2022 (8) TMI 140 - HC - Income Tax

Reopening of assessment u/s 147 - scope of new provision section 148A - As contended present case should be governed by the newly amended provisions relating to proceeding under section 147 and the formalities of which have not been observed and complied with, and as such, the same is bad in law - HELD THAT - As decided in UNION OF INDIA ORS. VERSUS VERSUS ASHISH AGARWAL 2022 (5) TMI 240 - SUPREME COURT 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 148 as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b). AO 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 one-time measure vis-avis those notices which have been issued under section 148 of the unamended 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; AO 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.

Summary

Issues:
1. Interpretation of Section 148 of the Income Tax Act post-amendment by the Finance Act of 2021.
2. Applicability of Section 148A procedure in re-assessment proceedings.
3. Compliance with Supreme Court judgment in Union of India v. Ashish Agarwal regarding notices issued under Section 148.

Analysis:
1. The petitioners challenged notices under Section 148 of the Income Tax Act, contending that post-amendment by the Finance Act of 2021, the procedure under Section 148A had to be followed before re-assessment proceedings were initiated by the Department. The Supreme Court judgment in Union of India v. Ashish Agarwal clarified that notices issued under unamended Section 148 shall be deemed as issued under the amended Section 148, with a requirement for the assessing officer to provide information and material relied upon by the Revenue to the Assessees for a response within two weeks.

2. The judgment further dispensed with the requirement of conducting any inquiry with prior approval under Section 148A(a) as a one-time measure for notices issued under the unamended Act from 01.04.2021 till date. Assessing officers were directed to pass orders in terms of Section 148A(d) for each Assessee and then issue notices under the substituted Section 148. The judgment emphasized that all defenses available to Assessees under Section 149 of the IT Act and rights under the Finance Act, 2021, and in law shall continue to be available.

3. The learned Standing Counsel for the Department acknowledged that the Supreme Court judgment covered the matters at hand. Consequently, the High Court directed that notices issued under Section 148 to the petitioners should be treated as show-cause notices under Section 148A. The proceedings were to be completed in accordance with the directions provided by the Supreme Court in the aforementioned judgment. This disposal aligned with the interpretation and application of the amended provisions under the Income Tax Act as per the recent judicial pronouncements.