The Supreme Court on Wednesday held that the reassessment notices issued under the unamended Section 148 of the Income Tax Act on or after April 1, 2021, will not be deemed to be invalid just because they were issued under the old law.
While modifying the relevant orders of various high courts that quashed the reassessment notices issued under the Section after the cut-off date, the SC said that these notices will be deemed as show-cause notices issued to the respective assessees under the new Section 148A of the Act.
The SC order would mean that the the change in law can’t be an alibi for taxpayers to escape the proceedings initiated via the notices. The rare step taken by the apex court invoking the Constitution will help clear the backlog of over 9,000 appeals filed by the finance ministry in this connection. The apex court ruled that its order shall also govern the relevant pending cases before various HCs.
A Bench led by Justice MR Shah passed the judgment in a batch of cases led by Union of India vs Ashish Agarwal. In this batch of 24 cases, the high courts had ruled in favour of the assessees by quashing several reassessment notices issued by the department under Section 148 on the ground that the same were bad in law in view of the amendment by the Finance Act, 2021.
Partly allowing the appeals filed by the government, the apex court said that 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 one-time measure vis a vis those notices which have been issued under section 148 of the unamended Act from April 1, 2021 till date, including those which have been quashed by the HCs.
“All defences which may be available to the assessees, including those available under Section 149 of the IT Act, and all rights and contentions which may be available to the concerned assessees and the Revenue under the Finance Act, 2021, and in law shall continue to be available,” the judgment stated.
The assessing officer has to provide respective assessees information and material relied upon by the Revenue within 30 days from today so that the latter can respond to the showcause notices within two weeks thereafter, the top court ruled.
Welcoming the SC decision, Rakesh Nangia, chairman, Nangia Andersen India, said while reversing/ modifying the orders the SC has acknowledged that the HC orders on this issue was correct, based on interpretation of statutory provisions. “However, the SC has also noted that while change in law for reassessment has been made by the legislature for the benefit of taxpayers and department cannot be left remediless due to a bona-fide mistake of extending time limits by extension notification and issuing such reassessment notices on/ after 01.04.2021 under old reassessment law, when new law had become applicable.”
Nangia added that the apex court has struck a balance between the rights of the department and taxpayers and taken care to prevent the loss to public exchequer. According to the tax expert, till now, the SC had been refraining from invoking extraordinary constitutional power in tax matters and interpreting tax laws based on statute book, as it stands.