The Supreme Court has, in its judgement dated 4 May 2022, held that the reassessment notices issued under unamended Section 148 of the Income Tax Act, 1961, but after the amendments by the Finance Act, 2021, are valid.
Observing that the Revenue department cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated, the Apex Court was of the view that the High Courts ought to have passed an order construing the notices issued under unamended provision of the Income Tax Act as those deemed to have been issued as per the new provisions of Section 148A.
The Supreme Court in this regard noted that the Revenue department had issued the impugned notices due to a bona fide mistake and in view of the subsequent extension of time vide various notifications.
However, the Court upheld the view of the High Courts that the benefit of the new provisions, as applicable from 1 April 2021, shall be made available even in respect of the proceedings relating to past assessment years. It observed that the new provisions substituted by the Finance Act, 2021 were remedial and benevolent in nature and were substituted with a specific aim and object to protect the rights and interest of the assessee. It noted that the new provisions were also in public interest.
Partly allowing the appeals, the Apex Court in the exercise of its powers under Article 142 of the Constitution directed the orders of the High Court to be modified as under:
- Section 148 notices shall be deemed to have been issued under Section 148A as substituted by the Finance Act, 2021 and treated to be showcause notices in terms of Section 148A(b). Revenue officers to provide information and material relied upon within 30 days to the assessee, to enable the assesee to file replies within two weeks.
- The requirement of conducting any inquiry, was dispensed with as a onetime measure vis-à-vis notices issued under Section 148 of the unamended Act from 1 April 2021 till date, including those which were quashed by the High Courts.
- The assessing officers shall thereafter pass orders in terms of Section 148A(d) in respect of each of the concerned assesses and thereafter, after following the procedure as required under Section 148A, may issue a notice under Section 148 (as substituted).
All defences available to assessees and all the rights of the Revenue department introduced through the amendment shall continue to be available.