Union Of India vs Ashish Agarwal

Union of India & Ors. ..Appellant (S)

Versus

Ashish Agarwal ..Respondent (S)

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Civil Appeal No. 3006/2022

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Civil Appeal No. 3009/2022

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Civil Appeal No. 3007/2022

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Civil Appeal No. 3008/2022

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Civil Appeal No. 3010/2022

With Signature Not Verified

Digitally signed by R Natarajan Civil Appeal No. 3013/2022 Date: 2022.05.04 16:47:06 IST Reason:

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1 Civil Appeal No. 3011/2022

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Civil Appeal No. 3014/2022

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Civil Appeal No. 3015/2022

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Civil Appeal No. 3016/2022

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Civil Appeal No. 3017/2022

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Civil Appeal No. 3019/2022

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Civil Appeal No. 3020/2022

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6448/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 5381/2022)

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2 Civil Appeal No. /2022 (arising out of SLP(C) No. 5079/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6092/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6534/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6158/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6316/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6281/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6545/2022)

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Civil Appeal No. /2022 (arising out of SLP(C) No. 6038/2022)

JUDGMENT

3 M. R. Shah, J.

Leave granted in SLP (C) Nos. 6448/2022, 5381/2022,

5079/2022, 6092/2022, 6534/2022, 6158/2022,

6316/2022, 6281/2022, 6545/2022, 6038/2022.

1. Feeling aggrieved and dissatisfied with the impugned

common judgment and order passed by the High Court of

Judicature at Allahabad in Writ Tax No. 524/2021 and

other allied writ tax petitions, by which the High Court has

allowed the said writ petitions and has quashed several

reassessment notices issued by the Revenue, issued under

section 148 of the Income Tax Act, 1961, on the ground

that the same are bad in law in view of the amendment by

the Finance Act, 2021 which has amended Income Tax Act

by introducing new provisions i.e. sections 147 to 151

w.e.f. 1st April, 2021, the Revenue has preferred the

present appeals.

2. Similar judgments and orders are passed by various other

High Courts including High Court of Delhi; High Court of

Rajasthan; High Court of Calcutta; High Court of Madras;

4 High Court of Bombay, the particulars of which are as

under: ­

Sl. No. Particulars

1. Ashok Kumar Agarwal Vs. UOI (Allahabad HC)

Judgment passed by the Hon’ble High Court of Allahabad at Allahabad in Writ Tax No. 524/2021 dated 30.09.2021

2. Bpip Infra Pvt. Ltd. Vs. Income Tax Officer & Others (Rajasthan HC)

Judgment in S.B. Civil Writ Petition No. 13297/2021 passed by the Hon’ble High Court of Rajasthan at Jaipur dated 25.11.2021

3. Mon Mohan Kohli Vs. ACIT (Delhi HC)

Judgment passed by the Hon’ble High Court of Delhi in W.P.(C) No. 6176/2021 dated 15.12.2021

4. Bagaria Properties & Investment Pvt. Ltd. Vs. UOI (Calcutta HC)

Judgment passed by the Hon’ble High Court of Calcutta in W.P.O No. 244/2021 dated 17.01.2022

5. Manoj Jain Vs. UOI (Calcutta HC)

5 Judgment passed by the Hon’ble High Court of Calcutta in W.P.A. No. 11950 of 2021 dated 17.01.2022

6. Sudesh Taneja Vs. ITO (Rajasthan HC)

Judgment passed by the Hon’ble High Court of Rajasthan in D.B. Civil Writ Petition No. 969 of 2022 dated 27.01.2022

7. Vellore Institute of Technology Vs. CBDT (Madras HC)

Judgment passed by the Hon’ble High Court of Madras in W.P. No. 15019/2021 dated 04.02.2022.

8. Tata Communications Transformation Services Vs. ACIT (Bombay HC)

Judgment passed by the Hon’ble High Court of Bombay in Writ Petition No. 1334 of 2021 dated 29.03.2022

At this stage, it is required to be noted that

approximately 90,000 such reassessment notices under

section 148 of the unamended Income Tax Act were issued

by the Revenue after 01.04.2021, which were the subject

matter of more than 9000 writ petitions before various

High Courts across the country and by different judgments

6 and orders, the particulars of which are as above, the High

Courts have taken a similar view and have set aside the

respective reassessment notices issued under section 148

on similar grounds.

2.1 The common judgment and order passed by the Allahabad

High Court is the subject matter of the present appeals.

Shri N. Venkataraman, learned ASG, stated at the bar that

the Revenue is contemplating to prefer appeals against the

similar judgments and orders passed by various High

Courts. However, as the issue is common and there will be

multiplicity of the proceedings and to lessen the burden of

this Court and for the reasons stated hereinbelow, as we

propose to pass an order in exercise of powers under

Article 142 of the Constitution of India the present order

shall govern all the other judgments and orders passed by

various High Courts on the similar issue. Hence, we

observe that the Revenue need not file separate individual

appeals which may be more than 9000 in numbers.

7 2.2 In fact, we have heard Shri C.A. Sundaram, learned Senior

Advocate, appearing on behalf of the respective assessee,

who were before the Delhi High Court also.

3. While appreciating the controversy, a few facts and the

relevant statutory provisions applicable pre 01.04.2021

and post 01.04.2021 are required to be referred to.

The procedure governing initiation of reassessment

proceedings prior to coming into force of the Finance Act,

2021 was governed by the following provisions: ­

“Income escaping assessment­

147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):

Provided that where an assessment under sub­section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub­section (1) of section 142 or section 148 or to disclose

8 fully and truly all material facts necessary for his assessment, for that assessment year:

Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:

Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.

Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :—

(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income­tax;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;

(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;

(c) where an assessment has been made, but—

(i) income chargeable to tax has been underassessed; or

(ii) such income has been assessed at too low a rate; or

(iii) such income has been made the subject of excessive relief under this Act; or

9

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;

(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income­tax authority, under sub­section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;

(d) where a person is found to have any asset (including financial interest in any entity) located outside India.

Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub­ section (2) of section 148.

Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.

Issue of notice where income has escaped assessment­

148.(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that in a case—

10

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and

(b) subsequently a notice has been served under sub­section (2) of section 143 after the expiry of twelve months specified in the proviso to subsection (2) of section 143, as it stood immediately before the amendment of said sub­section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re­assessment or recomputation as specified in sub­section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice:

Provided further that in a case—

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and

(b) subsequently a notice has been served under clause (ii) of sub­section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub­section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub­section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.

Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.

Time limit for notice­

149. (1) No notice under section 148 shall be issued for the relevant assessment year,—

(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);

11

(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;

(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.

Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes of this sub­ section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.

(2) The provisions of sub­section (1) as to the issue of notice shall be subject to the provisions of section 151.

(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a nonresident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non­resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year.

Explanation.—For the removal of doubts, it is hereby clarified that the provisions of sub­sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.

Sanction for issue of notice­

151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.

(2) In a case other than a case falling under sub­section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded

12 by such Assessing Officer, that it is a fit case for the issue of such notice.

(3) For the purposes of sub­section (1) and sub­section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.”

3.1 In pursuance to the power vested under section 3 of the

Relaxation Act, 2020, the Central Government issued

following Notifications inter­alia extending the time lines

prescribed under section 149 for issuance of

reassessment notices under section 148 of the Income

Tax Act, 1961:

Date of Original limitation for Extended Notificatio issuance of notice Limitation n under Section 148 of the Act 31.03.2020 20.03.2020 to 30.06.2020 29.06.2020 24.06.2020 20.03.2020 to 31.03.2021 31.12.2020 31.03.2021 31.03.2021 30.04.2021 27.04.2021 30.04.2021 30.06.2021

The Explanations to the Notifications dated 31 st March,

2021 and 27th April, 2021 issued under section 3 of the

Relaxation Act, 2020 also stipulated that the provisions,

as they existed prior to the amendment by the Finance

13 Act, 2021, shall apply to the reassessment proceedings

initiated thereunder.

3.2 The Parliament introduced reformative changes to

Sections 147 to 151 of the Income Tax Act, 1961

governing reassessment proceedings by way of the

Finance Act, 2021, which was passed on 28 th March,

2021. The substituted sections 147 to 149 and section

151 applicable w.e.f. 01.04.2021, passed in the Finance

Act, 2021, are as under: ­

Income escaping assessment­

“147. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).

Explanation.—For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.”.

Issue of notice where income has escaped assessment­

148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve

14 on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.

Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,—

(i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;

(ii) any final objection raised by the Comptroller and Auditor­ General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act.

Explanation 2.—For the purposes of this section, where,—

(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or

(ii) a survey is conducted under section 133A, other than under sub­section (2A) or sub­section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or

15

(iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or under section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee,

the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section

151.”

Conducting inquiry, providing opportunity before issue of notice under section 148 ­

“148A. The Assessing Officer shall, before issuing any notice under section 148,—

(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of

16 information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show­cause notice referred to in clause (b);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

Provided that the provisions of this section shall not apply in a case where,—

(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.

Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section

151.”

17 Time limit for notice­

“149. (1) No notice under section 148 shall be issued for the relevant assessment year,—

(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub­section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:

Provided further that the provisions of this sub­section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show­cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub­section shall be deemed to be extended accordingly.

18 Explanation.—For the purposes of clause (b) of this subsection, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account.

(2) The provisions of sub­section (1) as to the issue of notice shall be subject to the provisions of section 151.’

Sanction for issue of notice­

“151. Specified authority for the purposes of section 148 and section 148A shall be—

(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;

(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.”

3.3 In sub­section (1) of section 151A of the Income Tax Act, in

the opening portion, after the words and figures “issuance

of notice under section 148”, the words, figures and letter

“or conducting of enquiries or issuance of show­cause

notice or passing of order under section 148A” are

inserted.

4. Despite the substituted sections 147 to 151 of the Income

Tax Act, 1961 by the Finance Act, 2021 coming into force

19 on 1st April, 2021, according to learned ASG, the Revenue

issued approximately 90,000 reassessment notices to the

respective assessees under the erstwhile sections 148 to

151 thereof by relying on explanations in the Notifications

dated 31st March, 2021 and 27th April, 2021. The said

reassessment notices were the subject matter of writ

petitions before the various High Courts. The respective

High Courts have held that all the respective reassessment

notices issued under the erstwhile sections 148 to 151 of

the Income Tax Act, 1961, are bad in law as the

reassessment notices issued after 01.04.2021 are governed

by the substituted sections 147 to 151 of the Income Tax

Act, 1961, substituted by the Finance Act, 2021.

Consequently, the respective High Courts have set aside all

the reassessment notices issued under section 148 of the

Income Tax Act, 1961 wherever assailed. The common

judgment and order passed by the High Court of Allahabad

is the subject matter of the present appeals. However, the

High Court of Delhi in its common judgment and order

dated 15.12.2021 while quashing the respective

reassessment notices has also observed that if the law

20 permits the revenue to take further steps in the matter

they shall be at liberty to do so.

5. We have heard Shri N. Venkataraman, learned ASG

appearing on behalf of the Revenue and Shri C.A.

Sundaram and Shri S. Ganesh, learned Senior Advocates

and other learned counsel appearing on behalf of the

respective assessee.

6. It cannot be disputed that by substitution of sections 147

to 151 of the Income Tax Act (IT Act) by the Finance Act,

2021, radical and reformative changes are made governing

the procedure for reassessment proceedings. Amended

sections 147 to 149 and section 151 of the IT Act prescribe

the procedure governing initiation of reassessment

proceedings. However, for several reasons, the same gave

rise to numerous litigations and the reopening were

challenged inter alia, on the grounds such as (1) no valid

“reason to believe” (2) no tangible/reliable

material/information in possession of the assessing officer

leading to formation of belief that income has escaped

assessment, (3) no enquiry being conducted by the

21 assessing officer prior to the issuance of notice; and

reopening is based on change of opinion of the assessing

officer and (4) lastly the mandatory procedure laid down by

this Court in the case of GKN Driveshafts (India) Ltd. Vs.

Income Tax Officer and ors; (2003) 1 SCC 72, has not

been followed.

6.1 Further pre­Finance Act, 2021, the reopening was

permissible for a maximum period up to six years and in

some cases beyond even six years leading to uncertainty

for a considerable time. Therefore, Parliament thought it fit

to amend the Income Tax Act to simplify the tax

administration, ease compliances and reduce litigation.

Therefore, with a view to achieve the said object, by the

Finance Act, 2021, sections 147 to 149 and section 151

have been substituted.

6.2 Under the substituted provisions of the IT Act vide Finance

Act, 2021, no notice under section 148 of the IT Act can be

issued without following the procedure prescribed under

section 148A of the IT Act. Along with the notice under

22 section 148 of the IT Act, the assessing officer (AO) is

required to serve the order passed under section 148A of

the IT Act. section 148A of the IT Act is a new provision

which is in the nature of a condition precedent.

Introduction of section 148A of the IT Act can thus be said

to be a game changer with an aim to achieve the ultimate

object of simplifying the tax administration, ease

compliance and reduce litigation.

6.3 But prior to pre­Finance Act, 2021, while reopening an

assessment, the procedure of giving the reasons for

reopening and an opportunity to the assessee and the

decision of the objectives were required to be followed as

per the judgment of this Court in the case of GKN

Driveshafts (India) Ltd. (supra).

6.4 However, by way of section 148A, the procedure has now

been streamlined and simplified. It provides that before

issuing any notice under section 148, the assessing officer

shall (i) conduct any enquiry, if required, with the

approval of specified authority, with respect to the

23 information which suggests that the income chargeable to

tax has escaped assessment; (ii) provide an opportunity of

being heard to the assessee, with the prior approval of

specified authority; (iii) consider the reply of the assessee

furnished, if any, in response to the show­cause notice

referred to in clause (b); and (iv) decide, on the basis of

material available on record including reply of the

assessee, as to whether or not it is a fit case to issue a

notice under section 148 of the IT Act and (v) the AO is

required to pass a specific order within the time stipulated.

6.5 Therefore, all safeguards are provided before notice under

section 148 of the IT Act is issued. At every stage, the prior

approval of the specified authority is required, even for

conducting the enquiry as per section 148A(a). Only in a

case where, the assessing officer is of the opinion that

before any notice is issued under section 148A(b) and an

opportunity is to be given to the assessee, there is a

requirement of conducting any enquiry, the assessing

officer may do so and conduct any enquiry. Thus if the

assessing officer is of the opinion that any enquiry is

required, the assessing officer can do so, however, with the

24 prior approval of the specified authority, with respect to

the information which suggests that the income chargeable

to tax has escaped assessment.

6.6 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 pre­Finance Act, 2021.

7. 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 1st April, 2021. We are in complete

25 agreement with the view taken by the various High Courts

in holding so.

8. However, at the same time, the judgments of the several

High Courts would result in no reassessment proceedings

at all, even if the same are permissible under the Finance

Act, 2021 and as per substituted sections 147 to 151 of

the IT Act. The Revenue cannot be made remediless and

the object and purpose of reassessment proceedings

cannot be frustrated. It is true that due to a bonafide

mistake and in view of subsequent extension of time vide

various notifications, the Revenue issued the impugned

notices under section 148 after the amendment was

enforced w.e.f. 01.04.2021, under the unamended section

148. In our view the same ought not to have been issued

under the unamended Act and ought to have been issued

under the substituted provisions of sections 147 to 151 of

the IT Act as per the Finance Act, 2021. There appears to

be genuine non­application of the amendments as the

officers of the Revenue may have been under a bonafide

belief that the amendments may not yet have been

26 enforced. Therefore, we are of the opinion that some

leeway must be shown in that regard which the High

Courts could have done so. Therefore, instead of quashing

and setting aside the reassessment notices issued under

the unamended provision of IT Act, the High Courts ought

to have passed an order construing the notices issued

under unamended Act/unamended provision of the IT Act

as those deemed to have been issued under section 148A

of the IT Act as per the new provision section 148A and the

Revenue ought to have been permitted to proceed further

with the reassessment proceedings as per the substituted

provisions of sections 147 to 151 of the IT Act as per the

Finance Act, 2021, subject to compliance of all the

procedural requirements and the defences, which may be

available to the assessee under the substituted provisions

of sections 147 to 151 of the IT Act and which may be

available under the Finance Act, 2021 and in law.

Therefore, we propose to modify the judgments and orders

passed by the respective High Courts as under: ­

27

(i) The respective impugned section 148 notices issued

to the respective assessees shall be deemed to have

been issued under section 148A of the IT Act as

substituted by the Finance Act, 2021 and treated to

be show­cause notices in terms of section 148A(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;

(ii) The requirement of conducting any enquiry with the

prior approval of the specified authority under

section 148A(a) be dispensed with as a one­time

measure vis­à­vis those notices which have been

issued under Section 148 of the unamended Act

from 01.04.2021 till date, including those which

have been quashed by the High Courts;

(iii) The assessing officers shall thereafter pass an order

in terms of section 148A(d) after following the due

28 procedure as required under section 148A(b) in

respect of each of the concerned assessees;

(iv) All the defences which may be available to the

assessee under section 149 and/or which may be

available under the Finance Act, 2021 and in law

and whatever rights are available to the Assessing

Officer under the Finance Act, 2021 are kept open

and/or shall continue to be available and;

(v) The present order shall substitute/modify respective

judgments and orders passed by the respective High

Courts quashing the similar notices issued under

unamended section 148 of the IT Act irrespective of

whether they have been assailed before this Court or

not.

9. There is a broad consensus on the aforesaid aspects

amongst the learned ASG appearing on behalf of the

Revenue and the learned Senior Advocates/learned

counsel appearing on behalf of the respective assessees.

29 We are also of the opinion that if the aforesaid order is

passed, it will strike a balance between the rights of the

Revenue as well as the respective assesses as because of a

bonafide belief of the officers of the Revenue in issuing

approximately 90000 such notices, the Revenue may not

suffer as ultimately it is the public exchequer which would

suffer.

Therefore, we have proposed to pass the present order

with a view avoiding filing of further appeals before this

Court and burden this Court with approximately 9000

appeals against the similar judgments and orders passed

by the various High Courts, the particulars of some of

which are referred to hereinabove. We have also proposed

to pass the aforesaid order in exercise of our powers under

Article 142 of the Constitution of India by holding that the

present order shall govern, not only the impugned

judgments and orders passed by the High Court of

Judicature at Allahabad, but shall also be made applicable

in respect of the similar judgments and orders passed by

30 various High Courts across the country and therefore the

present order shall be applicable to PAN INDIA.

10. In view of the above and for the reasons stated above, the

present Appeals are ALLOWED IN PART. The impugned

common judgments and orders passed by the High Court

of Judicature at Allahabad in W.T. No. 524/2021 and

other allied tax appeals/petitions, is/are hereby modified

and substituted as under: ­

(i) 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 148A of the IT Act as

substituted by the Finance Act, 2021 and construed

or treated to be show­cause notices in terms of

section 148A(b). The assessing officer shall, within

thirty days from today provide to the respective

assessees information and material relied upon by

31 the Revenue, so that the assesees can reply to the

show­cause notices within two weeks thereafter;

(ii) The requirement of conducting any enquiry, if

required, with the prior approval of specified

authority under section 148A(a) is hereby dispensed

with as a one­time measure vis­à­vis those notices

which have been issued under section 148 of the

unamended Act from 01.04.2021 till date, including

those which have been quashed by the High Courts.

Even otherwise as observed hereinabove holding

any enquiry with the prior approval of specified

authority is not mandatory but it is for the concerned

Assessing Officers to hold any enquiry, if required;

(iii) The assessing officers shall thereafter pass orders in

terms of section 148A(d) in respect of each of the

concerned assessees; Thereafter after following the

procedure as required under section 148A may issue

notice under section 148 (as substituted);

32

(iv) All defences which may be available to the assesses

including those available under section 149 of the IT

Act and all rights and contentions which may be

available to the concerned assessees and Revenue

under the Finance Act, 2021 and in law shall

continue to be available.

11. The present order shall be applicable PAN INDIA and all

judgments and orders passed by different High Courts on

the issue and under which similar notices which were

issued after 01.04.2021 issued under section 148 of the

Act are set aside and shall be governed by the present

order and shall stand modified to the aforesaid extent. The

present order is passed in exercise of powers under Article

142 of the Constitution of India so as to avoid any further

appeals by the Revenue on the very issue by challenging

similar judgments and orders, with a view not to burden

this Court with approximately 9000 appeals. We also

observe that present order shall also govern the pending

writ petitions, pending before various High Courts in

33 which similar notices under Section 148 of the Act issued

after 01.04.2021 are under challenge.

12. The impugned common judgments and orders passed by

the High Court of Allahabad and the similar judgments

and orders passed by various High Courts, more

particularly, the respective judgments and orders passed

by the various High Courts particulars of which are

mentioned hereinabove, shall stand modified/substituted

to the aforesaid extent only.

All these appeals are accordingly partly allowed to the

aforesaid extent.

In the facts of the case, there shall be no order as to

costs.

…………………………………J. (M. R. SHAH)

…………………………………J. (B.V. NAGARATHNA) New Delhi, May 4, 2022.

34