• Notification Date: 06-05-2022
• Notification No: N/A

Supreme Court Saves 90,000 Income Tax Reassessment Notices

On last Wednesday, the Supreme Court has declared a reassessment for those notices that have been issued beyond 1 April, 2021 under Section 148 of the former Income Tax Act. The notices which were considered to be issued under Section 148A of the Income Tax Act are substituted by the Finance Act, 2021 and are to be reconstructed as show cause notices under Section 148A(b).

The matter was raised while deciding an appeal against an order of the Allahabad Court. The order had discarded the reassessment notices that were issued after 1 April, 2021 under the former unaltered Section 148 of the Income Tax Act. In the meeting a bench consisting of Justices M.R. Shah and B.V. Nagarathna declared the necessity of amendments of these reassessment notices.

About 90,000 reassessment notices have been issued by the Revenue under Section 148 of the unaltered Income Tax Act since 1 April, 2021. These notices have been challenged in about 9,000 writ petitions in the various High Courts all over India. Several High Courts have discarded these older reassessment notices.

The Bench of Justices has decided to partly allow these appeals after hearing the submissions and on Government notifications. The Bench has decided to allow the appeals and the exercising power under Article 142 mentioned under the Constitution of India to some extent. The Supreme Court has declared the orders of the High Court to be amended by following the rules mentioned below.

According to the instruction of the Supreme Court, the notices issued under the former unaltered Section 148 of the Income Tax Act, are to be issued under Section 148A of the Income Tax Act as substituted by the Finance Act, 2021. These notices are further to be constructed as the show cause notices in terms of Section 148A (b). The assessing officer is required to provide to the respective assesssees information within thirty days from the present day. The officer has to provide the material relied upon the Revenue so that the taxpayers may reply to the IT department within two weeks from that day.

If there is a requirement of conducting any enquiry, it can be done with the approval of the respective authority under Section 148A (a). This is a one-time measure in relation to notices which have been issued under the unamended Section 148 of the Income Tax Act since 1 April, 2021. This rule is also applicable for those notices which have been discarded by the High Courts. It is not mandatory to hold any enquiry with former approval of the specific authority. On the other hand, the concerned Assessing Officers might have hold any enquiry if required.

Moreover, the Assessing Officers are required to pass the orders with respect to Section 148A (d) for each concerned assessees. Following these procedures as mentioned under Section 148A, the Assessing Officers may issue notices under Section 148. All available defenses of the assessees including those under Section 149 of the Income Tax Act, and the rights and contentions as mentioned in the law under the Finance Act, 2021, shall continue to be available for the concerned assessees.