2025 (2) TMI 50 - HC - Income Tax

Validity of reopening of assessment - validity of a notice issued u/s 148A(b) - issuance of a fresh notice under the amended provisions of the Income Tax Act - HELD THAT - The reasons for issuance of notice on 28.06.2021 u/s 148 as communicated to the petitioner vide notice dated 23.02.2022 issued u/s 143(2) and the reasons stated in the notice issued u/s 148A(b) of the Income Tax Act 1961 on 1.06.2022 read almost identically. As decision of the Hon ble Supreme Court in Ashish Agarwal s case 2022 (5) TMI 240 - SUPREME COURT has been passed under Article 142 of the Constitution of India in view of the peculiar circumstances arising out of the amendment to the Income Tax Act 1961 vide Finance Act 2021. In order to put the issue at rest the Hon ble Supreme Court had given the above direction. Hon ble Supreme Court has not given a direction to the Assessing Officer to reopen the assessment even when the assessment was completed earlier by treating the notice issued u/s 148 as the notice issued u/s 148A(b) as amended with effect from 01.04.2021. This is also the view in Anindita Sengupta s case 2024 (4) TMI 96 - DELHI HIGH COURT . Therefore we are inclined to allow this Writ Petition. This reassessment order dismissed.

Summary

The core legal issue in this case revolves around the validity of a notice issued under Section 148A(b) of the Income Tax Act, 1961, following an earlier assessment order. The petitioner challenges the issuance of a fresh notice under the amended provisions of the Income Tax Act, arguing that the previous assessment order, which was accepted by both parties, should preclude further proceedings. The respondents, however, contend that the Supreme Court's decision in Union of India v. Ashish Agarwal allows for such notices to be reissued under the new legal framework.

The relevant legal framework involves the amendments to the Income Tax Act, 1961, effective from April 1, 2021, which introduced new provisions under Section 148A. The Supreme Court's decision in Union of India v. Ashish Agarwal is pivotal, as it addresses the transition from the old to the new legal regime and the validity of notices issued during this period. The Court in Ashish Agarwal held that notices issued under the unamended Section 148 should be deemed as issued under the new Section 148A, thus allowing the proceedings to continue under the amended provisions.

The petitioner's argument is based on the finality of the earlier assessment order dated March 30, 2022, which was accepted by both the petitioner and the Department. The petitioner contends that the Supreme Court's decision should not apply to cases where the assessment has already been completed, as the decision primarily aimed to address notices that had not yet attained finality. The petitioner relies on the Delhi High Court's interpretation in Anindita Sengupta v. Assistant Commissioner of Income-tax, which supports the view that the Supreme Court's directions were not intended to reopen finalized assessments.

The respondents argue that the Supreme Court's decision in Ashish Agarwal provides a framework for reissuing notices under the new regime, even if the original proceedings had concluded. They assert that the decision aims to remedy the procedural oversight caused by the transition to the new legal framework, thus justifying the issuance of a fresh notice under Section 148A(b).

The Court's analysis focuses on the interpretation of the Supreme Court's directions in Ashish Agarwal. It considers whether these directions allow for the reopening of assessments that had already been finalized under the old regime. The Court notes that the Supreme Court's decision was made under Article 142 of the Constitution of India, which allows for extraordinary measures to ensure complete justice. However, the Court finds that the directions were intended to address ongoing proceedings rather than those that had reached finality.

The Court examines the reasoning of the Delhi High Court in Anindita Sengupta, which interprets the Supreme Court's decision as not mandating the reopening of finalized assessments. The Delhi High Court emphasized that the Supreme Court's directions were confined to cases where proceedings were still pending and had not attained finality. The Court agrees with this interpretation, concluding that the Supreme Court's decision does not justify reopening the petitioner's finalized assessment.

The Court holds that the impugned notice and order issued under the new regime are invalid, as they attempt to reopen an assessment that had already been concluded. The Court quashes the impugned order and notice, thereby allowing the writ petition. This decision reinforces the principle that the Supreme Court's directions in Ashish Agarwal were not intended to disrupt finalized assessments, thereby providing clarity on the application of the amended provisions of the Income Tax Act.