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TMI Blog2024 (9) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... as contemplated under clause (b) thereof. The judgments of respective High Courts were thus proposed to be modified in terms set forth. However, it becomes pertinent to note that while doing so, the Supreme Court in Ashish Agarwal significantly observed that the modulation of the directions in terms aforenoted would be subject to compliance with all procedural requirements and without prejudice to the various defences which may be available for assessees to adopt in terms of the substituted provisions of Section 147 to 151 of the Act as well as those which may be available in terms of Finance Act, 2021. The preservation of defences and objections which assessees could possibly take, including those comprised in Section 149 stood reiterated in Ashish Agarwal[supra]. Proceeding to invoke its powers flowing from Article 142 of the Constitution, the Supreme Court further held that its judgment would not only apply to those notices which stood impugned in the appeals forming part of that batch but would also be applicable to all similar judgments and orders passed by various High Courts irrespective of whether any appeal had been instituted and thus observed that its order would be appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituted. The reassessment action also did not come to be interdicted by any order or injunction passed by a court. This was, therefore, clearly not a case where the subsequent notice under section 148A (b) could be countenanced to be in continuance or substitution of the original notice. The substitution of original notices was one which Ashish Agarwal had provisioned for in respect of notices which had been impugned before various High Courts and had come to be quashed. No fetter operated upon the AO to take remedial steps and follow or adopt the procedure as prescribed by Section 148A prior to 31 March 2022. This aspect assumes added significance in light of the writ petitioner itself having drawn the respondents attention to the amended procedure for reassessment. Thus, even though the AO was duly apprised and placed on notice of the aforesaid aspects, it failed to take any corrective action. Petitioner had merely asserted that the notice of 30 June 2021 was liable to be withdrawn as opposed to being placed in abeyance. In fact it had been submitted on its behalf that in case the notice of 30 June 2021 was proposed to be proceeded with, they should be provided the reasons underly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforenoted contentions which fall for our consideration. 4. For the purposes of disposal of the present writ petition and before proceeding further, we deem it apposite to take note of the following essential facts. 5. The petitioner is stated to be a company engaged in the business of providing a host of business process outsourcing services, data modelling and analytics support, managed IT services, software solutions and e-learning. 6. The petitioner was earlier known as Empower Research Knowledge Services Private Limited [ERKS], and this fact is noticed since the transactions which formed the subject matter of the allegation of escapement of income were entered into in the erstwhile avatar of the present writ petitioner. The reassessment action itself was initiated based on information received pursuant to a survey carried out at the premises of the petitioner between 25 to 27 February 2019. In the course of that survey, various remittances made to foreign entities came to light and upon information and material being gathered, those remittances were broadly classified under the following heads:- 1. Remittances made to Genpact Limited on account of ESOPs 2. Remittances mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis that the original Section 148 notice was premised on the aforesaid information when it came to be issued on 30 June 2021. 11. Responding to the aforesaid notice, the petitioner in terms of a letter dated 26 July 2021 drew the attention of the AO to the amended regime of reassessment which had come into force with effect from 01 April 2021 consequent to the enforcement of Finance Act, 2021. The petitioner appears to have asserted that it was incumbent upon the AO to follow the procedure as prescribed under Section 148A of the Act. 12. Responding to the Section 148 notice dated 30 June 2021, the petitioner is also stated to have filed its Return of Income on 30 July 2021. The reassessment proceedings, however, do not appear to have progressed further apart from notices under Section 142(1) coming to be issued on 15 and 16 November 2021. 13. In the meanwhile, challenges came to be raised across the country and before various High Courts with respect to reassessment notices having been issued post 01 April 2021, albeit following and adhering to the procedure which prevailed prior to the enforcement of Finance Act, 2021. A challenge along those lines also came to be laid before this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax has escaped assessment. 21. Substituted Section 149 is the provision governing the time-limit for issuance of notice under Section 148 of the IT Act. The substituted Section 149 of the IT Act has reduced the permissible time-limit for issuance of such a notice to three years and only in exceptional cases ten years. It also provides further additional safeguards which were absent under the earlier regime pre-Finance Act, 2021 . 22. Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided Section 148 notice has been issued on or after 1-4-2021. We are in complete agreement with the view taken by the various High Courts in holding so. 17. The Supreme Court thereafter proceeded to take note of the anomalous situation which had arisen on account of the conflicting views expressed by different High Courts as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms:- 25. Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under: 25.1. The respective impugned Section 148 notices issued to the respective assessees shall be deemed to have been issued under Section 148-A of the IT Act as substituted by the Finance Act, 2021 and treated to be show-cause notices in terms of Section 148-A (b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter. 25.2. The requirement of conducting any enquiry with the prior approval of the specified authority under Section 148-A (a) be dispensed with as a one-time measure vis- -vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. 25.3. The assessing officers shall thereafter pass an order in terms of Section 148-A (d) after following the due procedure as required under Section 148-A(b) in respect of each of the assessees concerned. 25.4. All the defences which may be available to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in WT No. 524 of 2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under: 28.1. The 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-A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assessees can reply to the show-cause notices within two weeks thereafter. 28.2. The requirement of conducting any enquiry, if required, with the prior approval of specified authority under Section 148-A (a) is hereby dispensed with as a one-time measure vis- -vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. 28.3. Even otherwise as observed hereinabove holding any enquiry with the prior appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctus of the aforesaid, the Supreme Court opined that rather than the reassessment notices issued under the unamended provisions of the Act being quashed, the High Courts would have been well advised to modulate their directions by providing that those notices issued under the unamended provisions of the Act be treated as notices under Section 148A (b). It was, while proceeding on the aforesaid reasoning that the Supreme Court held that the impugned Section 148 notices issued to respective assessees should be deemed to be under Section 148A and treated to be Show Cause Notices [SCN] as contemplated under clause (b) thereof. The judgments of respective High Courts were thus proposed to be modified in terms set forth in paragraph 25. 22. However, it becomes pertinent to note that while doing so, the Supreme Court in Ashish Agarwal significantly observed that the modulation of the directions in terms aforenoted would be subject to compliance with all procedural requirements and without prejudice to the various defences which may be available for assessees to adopt in terms of the substituted provisions of Section 147 to 151 of the Act as well as those which may be available in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment pertaining to any AY prior to 01 April 2021 would have to be in accord with the time limit specified under Section 149 (1) (b) as it stood prior to the amendments enforced by virtue of Finance Act, 2021. Insofar as our case is concerned, that time limit would constitute a maximum of six years from the end of the relevant assessment year bearing in mind the language in which Section 149 (1) (b) stood couched and existed prior to 01 April 2021. 27. However, and as was noticed in the preceding parts of this decision, the respondents assert that the Section 148A (b) notice dated 27 May 2022 was in continuation of the original Section 148 notice dated 30 June 2021 and is thus not liable to be construed as a fresh or independent action which may have been initiated. The respondents would contend that the issuance of the notice under Section 148A (b) was essentially guided by an obligation to comply with the judgment of the Supreme Court in Ashish Agarwal. It is the correctness of the aforesaid stand which falls for determination. 28. It becomes pertinent to note at the outset that Ashish Agarwal was principally concerned with the correctness of judgments rendered by various High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Agarwal had mandated a revival of notices which had been struck down by various High Courts and modified the judgments rendered in respect of those notices. Consequent to the decision of the Supreme Court, those judgments came to be modified with the notices being revived and ordained to be treated as having been issued under Section 148A (b). We are thus of the firm opinion that the said decision cannot be read as mandating a continuance or reinvention of notices which had not formed subject matter of challenge or a vacation of assessments which may have been made. 32. We also cannot possibly lose sight of the Supreme Court at more than one place in the judgment in Ashish Agarwal having preserved the rights of assessees to raise all defences and objections as were otherwise available to be adopted or taken in light of Sections 147 to 151 of the Act. The Supreme Court in paragraph 25.4 and again in 28.5 had specifically adverted to Section 149 and the defences and challenges which could be raised by assessees in light thereof. Their Lordships were clearly cognizant of the new time frames which came to be introduced by virtue of Section 149 as well as the First Proviso to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under Section 148A (b) in spite of no challenge to the original action having been mounted by the assessee, we had in Anindita Sengupta observed as follows:- 22. As is manifest from a reading of the aforesaid passages forming part of the decision in Ashish Agarwal, the Supreme Court was essentially concerned with the imperatives of striking a just balance between the right of the respondents to undertake and conclude a reassessment that may have been initiated while at the same time according due protection to the interest of the assessees. The Supreme Court held that although the High Courts were correct in taking the view that after the amendments in the Act, coming to be enforced with effect from 01 April 2021, notices could have been issued only in terms of the substituted provisions, the Department appeared to have proceeded under the mistaken yet bona fide belief that those amendments were yet to be enforced. It was in the aforesaid background that it found that the ends of justice would warrant the notices issued with reference to the erstwhile provisions being saved and being read as referable to Section 148A (b). It was to subserve the aforesaid primary objective that A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee thus derived a right to assail the initiation of reassessment proceedings on jurisdictional grounds by preferring objections which the AO was statutorily obliged to take into consideration before issuing notices under Section 148 of the Act. The Revenue on the other hand, and notwithstanding its folly of having erroneously proceeded under the erstwhile regime, was enabled to continue proceedings in accordance with the amended procedure as introduced by virtue of Finance Act, 2021 and thus avoid the specter of a fait accompli which it faced on account of some of the High Court decisions. This is apparent from the Supreme Court observing that the judgments rendered by some of the High Courts' had left the Revenue remediless and resulting in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147. 25. However, we are of the firm opinion that Ashish Agarwal neither intended nor mandated concluded assessments being reopened. The respondent clearly appears to have erred in proceedings along lines contrary to the above as would be evident from the reasons which follow. Firstly, Ashish Agarwal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the various High Courts and where assessees had questioned the invocation of the unamended provisions. The petitioner chose to contest the reassessment proceedings on merits. It is also admitted before us that the petitioner was also not a party to the Man Mohan Kohli batch of matters. There was therefore no justification for the respondent to have issued notices afresh seeking to reopen proceedings which had been rendered a closure prior to the judgment rendered in Ashish Agarwal. At the cost of being repetitive we deem it appropriate to observe that the Ashish Agarwal judgment neither spoke of completed assessments nor did it embody any direction that could be legitimately or justifiably construed as mandating completed assessments being reopened and more so where the assessee had raised no objection to the initiation of proceedings. 27. We are also of the firm opinion that even para 25.5 of Ashish Agarwal would not sustain the stand taken by the respondent since the same clearly confines itself to decisions or judgments rendered by a High Court invalidating a notice under Section 148 and the manifest intent of the Supreme Court being that its judgment would apply and gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment which is sought to be commenced post April 1, 2021 would thus have to abide by the time limits prescribed by section 149 (1) (b), 153A or 153B as may be applicable. 13. Undisputedly, section 149 (1) (b) as it stood prior to the introduction of the amendments by way of the Finance Act, 2021 ([2021] 432 ITR (St.) 52) prescribed that no notice under section 148 shall be issued if four years but not more than six years have elapsed from the end of the relevant assessment year. Thus the period of six years stood erected as the terminal point which when crossed would have rendered the initiation of reassessment impermissible in law. 14. Viewed in the light of the above, the impugned notice when tested on the anvil of the pre-amendment section 149 (1) (b) in order to be sustained would have to meet the prescription of six years. Undisputedly that period in respect of the assessment year 2016-2017 came to an end on March 31, 2023. We thus find ourselves unable to sustain the impugned action of reassessment and which was commenced pursuant to the notice dated April 29, 2024. 15. It would be important to note that the respondents also do not attempt to sustain the initiation of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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