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 by Finance Act, 2021. The relevant extract of Speech of the Honourable Finance Minister in Budget 2021-2022 concerning the substitution of sections 147 to 149 and section 151 applicable w.e.f. 01.04.2021 as follows:
“Reduction in time for Income Tax Proceedings
153. Honourable Speaker, presently, an assessment can be re-opened up to 6 years and in serious tax fraud cases for up to 10 years. As a result, taxpayers have to remain under uncertainty for a long time.
154. I therefore propose to reduce this time-limit for re-opening of assessment to 3 years from the present 6 years. In serious tax evasion cases too, only where there is evidence of concealment of income of Rs.50 Lakhs or more in a year, can be assessment be re-opened up to 10 years. Even this re-opening can be done only after the approval of the Principal Chief Commissioner, the highest level of the Income Tax Department.”
Section 148A of the Income Tax Act, 1961 deals with “Conducting inquiry, providing opportunity before issue of notice under section 148 of the Income Tax Act, 1961”. It states that the assessing officer shall before issuing any notice under section 148 of the Act:
Conduct enquiry, if required, with the prior approval of specified authority;
Provide an opportunity of being heard to the assessee, by serving upon him a show cause notice u/s 148A(b) of the Act;
Consider the reply furnished by the assessee;
Decide on the basis of material available on record and reply filed by assesse, whether or not it is a fit case to issue a notice under section 148 of the Income Tax Act, 1961.
The controversy which arises after introduction of section 148A through Finance Act, 2021 is narrated below:
During the COVID-19 Central Government introduced a new law titled The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Section 3 of TOLA deals with the extension of the time limit of compliance under the Income Tax Act, 1961. Further, section 3 also gives power to Central Government to specify different dates for completion or compliance by way of issue of further notification concerning the extension of timelines of compliance under the Income Tax Act, 1961.
In pursuance of the power vested under section 3 of The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), the Central Government issued three notifications inter alia extending the timelines prescribed under section 149 for issuance of reassessment notices under section 148 of the Income Tax Act, 1961.
Notification No. 93/2020 dated 31.12.2020 extended the time limit to 31st March 2021,
Notification No. 20/2021 dated 31.03.2021 extended the time limit to 30th April 2021 and
Notification No. 38/2021 dated 27.04.2021extended the time limit to 30th June 2021.
After the applicability of aforesaid notifications, the issue was raised before various High Courts in the form of a writ that w.e.f. 01.4.2021 new law introduced by Finance Act, 2021 shall be applied. Therefore, the notices issued u/s 148 of the Income Tax Act, 1961 under the old law are invalid in the eyes of the law.
That after considering the aforesaid issues presented before various High Courts, the Hon’ble High Courts concluded that there is no saving clause for old law. Therefore, all the notices issued u/s 148 of the Income Tax Act, 1961 from April 2021 to June 2021 under old law are barred by limitation and bad in law. Similar judgments and orders are passed by various High Courts including Allahabad High Court, Delhi High Court, Rajasthan High Court, Calcutta High Court, Madras High Court and High Court of Bombay.
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, 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. section 147 to 151 w.e.f 1st April 2021, the revenue preferred the appeal before Hon’ble Supreme Court. The Hon’ble Supreme Court allowed the appeals in part and held that 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:
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 the Revenue, so that the assesees can reply to the showcause notices within two weeks thereafter;
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 un-amended 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;
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);
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.
After the Hon’ble Supreme Court judgment dated 04.05.2022 vide CA 3005/2022 titled Union of India & Ors. vs. Ashish Agarwal, the CBDT interpreted the judgment and accordingly issued Circular dated 11.05.2022 vide instruction no. 01/2022.
The most controversial paras incorporated by CBDT are 6.1 & 6.2. The relevant extract of the same is reproduced below for your ready reference.
“6.1
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Hon’ble Supreme Court has upheld the views of High Courts that the benefit of new law shall be made available even in respect of proceedings relating to past assessment years. Decision of Hon’ble Supreme Court read with the time extension provided by TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that time.
6.2 Based on above, the extended reassessment notices are to be dealt with as under:
AY 2013-14, AY 2014-15 and AY 2015-16: Fresh Notice under section 148 of the Act can be issued in these cases, with the approval of the specified authority, only if the case falls under clause (b) of sub section (1) of section 149 as amended by the Finance Act, 2021 and reproduced in paragraph 6.1 above. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (ii) of that section.
AY 2016-17, AY 2017-18: Fresh notice under section 148 can be issued in these cases, with the approval of the specified authority, under clause (1) of sub-section (1) of new section 149 of the Act, since they are within the period of three years from the end of the relevant assessment year. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (i) of that section.”
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That the CBDT instruction no. 01/2022 dated 11.05.2022 increased number of litigations concerning section 148A of the Income Tax Act, 1961, wherein the assessee challenged the notice issued u/s 148 of the Income Tax Act, 1961 on various grounds under the new law. Reliance is placed on some following judgments.
1-Divya Capital One Pvt. Ltd. vs. Assistant Commissioner of Income Tax, Circle 7(1), Delhi and Anr. (2022) 445 ITR 436 (Delhi)
And
First Solar Power India Private Limited vs. Assistant Commissioner of Income Tax, Circle 7(1), Delhi & Anr. (2022) 447 ITR 337 (Delhi)
Held: Revenue failed to consider the reply or submission filed by assessee in response to notice issued u/s 148A(b) of the Act and passed the order u/s 148A(d) of the Act which leads to violation of mandate of section 148A(c) of the Act, and , therefore, the aforesaid order passed u/s 148A(d) of the Act was to be quashed and the matter remanded back of jurisdictional assessing officer to consider the reply for determination afresh.
2-Daujee Abhushan Bhandar Pvt. Ltd. vs. Union of India & Ors. (2022) 444 ITR 41 (Allahabad)
Held: Mere digital signing of notice shall not be considered to be issuance of notice. When digitally signed notice entered in computer resources outside control of originator, i.e., assessing authority, shall be considered the date and time of issuance of notice u/s 148 read with section 149 of the Act.
3-Suman Jeet Agarwal vs. Income Tax Officer, Ward 61(1) & Ors. (2022) 449 ITR517 (Delhi)
Held:
Mere generation of notice cannot consider an issuance of notice. It can only be termed as issued when it is dispatched and outside the control of originator.
Date of issue of notice is not important, the date on which digitally signed shall be considered the date of issue of notice.
When notice was issued through registered email id of assessing officer, though not digitally signed shall be considered to be a valid notice.
Where notices were manually dispatched, date and time when notices were delivered to post office for dispatch was to be construed as date of issuance of notice.
Where notices were sent to unrelated e-mail addresses, date on which notice was first viewed by assessee on E-filing portal was to be construed as date of issuance of notice.
4-Rajeev Bansal vs. Union of India and 3 Others (2023) 147 taxmann.com 549 (Allahabad)
Held: Reassessment notice issued between 1-4-2021 & 30-6-2021 will be deemed to be notice issued u/s 148A & will not be saved from time-barring by TOLA.
5-Keenara Industries Private Limited vs. The Income Tax Officer, Ward 1(1)(3), Surat [2023] 147 taxmann.com 585 (Gujarat)
Held: Reassessment notices for AYs 13-14 & 14-15 can't be issued on or after 1-4-2021.
Conclusion
In view of the above, it is concluded t hat substitution of sections 147 to 151 of the Act by the Finance Act 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended section 147 to 149 and section 151 of the Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations.
Author- Anshul Mittal
9818214348
anshulmittalamm@gmail.com
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