2022 (3) TMI 536 - HC - Income Tax

Re-assessment proceedings notice u/s 148 - scope of newly inserted section 148-A - according to the petitioner no notice directly under section 148 of the Act, 1961 could have been issued on 16/04/2021 when the old section 148 stood omitted upon insertion of new section 148-A which came into force with effect from 1/04/2021 - HELD THAT - As newly inserted section 148-A now specifically provides for issuance of a notice if the Assessing Officer takes a decision to initiate re-assessment and therefore, a procedure has been laid down under section 148-A which is required to be adhered to by the AO after 1/04/2021 i.e. the date on which the Finance Act, 2021 came into force. The parties were heard and during the course of hearing, the counsel for respondent/revenue Shri Sanjay Lal produced a letter dated 24/02/2022 bearing no. 1002 issued by Income Tax Officer - 3 (1) of Bhopal which was addressed to the counsel for the revenue and in the said letter it was stated that though in the notice which was issued to the petitioner herein, the date was mentioned as 31/03/2021 but, the system of the office of the respondents revealed that the Email to the petitioner was infact sent on 16/04/2021. Thus, the counsel for respondent does not dispute that the notice which is impugned in the petition contained in Annexure P/1 infact was issued on 16/04/2021 though the date on the same was mentioned as 31/03/2021 but was issued later on 6/04/2021. In view of the aforesaid letter so produced before us dated 24/02/2022 and in view of the admission by the counsel for respondents, we have no hesitation to hold that the impugned notice is bad in the eye of law, contained in Annexure P/1 dated 31/03/2021 (received by the petitioner on 16/04/2021 through Email) inasmuch as after 1/04/2021, it is mandatory requirement that prior to re-assessment proceedings notice under section 148-A of Income Tax Act, 1961 should be issued to assessee. Since now in view of the admission by the respondents the other reliefs as sought for by the petitioner in the relief clause have become redundant inasmuch as now there is no dispute about the date of issuance of the impugned notice. Accordingly, the impugned notice dated 31/03/2021 (served through Email to the petitioner on 16/04/2021) stands quashed. However, it is left open for the respondents to take recourse to the procedure laid down in newly enacted section 148-A of the Income Tax Act, 1961 if it is required under the law.

Summary

Issues involved:
1. Validity of impugned notices under Income Tax Act, 1961.
2. Interpretation of newly inserted Section 148-A of the Act.
3. Compliance with procedural requirements post Finance Act, 2021.

Issue 1: Validity of impugned notices under Income Tax Act, 1961:

The petitioner sought relief by challenging the impugned notices, specifically notice no. ITBA/AST/S/148/2020-21/1032088407 (1) dated 31.03.2021 and notice no. ITBA/AST/F/142(1)/2021-22/1037509888(1) dated 6.12.2021, along with related explanations in notifications. The petitioner argued that the notices were issued under the omitted Section 148 of the Act, 1961, despite the enactment of Section 148-A, effective from 1/04/2021. The petitioner contended that the Assessing Authority should have followed the new procedure under Section 148-A for re-assessment initiated after 1/04/2021. The High Court acknowledged that the impugned notice dated 31/03/2021 (served through Email on 16/04/2021) was issued after the new provision came into force, rendering it legally deficient. Consequently, the court quashed the impugned notice dated 31/03/2021.

Issue 2: Interpretation of newly inserted Section 148-A of the Act:

The newly inserted Section 148-A of the Income Tax Act, 1961, mandates the Assessing Officer to conduct an inquiry and provide an opportunity for the assessee to be heard before issuing a notice under Section 148 for re-assessment. The section outlines a detailed procedure, including obtaining prior approval, serving a show-cause notice, considering the assessee's response, and deciding on issuing the notice within a specified timeframe. The court emphasized that post the enactment of Section 148-A, compliance with its provisions is essential for initiating re-assessment proceedings after 1/04/2021. The court highlighted the significance of following the prescribed procedure under Section 148-A for ensuring the legality of re-assessment actions.

Issue 3: Compliance with procedural requirements post Finance Act, 2021:

The judgment extensively referred to the provisions of the Finance Act, 2021, which substituted sections of the Income Tax Act, 1961, and introduced Section 148-A. The court underscored the importance of adhering to the amended provisions and timelines specified in the Finance Act, 2021, for initiating re-assessment proceedings. The court's decision to quash the impugned notice dated 31/03/2021 was based on the non-compliance with the procedural requirements set forth in the newly enacted Section 148-A. By upholding the necessity of following the amended legal framework, the court emphasized the significance of procedural compliance in tax assessment matters post the Finance Act, 2021.

In conclusion, the High Court of Madhya Pradesh, in the judgment, addressed the issues concerning the validity of impugned notices under the Income Tax Act, 1961, the interpretation of newly inserted Section 148-A, and the compliance with procedural requirements post the Finance Act, 2021. The court's decision to quash the impugned notice dated 31/03/2021 highlighted the imperative need for adherence to the revised legal provisions and procedural protocols for re-assessment proceedings under the amended legislation.