While deciding an appeal against an order of the Allahabad High Court (Union of India v Ashish Agarwal, 2022), which had set aside reassessment notices issued by the Department of Revenue, within the Ministry of Finance, after 1 April 2021 under unamended section 148 of the Income Tax Act (IT Act), Supreme Court Justices MR Shah and BV Nagarathna passed a slew of directions for reassessment notices.
The Supreme Court directed that reassessment notices under section 148 of the unamended IT Act issued after 1 April 2021 (the effective date of amendment of the provision by the Finance Act, 2021) were deemed to have been issued under section 148A of the IT Act, as substituted by the Finance Act, 2021, and construed as show-cause notices in terms of section 148A(b).
About 90,000 reassessment notices were issued after 1 April 2021 by the revenue department under section 148 of the unamended IT Act. Such issuance was challenged in more than 9,000 writ petitions before various high courts across the country.
After hearing submissions and perusing statutory provisions and government notifications, the Bench, exercising power under article 142 of the Constitution of India, directed that the high court orders be modified and:
- The notices issued under the unamended section 148 of the IT Act, 1961 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 show-cause notices in terms of section 148A(b). The assessing officer shall, within 30 days, provide to the assessees information and material relied upon by the revenue authorities, so the assessees can reply to the show-cause notices within two weeks;
- The assessing officers shall pass orders in terms of section 148A(d) for each of the assessees;
- All defences that may be available to the assessees, including those available under section 149 of the IT Act, and all rights and contentions that may be available to the assessees and revenue department under the Finance Act, 2021, and in law, shall continue to be available.
The court clarified that the directions would have a pan-India effect and not just on the impugned judgments. That means the directions will govern all other similar notices issued under the previous regime. The court also clarified that the directions were issued to strike a balance between revenue interest and assesses’ rights.