2022 (5) TMI 240 - SC - Income Tax

Reopening of assessment u/s 147 - Scope of new provision section 148A - Validation of notices after quashed by various High Courts - conducting of enquiries or issuance of show-cause notice or passing of order under section 148A - Scope of amendment by the Finance Act, 2021 which has amended Income Tax Act by introducing new provisions i.e. sections 147 to 151 w.e.f. 1st April, 2021 - HELD THAT - The judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 - Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced w.e.f. 01.04.2021, under the unamended section 148. In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 as per the Finance Act, 2021. There appears to be genuine non-application of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessee. We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. Therefore, we have proposed to pass the present order with a view avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA. The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge. The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only.

Summary

Issues Involved:
1. Validity of reassessment notices issued under section 148 of the Income Tax Act, 1961, post-amendment by the Finance Act, 2021.
2. Applicability of the new provisions substituted by the Finance Act, 2021, to reassessment notices issued after 01.04.2021.
3. The procedural requirements under section 148A of the Income Tax Act, 1961.
4. The impact of the Supreme Court's judgment on similar judgments passed by various High Courts across India.

Detailed Analysis:

1. Validity of Reassessment Notices Issued Under Section 148 of the Income Tax Act, 1961, Post-Amendment by the Finance Act, 2021:
The Supreme Court addressed the issue of reassessment notices issued by the Revenue under the erstwhile sections 148 to 151 of the Income Tax Act, 1961, after the Finance Act, 2021, came into force on 01.04.2021. The Court noted that approximately 90,000 such reassessment notices were issued, leading to over 9000 writ petitions before various High Courts. The High Courts quashed these notices on the grounds that they should have been issued under the amended provisions introduced by the Finance Act, 2021.

2. Applicability of the New Provisions Substituted by the Finance Act, 2021, to Reassessment Notices Issued After 01.04.2021:
The Court emphasized that the new provisions substituted by the Finance Act, 2021, are remedial and benevolent in nature. These provisions aim to simplify tax administration, ease compliance, and reduce litigation. The Court agreed with the High Courts' view that the benefit of the new provisions should be available for reassessment proceedings relating to past assessment years if the section 148 notice was issued on or after 01.04.2021.

3. The Procedural Requirements Under Section 148A of the Income Tax Act, 1961:
The Court highlighted the procedural safeguards introduced by section 148A of the Income Tax Act, 1961. This section mandates that before issuing any notice under section 148, the Assessing Officer must (i) conduct any enquiry with the prior approval of the specified authority, (ii) provide an opportunity of being heard to the assessee, (iii) consider the assessee's reply, and (iv) decide whether it is a fit case to issue a notice under section 148. The Court noted that these safeguards were absent under the earlier regime and that the new provisions provide additional protections to the assessee.

4. The Impact of the Supreme Court's Judgment on Similar Judgments Passed by Various High Courts Across India:
The Supreme Court proposed to modify the judgments and orders passed by the respective High Courts. Instead of quashing the reassessment notices issued under the unamended provisions, the Court deemed these notices to have been issued under section 148A of the Income Tax Act, 1961, as substituted by the Finance Act, 2021. The Court directed the Assessing Officers to provide the information and material relied upon by the Revenue to the assessees within thirty days and to follow the procedure prescribed under section 148A.

Conclusion:
The Supreme Court allowed the appeals in part and modified the impugned judgments and orders passed by the High Court of Judicature at Allahabad and other similar judgments passed by various High Courts. The Court's order applies PAN INDIA and governs all similar judgments and orders passed by different High Courts. The Court exercised its powers under Article 142 of the Constitution of India to avoid further appeals by the Revenue on the same issue and to prevent burdening the Court with approximately 9000 appeals. The Court's order ensures that the reassessment proceedings can continue under the new provisions of the Income Tax Act, 1961, as substituted by the Finance Act, 2021, while protecting the rights and interests of the assessees.