2021 (12) TMI 568 - HC - Income Tax

Reopening of assessment u/s 147 - Period of limitation - scope of procedure prescribed under Section 148A - according to the petitioners notice 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 under Section 148A of the Act as prescribed by the Finance Act, 2021 and applicable w.e.f. 01.04.2021 before issuance of notice under Section 148 - HELD THAT - The issue involved in the present writ petitions is squarely covered by the decision of the Allahabad High Court in the matter of Ashok Kumar 2021 (10) TMI 517 - ALLAHABAD HIGH COURT which in my view is a correct view and has been taken after considering the judgment passed by the Single Bench of Chhatisgarh High Court in the matter of Palak Khatuja 2021 (9) TMI 199 - CHHATTISGARH HIGH COURT which has been relied upon by respondents counsel and therefore the present petitions deserve to succeed. Accordingly, the writ petitions are allowed. The reassessment notice issued to the petitioners under Section 148 of the Income Tax Act is quashed.

Issues Involved:
1. Validity of reassessment notices issued under Section 148 of the Income Tax Act, 1961.
2. Applicability of the Finance Act, 2021 and the substitution of old provisions with new provisions effective from 01.04.2021.
3. Compliance with mandatory procedures prescribed under Section 148A of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of reassessment notices issued under Section 148 of the Income Tax Act, 1961:
The petitioners contested the reassessment notices issued under Section 148, arguing that they were barred by limitation and did not comply with the mandatory procedures prescribed under Section 148A, introduced by the Finance Act, 2021. The court noted that the reassessment notices were issued after 01.04.2021, when the new provisions under the Finance Act, 2021 had come into effect, replacing the old provisions of Sections 147, 148, 149, and 151 of the Act.

2. Applicability of the Finance Act, 2021 and the substitution of old provisions with new provisions effective from 01.04.2021:
The court referred to the Division Bench judgment of the Allahabad High Court in the case of 'Ashok Kumar Agarwal Vs. Union of India,' which held that the old provisions were omitted and replaced by new provisions effective from 01.04.2021. The court emphasized that in the absence of any saving clause, the old provisions could not continue to operate beyond 31.03.2021. The court further noted that the Enabling Act did not validate the initiation of any proceeding that may otherwise be incompetent under the law and that reassessment proceedings must comply with the new provisions introduced by the Finance Act, 2021.

3. Compliance with mandatory procedures prescribed under Section 148A of the Income Tax Act, 1961:
The court highlighted that the new provisions under Section 148A, effective from 01.04.2021, mandated specific procedures to be followed before issuing reassessment notices. The court found that the revenue authorities had not complied with these mandatory procedures, rendering the reassessment notices invalid. The court reiterated that reassessment proceedings must be initiated in accordance with the new provisions and after making all required compliances under the law.

Conclusion:
The court concluded that the issue involved in the writ petitions was covered by the Allahabad High Court's decision in 'Ashok Kumar Agarwal Vs. Union of India.' The court found that the reassessment notices issued under Section 148 were invalid as they did not comply with the new provisions introduced by the Finance Act, 2021. Consequently, the court allowed the writ petitions, quashing the reassessment notices. However, the court left it open to the assessing authority to initiate reassessment proceedings in accordance with the amended provisions of the Act, after making due compliance as required under the law.

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