2021 (12) TMI 567 - HC - Income Tax

Reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - petitioners are aggrieved of issuance of the re-assessment notice u/s.148 which according to the petitioners is barred by limitation and that the respondent before issuing the notice under Section 148 of the Act has not followed the mandatory procedure prescribed u/s 148A of the Act as prescribed by the Finance Act, 2021 and applicable w.e.f. 01.04.2021 - HELD THAT - The issue involved in these writ petitions has been considered and decided in ASHOK KUMAR AGARWAL VERSUS UNION OF INDIA THROUGH ITS REVENUE SECRETARY NORTH BLOCK AND 2 OTHERS 2021 (10) TMI 517 - ALLAHABAD HIGH COURT considering case of PALAK KHATUJA 2021 (9) TMI 199 - CHHATTISGARH HIGH COURT decided in favour of assessee.

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. Compliance with the mandatory procedure prescribed under Section 148A of the Income Tax Act, 1961.
3. Interpretation of the Finance Act, 2021 and the Enabling Act in the context of reassessment proceedings.

Detailed Analysis:

1. Validity of Reassessment Notices:
The petitioners challenged the reassessment notices issued under Section 148 of the Income Tax Act, 1961, arguing that they were barred by limitation and did not follow the mandatory procedure under Section 148A, as amended by the Finance Act, 2021. The court noted that the Finance Act, 2021, effective from 01.04.2021, substituted the old provisions of Sections 147, 148, 149, and 151 with new provisions, including Section 148A. The court referenced the Division Bench of the Allahabad High Court's decision in 'Ashok Kumar Agarwal Vs. Union of India,' which held that after 01.04.2021, reassessment proceedings must comply with the new provisions, and any notices issued under the old provisions were invalid.

2. Compliance with Section 148A:
The court emphasized that the Finance Act, 2021 introduced Section 148A, which mandates a specific procedure before issuing a reassessment notice. Since the notices in question were issued post-01.04.2021, they should have followed the new procedure. The court found that the revenue authorities did not comply with Section 148A, making the reassessment notices invalid.

3. Interpretation of the Finance Act, 2021 and the Enabling Act:
The court examined the interplay between the Finance Act, 2021, and the Enabling Act, which extended certain timelines due to the COVID-19 pandemic. The court concluded that the Enabling Act did not save the old provisions of Sections 147 and 148 post-01.04.2021. The court agreed with the Allahabad High Court's interpretation that the Enabling Act only extended timelines for proceedings already initiated before 01.04.2021 and did not validate new reassessment proceedings under the old law after this date.

The court also addressed the respondents' reliance on the Chhattisgarh High Court's decision in 'Palak Khatuja Vs. Union of India,' which supported the Department's stance. However, the court found the Allahabad High Court's reasoning more persuasive and aligned with the correct interpretation of the law.

Conclusion:
The court allowed the writ petitions, quashing the reassessment notices issued under Section 148 of the Income Tax Act. It left open the possibility for the assessing authority to initiate reassessment proceedings in accordance with the amended provisions of the Act, as per the Finance Act, 2021, after ensuring compliance with the required legal procedures.

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