2023 (10) TMI 401 - HC - Income Tax

Reopening of assessment u/s 147 - reassessment under the new regime - Scope of new provision section 148A - order rejecting the objections of the petitioner has been passed u/s 148A(d) accompanied by a notice issued u/s 148 - whether at all the liberty granted under the judgment in Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT would be available / applicable in this case, as, even prior to delivery of that judgment on 04.05.2022, the respondent had issued a notice u/s 148A(b) of the Act followed by an order u/s 148A (d) of the Act accompanied by Section 148 notice dated 18.04.2022? - third round of proceedings for re-assessment - HELD THAT - The first round ended with success for the petitioner with the allowing of 2022 (2) TMI 923 - MADRAS HIGH COURT granting liberty to the Department to initiate proceedings if limitation so permitted. Department issued a second notice in April, 2021 and proceedings have been taken forward till the passing of order under Section 148 A(d) and notice u/s 148 dated 04.05.2022. Those proceeding, the Department concedes at para 7 of counter dated 17.10.2022, have been dropped, There is absolutely no justification for the Department to re-visit the proceedings simply invoking the liberty granted in Ashish Agarwal. Having chosen to drop the second round of proceedings, the Department is bound by that decision in full. The explanation tendered for issuance of 148 A (b) notice yet again for the third time on 02.06.2022 is fallacious and unacceptable as the liberty granted under Ashish Agarwal would be available only in those situations where the matters stood at an initial / preliminary stage of re-assessment i.e., at notice stage. In matters where the proceedings have been carried forward to the stage of passing of Section 148A(d) order and issuance of section 148 notice, there is simply no justification in law or in fact, to subject the petitioner to a third round of proceedings. In our view, this is a case, where the liberty granted has not been used but abused by the Department. Submission of the Revenue that the proceedings initiated on 01.04.2021 stood revived is also founded to be factually incorrect as there are material differences between the reasons dated 25.06.2021 and those u/s 148A(b) notice dated 04.05.2022. If, as the Department states, the third round is only a revival of the earlier proceedings, then the reasons ought to have been identical, which is not the case. Thus, the justification for the impugned proceedings is found vitiated on this aspect as well. A reading of the judgment in Ashish Agarwal specifically the directions extracted make it clear that the liberty related relates to Section 148 notices alone as paragraph 26(1) categorically states that the impugned Section 148 notices issued to the respective assessees under unamended Section 148 of the IT Act and which were the subject-matter of writ petitions before various respective High Courts shall be deemed to have been issued under Section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show cause notices in terms of Section 148A (b) . Such liberty is unavailable to the respondent in this case since the respondent has, suo motu, and even prior to the judgment in Ashish Agarwal acted on the liberty granted by the Madras High Court and issued notice under Section 148A (b) in April, 2021. Having so availed the same, and thereafter allowing the proceedings to lapse, there is no question of initiating proceedings once again, which, in my considered view, is nothing but sheer harassment to an assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income-Tax Act, 1961.
2. Applicability of the Supreme Court's judgment in Union of India v. Ashish Agarwal.
3. Justification for multiple rounds of reassessment proceedings.

Summary:

1. Validity of reassessment proceedings under Section 147 of the Income-Tax Act, 1961:
The petitioner, a public charitable trust, challenged reassessment proceedings initiated for AY 2015-2016. The initial assessment was completed under Section 143(3) with a NIL demand. A notice under Section 148 was issued on 12.04.2021, which was later challenged and quashed by the Division Bench of the High Court, granting liberty to the Department to initiate reassessment in accordance with the new provisions effective from 01.04.2021. Subsequently, a second notice under Section 148A(b) was issued on 31.03.2022, which was followed by an order under Section 148A(d) and a notice under Section 148 dated 18.04.2022.

2. Applicability of the Supreme Court's judgment in Union of India v. Ashish Agarwal:
The Hon'ble Supreme Court in Union of India v. Ashish Agarwal directed that notices issued after 01.04.2021 under the old regime should be deemed as issued under the new regime. The Department issued a third notice on 02.06.2022, claiming it was acting on the liberty granted by the Supreme Court. However, the Court noted that the second notice under Section 148A(b) was issued even before the Supreme Court's judgment, and thus, the liberty granted under Ashish Agarwal was misapplied.

3. Justification for multiple rounds of reassessment proceedings:
The Court observed that the Department had already issued a second notice and allowed those proceedings to lapse. Initiating a third round of reassessment was seen as an abuse of the liberty granted by the Supreme Court. The Court emphasized that the liberty granted under Ashish Agarwal was only applicable to initial stages of reassessment and not to cases where proceedings had already advanced to the issuance of notices under Section 148A(d). The reasons provided in the third notice were also found to be materially different from those in the previous notices, further invalidating the proceedings.

Conclusion:
The Court concluded that the repeated reassessment proceedings constituted harassment to the assessee and quashed the impugned notices and proceedings. The writ petition was allowed with no costs, and all connected miscellaneous petitions were closed.