a rate; or
(iii)   such   income   has   been   made   the   subject   of
excessive relief under this Act; or 
9
(iv)   excessive   loss   or   depreciation   allowance   or   any
other allowance under this Act has been computed; 
(ca) where a return of income has not been furnished by the
assessee or a return of income has been furnished by him
and on the basis of information or document received from
the prescribed income­tax authority, under sub­section (2) of
section 133C, it is noticed by the Assessing Officer that the
income of the assessee exceeds the maximum amount not
chargeable to tax, or as the case may be, the assessee has
understated   the   income   or   has   claimed   excessive   loss,
deduction, allowance or relief in the return; 
(d) where a person is found to have any asset (including
financial interest in any entity) located outside India.
Explanation   3.—For   the   purpose   of   assessment   or
reassessment under this section, the Assessing Officer may
assess or reassess the income in respect of any issue, which
has escaped assessment, and such issue comes to his notice
subsequently in the course of the proceedings under this
section,   notwithstanding   that   the   reasons   for   such   issue
have not been included in the reasons recorded under subsection (2) of section 148. 
Explanation   4.—For   the   removal   of   doubts,   it   is   hereby
clarified that the provisions of this section, as amended by
the   Finance   Act,   2012,   shall   also   be   applicable   for   any
assessment year beginning on or before the 1st day of April,
2012.
Issue of notice where income has escaped assessment148.(1)   Before   making   the   assessment,   reassessment   or
recomputation under section 147, the Assessing Officer shall
serve   on   the   assessee   a   notice   requiring   him   to   furnish
within such period, as may be specified in the notice, a
return of his income or the income of any other person in
respect of which he is assessable under this Act during the
previous year corresponding to the relevant assessment year,
in the prescribed form and verified in the prescribed manner
and   setting   forth   such   other   particulars   as   may   be
prescribed; and the provisions of this Act shall, so far as may
be,   apply   accordingly   as   if   such   return   were   a   return
required to be furnished under section 139: 
Provided that in a case— 
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(a) where a return has been furnished during the period
commencing on the 1st day of October, 1991 and ending on
the 30th day of September, 2005 in response to a notice
served under this section, and 
(b) subsequently a notice has been served under sub­section
(2) of section 143 after the expiry of twelve months specified
in the proviso to subsection (2) of section 143, as it stood
immediately before the amendment of said sub­section by
the Finance Act, 2002 (20 of 2002) but before the expiry of
the time limit for making the assessment, re­assessment or
recomputation as specified in sub­section (2) of section 153,
every such notice referred to in this clause shall be deemed
to be a valid notice:
Provided further that in a case— 
(a) where a return has been furnished during the period
commencing on the 1st day of October, 1991 and ending on
the 30th day of September, 2005, in response to a notice
served under this section, and 
(b) subsequently a notice has been served under clause (ii) of
sub­section   (2)   of   section   143   after   the   expiry   of   twelve
months specified in the proviso to clause (ii) of sub­section
(2) of section 143, but before the expiry of the time limit for
making the assessment, reassessment or recomputation as
specified in sub­section (2) of section 153, every such notice
referred   to in   this   clause  shall  be   deemed   to  be  a   valid
notice. 
Explanation.—For   the   removal   of   doubts,   it   is   hereby
declared that nothing contained in the first proviso or the
second proviso shall apply to any return which has been
furnished   on   or   after   the   1st   day   of   October,   2005   in
response to a notice served under this section. 
(2)  The  Assessing Officer  shall, before  issuing any notice
under this section, record his reasons for doing so.
Time limit for notice­ 
149. (1) No notice under section 148 shall be issued for the
relevant assessment year,— 
(a)   if   four   years   have   elapsed   from   the   end   of   the
relevant assessment year, unless the case falls under
clause (b) or clause (c); 
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(b) if four years, but not more than six years, have
elapsed from the end of the relevant assessment year
unless   the   income   chargeable   to   tax   which   has
escaped assessment amounts to or is likely to amount
to one lakh rupees or more for that year; 
(c) if four years, but not more than sixteen years, have
elapsed from the end of the relevant assessment year
unless the income in relation to any asset (including
financial interest in any entity) located outside India,
chargeable to tax, has escaped assessment. 
Explanation.—In   determining   income   chargeable   to   tax
which has escaped assessment for the purposes of this subsection, the provisions of Explanation 2 of section 147 shall
apply as they apply for the purposes of that section. 
(2) The provisions of sub­section (1) as to the issue of notice
shall be subject to the provisions of section 151. 
(3) If the person on whom a notice under section 148 is to be
served is a person treated as the agent of a nonresident
under   section   163   and   the   assessment,   reassessment   or
recomputation to be made in pursuance of the notice is to be
made on him as the agent of such non­resident, the notice
shall not be issued after the expiry of a period of six years
from the end of the relevant assessment year. 
Explanation.—For   the   removal   of   doubts,   it   is   hereby
clarified that the provisions of sub­sections (1) and (3), as
amended by the Finance Act, 2012, shall also be applicable
for any assessment year beginning on or before the 1st day
of April, 2012.
Sanction for issue of notice­ 
151. (1) No notice shall be issued under section 148 by an
Assessing Officer, after the expiry of a period of four years
from the end of the relevant assessment year, unless the
Principal   Chief   Commissioner   or   Chief   Commissioner   or
Principal Commissioner or Commissioner is satisfied, on the
reasons recorded by the Assessing Officer, that it is a fit case
for the issue of such notice. 
(2) In a case other than a case falling under sub­section (1),
no notice shall be issued under section 148 by an Assessing
Officer, who is below the rank of Joint Commissioner, unless
the Joint Commissioner is satisfied, on the reasons recorded
12
by such Assessing Officer, that it is a fit case for the issue of
such notice. 
(3) For the purposes of sub­section (1) and sub­section (2),
the Principal Chief Commissioner or the Chief Commissioner
or the Principal Commissioner or the Commissioner or the
Joint Commissioner, as the case may be, being satisfied on
the reasons recorded by the Assessing Officer about fitness
of a case for the issue of notice under section 148, need not
issue such notice himself.”
3.1 In pursuance to the power vested under section 3 of the
Relaxation   Act,   2020,   the   Central   Government   issued
following Notifications inter­alia extending the time lines
prescribed   under   section   149   for   issuance   of
reassessment notices under section 148 of the Income
Tax Act, 1961:
Date   of
Notificatio
n
Original limitation for
issuance   of   notice
under   Section   148   of
the Act
Extended
Limitation
31.03.2020 20.03.2020   to
29.06.2020
30.06.2020
24.06.2020 20.03.2020   to
31.12.2020
31.03.2021
31.03.2021 31.03.2021 30.04.2021
27.04.2021 30.04.2021 30.06.2021
The Explanations to the Notifications dated 31st March,
2021 and 27th April, 2021 issued under section 3 of the
Relaxation Act, 2020 also stipulated that the provisions,
as they existed prior to the amendment by the Finance
13
Act, 2021, shall apply to the reassessment proceedings
initiated thereunder. 
3.2 The  Parliament   introduced   reformative   changes   to
Sections   147   to   151   of   the   Income   Tax   Act,   1961
governing   reassessment   proceedings   by   way   of   the
Finance  Act, 2021,  which  was passed on  28th  March,
2021.  The substituted sections 147 to 149 and section
151 applicable w.e.f. 01.04.2021, passed in the Finance
Act, 2021, are as under: ­ 
Income escaping assessment­ 
“147. If any income chargeable to tax, in the case of an
assessee, has escaped assessment for any assessment year,
the   Assessing   Officer   may,   subject   to   the   provisions   of
sections   148   to  153,   assess   or  reassess   such   income   or
recompute  the   loss   or  the  depreciation   allowance   or   any
other   allowance   or   deduction   for   such   assessment   year
(hereafter in this section and in sections 148 to 153 referred
to as the relevant assessment year). 
Explanation.—For   the   purposes   of   assessment   or
reassessment   or   recomputation   under   this   section,   the
Assessing   Officer   may   assess   or   reassess   the   income   in
respect of any issue, which has escaped assessment, and
such issue comes to his notice subsequently in the course of
the proceedings under this section, irrespective of the fact
that the provisions of section 148A have not been complied
with.”.
Issue of notice where income has escaped assessment148.   Before   making   the   assessment,   reassessment   or
recomputation   under   section   147,   and   subject   to   the
provisions of section 148A, the Assessing Officer shall serve
14
on the assessee a notice, along with a copy of the order
passed,   if   required,   under   clause   (d)   of   section   148A,
requiring   him   to   furnish   within   such   period,   as   may   be
specified in such notice, a return of his income or the income
of any other person in respect of which he is assessable
under this Act during the previous year corresponding to the
relevant assessment year, in the prescribed form and verified
in   the   prescribed   manner   and   setting   forth   such   other
particulars as may be prescribed; and the provisions of this
Act shall, so far as may be, apply accordingly as if such
return were a return required to be furnished under section
139: 
Provided that no notice under this section shall be issued
unless there is information with the Assessing Officer which
suggests   that   the   income   chargeable   to   tax   has   escaped
assessment   in   the   case   of   the   assessee   for   the   relevant
assessment   year   and   the   Assessing   Officer   has   obtained
prior approval of the specified authority to issue such notice.
Explanation 1.—For the purposes of this section and section
148A,   the   information   with   the   Assessing   Officer   which
suggests   that   the   income   chargeable   to   tax   has   escaped
assessment means,—
(i) any information flagged in the case of the assessee for the
relevant   assessment   year   in   accordance   with   the   risk
management strategy formulated by the Board from time to
time; 
(ii) any final objection raised by the Comptroller and AuditorGeneral of India to the effect that the assessment in the case
of the assessee for the relevant assessment year has not
been made in accordance with the provisions of this Act. 
Explanation 2.—For the purposes of this section, where,— 
(i)   a   search   is   initiated   under   section   132   or   books   of
account, other documents or any assets are requisitioned
under section 132A, on or after the 1st day of April, 2021, in
the case of the assessee; or 
(ii) a survey is conducted under section 133A, other than
under sub­section (2A) or sub­section (5) of that section, on
or   after   the   1st   day   of   April,   2021,   in   the   case   of   the
assessee; or 
15
(iii) the Assessing Officer is satisfied, with the prior approval
of the Principal Commissioner or Commissioner, that any
money, bullion, jewellery or other valuable article or thing,
seized or requisitioned under section 132 or under section
132A in case of any other person on or after the 1st day of
April, 2021, belongs to the assessee; or 
(iv) the Assessing Officer is satisfied, with the prior approval
of Principal Commissioner or Commissioner, that any books
of   account   or   documents,   seized   or   requisitioned   under
section 132 or section 132A in case of any other person on
or after the 1st day of April, 2021, pertains or pertain to, or
any information contained therein, relate to, the assessee, 
the Assessing Officer shall be deemed to have information
which   suggests   that   the   income   chargeable   to   tax   has
escaped assessment in the case of the assessee for the three
assessment   years   immediately   preceding   the   assessment
year relevant to the previous year in which the search is
initiated or books of account, other documents or any assets
are requisitioned or survey is conducted in the case of the
assessee or money, bullion, jewellery or other valuable article
or thing or books of account or documents are seized or
requisitioned in case of any other person. 
Explanation 3.—For the purposes of this section, specified
authority means the specified authority referred to in section
151.”
Conducting   inquiry,  providing  opportunity   before   issue
of notice under section 148 ­
“148A. The Assessing Officer shall, before issuing any notice
under section 148,— 
(a) conduct any enquiry, if required, with the prior approval
of specified authority, with respect to the information which
suggests   that   the   income   chargeable   to   tax   has   escaped
assessment; 
(b) provide an opportunity of being heard to the assessee,
with  the  prior approval of  specified authority,  by serving
upon him a notice to show cause within such time, as may
be specified in the notice, being not less than seven days and
but not exceeding thirty days from the date on which such
notice is issued, or such time, as may be extended by him on
the basis of an application in this behalf, as to why a notice
under  section  148  should  not  be issued on  the  basis of
16
information which suggests that income chargeable to tax
has   escaped   assessment   in   his   case   for   the   relevant
assessment year and results of enquiry conducted, if any, as
per clause (a); 
(c)   consider   the   reply   of   assessee   furnished,   if   any,   in
response to the show­cause notice referred to in clause (b); 
(d)   decide,   on   the   basis   of   material   available   on   record
including reply of the assessee, whether or not it is a fit case
to issue a notice under section 148, by passing an order,
with the prior approval of specified authority, within one
month from the end of the month in which the reply referred
to in clause (c) is received by him, or where no such reply is
furnished, within one month from the end of the month in
which time or extended time allowed to furnish a reply as per
clause (b) expires: 
Provided that the provisions of this section shall not apply in
a case where,— 
(a) a search is initiated under section 132 or books of
account,   other   documents   or   any   assets   are
requisitioned under section 132A in the case of the
assessee on or after the 1st day of April, 2021; or 
(b) the Assessing Officer is satisfied, with the prior
approval   of   the   Principal   Commissioner   or
Commissioner that any money, bullion, jewellery or
other   valuable   article   or   thing,   seized   in   a   search
under   section   132   or   requisitioned   under   section
132A, in the case of any other person on or after the
1st day of April, 2021, belongs to the assessee; or 
(c)  the  Assessing Officer  is satisfied,  with  the prior
approval   of   the   Principal   Commissioner   or
Commissioner   that   any   books   of   account   or
documents, seized in a search under section 132 or
requisitioned under section 132A, in case of any other
person on or after the 1st day of April, 2021, pertains
or pertain to, or any information contained therein,
relate to, the assessee. 
Explanation.—For   the   purposes   of   this   section,   specified
authority means the specified authority referred to in section
151.”
17
Time limit for notice­ 
“149. (1) No notice under section 148 shall be issued for the
relevant assessment year,— 
(a) if three years have elapsed from the end of the relevant
assessment year, unless the case falls under clause (b); 
(b) if three years, but not more than ten years, have elapsed
from the end of the relevant assessment year unless the
Assessing Officer has in his possession books of account or
other documents or evidence which reveal that the income
chargeable to tax, represented in the form of asset, which
has escaped assessment amounts to or is likely to amount to
fifty lakh rupees or more for that year: 
Provided that no notice under section 148 shall be
issued at any time in a case for the relevant assessment year
beginning on or before 1st day of April, 2021, if such notice
could not have been issued at that time on account of being
beyond   the   time   limit   specified   under   the   provisions   of
clause (b) of sub­section (1) of this section, as they stood
immediately before the commencement of the Finance Act,
2021: 
Provided further that the provisions of this sub­section
shall not apply in a case, where a notice under section 153A,
or section 153C read with section 153A, is required to be
issued in relation to a search initiated under section 132 or
books   of   account,   other   documents   or   any   assets
requisitioned under section 132A, on or before the 31st day
of March, 2021: 
Provided also that for the purposes of computing the
period of limitation as per this section, the time or extended
time   allowed   to   the   assessee,   as   per   show­cause   notice
issued under clause (b) of section 148A or the period during
which the proceeding under section 148A is stayed by an
order or injunction of any court, shall be excluded: 
Provided   also   that   where   immediately   after   the
exclusion   of   the   period   referred   to   in   the   immediately
preceding proviso, the period of limitation available to the
Assessing Officer for passing an order under clause (d) of
section 148A is less than seven days, such remaining period
shall be extended to seven days and the period of limitation
under   this   sub­section   shall   be   deemed   to   be   extended
accordingly. 
18
Explanation.—For   the   purposes   of   clause   (b)   of   this
subsection, “asset” shall include immovable property, being
land or building or both, shares and securities, loans and
advances, deposits in bank account.
(2) The provisions of sub­section (1) as to the issue of notice
shall be subject to the provisions of section 151.’
Sanction for issue of notice­ 
“151. Specified authority for the purposes of section 148 and
section 148A shall be— 
(i)   Principal   Commissioner   or   Principal   Director   or
Commissioner or Director, if three years or less than
three years have elapsed from the end of the relevant
assessment year; 
(ii) Principal Chief Commissioner or Principal Director
General   or   where   there   is   no   Principal   Chief
Commissioner   or   Principal   Director   General,   Chief
Commissioner or Director General, if more than three
years   have   elapsed   from   the   end   of   the   relevant
assessment year.” 
3.3 In sub­section (1) of section 151A of the Income Tax Act, in
the opening portion, after the words and figures “issuance
of notice under section 148”, the words, figures and letter
“or   conducting   of   enquiries   or   issuance   of   show­cause
notice   or   passing   of   order   under   section   148A”   are
inserted.
4. Despite the substituted sections 147 to 151 of the Income
Tax Act, 1961 by the Finance Act, 2021 coming into force
19
on 1st April, 2021, according to learned 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 respective
High Courts have held that all the respective reassessment
notices issued under the erstwhile sections 148 to 151 of
the   Income   Tax   Act,   1961,   are   bad   in   law   as   the
reassessment notices issued after 01.04.2021 are governed
by the substituted sections 147 to 151 of the Income Tax
Act,   1961,   substituted   by   the   Finance   Act,   2021.
Consequently, the respective High Courts have set aside all
the reassessment notices issued under section 148 of the
Income   Tax   Act,   1961   wherever   assailed.   The   common
judgment and order passed by the High Court of Allahabad
is the subject matter of the present appeals. However, the
High Court of Delhi in its common judgment and order
dated   15.12.2021   while   quashing   the   respective
reassessment notices has also observed that if the law
20
permits  the revenue to take further steps in the matter
they shall be at liberty to do so.
5. We   have   heard   Shri   N.   Venkataraman,   learned   ASG
appearing   on   behalf   of   the   Revenue   and   Shri   C.A.
Sundaram and Shri S. Ganesh, learned Senior Advocates
and   other   learned   counsel   appearing   on   behalf   of   the
respective assessee. 
6. 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.   Amended
sections 147 to 149 and section 151 of the IT Act prescribe
the   procedure   governing   initiation   of   reassessment
proceedings. However, for several reasons, the same gave
rise   to   numerous   litigations   and   the   reopening   were
challenged inter alia, on the grounds such as (1) no valid
“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
21
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; (2003) 1 SCC 72, has not
been followed. 
6.1 Further   pre­Finance   Act,   2021,   the   reopening   was
permissible for a maximum period up to six years and in
some cases beyond even six years leading to uncertainty
for a considerable time. Therefore, Parliament thought it fit
to   amend   the   Income   Tax   Act   to   simplify   the   tax
administration,   ease   compliances   and   reduce   litigation.
Therefore, with a view to achieve the said object, by the
Finance Act, 2021, sections 147 to 149 and section 151
have been substituted. 
6.2 Under the substituted provisions of the IT Act vide Finance
Act, 2021, no notice under section 148 of the IT Act can be
issued without following the procedure prescribed under
section 148A of the IT Act. Along with the notice under
22
section 148 of the IT Act, the assessing officer (AO) is
required to serve the order passed under section 148A of
the IT Act. section 148A of the IT Act is a new provision
which   is   in   the   nature   of   a   condition   precedent.
Introduction of section 148A of the IT Act can thus be said
to be a game changer with an aim to achieve the ultimate
object   of   simplifying   the   tax   administration,   ease
compliance and reduce litigation. 
6.3 But prior to pre­Finance 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. (supra). 
6.4 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
23
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 show­cause 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.
6.5 Therefore, all safeguards are provided before notice under
section 148 of the IT Act is issued. At every stage, the prior
approval of the specified authority is required, even for
conducting the enquiry as per section 148A(a). Only in a
case where, the assessing officer is of the opinion that
before any notice is issued under section 148A(b) and an
opportunity   is   to   be   given   to   the   assessee,   there   is   a
requirement   of   conducting   any   enquiry,   the   assessing
officer may do so and conduct any enquiry. Thus if the
assessing   officer   is   of   the   opinion   that   any   enquiry   is
required, the assessing officer can do so, however, with the
24
prior approval of the specified authority, with respect to
the information which suggests that the income chargeable
to tax has escaped assessment. 
6.6 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. It also
provides further additional safeguards which were absent
under the earlier regime pre­Finance Act, 2021. 
7. 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
25
agreement with the view taken by the various High Courts
in holding so. 
8. However, at the same time, 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 and
the   object   and   purpose   of   reassessment   proceedings
cannot be frustrated.   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
26
enforced.     Therefore,   we   are   of   the   opinion   that   some
leeway   must   be   shown   in   that   regard   which   the   High
Courts could have done so.  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 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.
Therefore, we propose to modify the judgments and orders
passed by the respective High Courts as under: ­ 
27
(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
28
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. 
9. There   is   a   broad   consensus   on   the   aforesaid   aspects
amongst   the   learned   ASG   appearing   on   behalf   of   the
Revenue   and   the   learned   Senior   Advocates/learned
counsel appearing on behalf of the respective assessees.
29
We are also of the opinion that if the aforesaid order is
passed, it will strike a balance between the rights of the
Revenue as well as the respective assesses as because of a
bonafide belief of the officers of the Revenue in issuing
approximately 90000 such notices, the Revenue may not
suffer as ultimately it is the public exchequer which would
suffer. 
Therefore, we have proposed to pass the present order
with a view avoiding filing of further appeals before this
Court   and   burden   this   Court   with   approximately   9000
appeals against the similar judgments and orders passed
by the various High Courts, the particulars of some of
which are referred to hereinabove. 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
30
various High Courts across the country and therefore the
present order shall be applicable to PAN INDIA.      
10. In view of the above and for the reasons stated above, the
present Appeals are ALLOWED IN PART. 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
31
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);
32
(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.
11. 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.     We   also
observe that present order shall also govern the pending
writ   petitions,   pending   before   various   High   Courts   in
33
which similar notices under Section 148 of the Act issued
after 01.04.2021 are under challenge.
12. The impugned common judgments and orders passed by
the High Court of Allahabad and the similar judgments
and   orders   passed   by   various   High   Courts,   more
particularly, the respective judgments and orders passed
by   the   various   High   Courts   particulars   of   which   are
mentioned hereinabove, shall stand modified/substituted
to the aforesaid extent only. 
All these appeals are accordingly partly allowed to the
aforesaid extent. 
In the facts of the case, there shall be no order as to
costs.     
…………………………………J.
                (M. R. SHAH)
…………………………………J.
 (B.V. NAGARATHNA)
New Delhi, 
May 4, 2022.
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