Supreme Court upholds validity of Section 148 notices issued after 31-03-21 under old provisions

Case Details: Union of India v. Ashish Agarwal - [2022] 138 taxmann.com 64 (SC)

Judiciary and Counsel Details

• • M. R. Shah & B. V. Nagarathna, JJ.
  • N. Venkataraman, ASG, Santosh Kumar, Praneet Pranav, Advs. & Raj Bahadur Yadav, AOR for the Appellant.
  • C.A. Sundaram, Sr. Adv., Ms Kavita Jha, AOR, Vaibhav Kulkarni, Anant Mann, Udit Naresh, Advs., Nishit Agrawal, AOR, Harsh Mishra, Ms Upasna Agrawal, Mohit Kumar Bansal, Ms Shubhakriti Gaur, Dr Rakesh Gupta, Somil Agarwal, Advs., Ambhoj Kumar Sinha, AOR, Kapil Goel, Sandeep Goel, Advs., Dhananjay Garg, AOR, D.K. Garg, Abhishek Garg, Divyanshu Agrawal, Advs., Vaibhav Niti, AOR, Ms Madhavi Agrawal, Adv., Abhinav Agrawal, AOR, Gaurav Jain, Ms Akshita Goyal, Shubham Gupta, Advs, Ms Archana Sahadeva, Subodh S. Patil, AORS, Abhinav Merhotra, Adv., Kush Chaturvedi, AOR, Ms Priyashree Sharma PH & Syed Faraz Alam, Advs. for the Respondent.

Facts of the Case

Revenue had preferred an appeal before the Supreme Court against the order of High Courts wherein several reassessment notices issued under old provisions of Section 148 were quashed. The notices were set-aside on the ground that the same was bad in law in view of the amendment made by the Finance Act, 2021.

Supreme Court Held

The Supreme Court has held that the respective High Courts had rightly held that the benefit of new provisions shall be made available if reassessment notice under Section 148 were issued on or after 01-04-2021. The Supreme Court is in complete agreement with the view taken by the various High Courts in holding so.

The Court further held that these judgments would result in no reassessment proceedings at all. Thus some leeway must be shown in that regard which the High Courts could have done so. The Revenue cannot be made remediless, and the object and purpose of reassessment proceedings cannot be frustrated.

Accordingly, the Supreme Court has proposed to modify the judgments and orders passed by the respective High Courts as under:

1. 1. Section 148 notices issued by the Assessing Officers shall be deemed to have been issued under Section 148A as substituted by the Finance Act, 2021 and to be treated as show­cause notices in terms of Section 148A(b);
   2. The Assessing Officers shall, within 30 days from 04-05-2022, provide the information and material relied upon so that the assessees can reply to the notices within two weeks thereafter;
   3.  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 the old provisions from 01-04-2021 till date, including those which have been quashed by the High Courts;
   4.  Thereafter, the Assessing Officers shall pass an order in terms of Section 148A(d) after following the due procedure as required under Section 148A(b) in respect of each of the concerned assessees;
   5. All the defenses which may be available to the assessee under Section 149, available under the Finance Act, 2021 and in law, and whatever rights are available to the AO are kept open and shall continue to be available.

The Supreme Court has said that this order will strike a balance between the rights of the Revenue and the respective assessees. The Revenue may not suffer due to the bonafide belief of the AOs in issuing approximately 90,000 notices as ultimately it is the public exchequer which would suffer.

This order of the Supreme Court shall be applicable to pan India. Accordingly, all orders passed by different High Courts, wherein reassessment notices issued after 01-04-2021 were set aside, shall be governed by the present order and shall stand modified to the aforesaid extent.

The Supreme Court has passed this order in exercise of powers under Article 142 of the Constitution of India to avoid any further appeals on the very issue by challenging similar judgments and orders.

List of Cases Reviewed

• • Ashok Kumar Agarwal v. Union of India [2021] 131 taxmann.com 22 (All.) (para 11) reversed.

List of Cases Referred to

• • Bpip Infra (P.) Ltd. v. ITO [2021] 133 taxmann.com 48/[2022] 284 Taxman 635/440 ITR 300 (Raj.) (para 2)
  • Mon Mohan Kohli v. Asstt. CIT [2021] 133 taxmann.com 166/[2022] 441 ITR 207 (Delhi) (para 2)
  • Bagaria Properties and Investment (P.) Ltd. v. Union of India [2022] 134 taxmann.com 196/441 ITR 359 (para 2)
  • Manoj Jain v. Union of India [2022] 134 taxmann.com 173 (Cal.) (para 2)
  • Sudesh Taneja v. ITO [2022] 135 taxmann.com 5/442 ITR 289 (Raj.) (para 2)
  • Vellore Institute of Technology v. CBDT [2022] 135 taxmann.com 285/442 ITR 233 (Mad.) (para 2)
  • Tata Communications Transformation Services v. Asstt. CIT [2022] 137 taxmann.com 2 (Bom.) (para 2)
  • GKN Driveshafts (India) Ltd. v. ITO [2002]125 Taxman 963/[2003] 259 ITR 19 (SC) (para 5).