Supreme Court (SC) gives it verdict on reassessment notices

Facts of the Case:

• Under the Relaxation Act, 2020, the CBDT issued notifications which extended the time limit for the issuance of notices as per the pre-amended section 148 of the Income Tax Act,1961(“Act”) beyond 1st April,2021(“the relevant date”).
• Numerous High Court’s quashed the notices issued after 1st April, 2021 u/s 148 of the Act on the ground that same are not tenable as per the Finance Act, 2021 and the notification is ultra vires/unconstitutional and any notice issued under section 148 of the Act on or after the relevant date must comply with the provisions of the amended reassessment sections.
• Aggrieved by the same, the revenue preferred an appeal before the Hon’ble Supreme Court.

Decision of Supreme Court:

• The non-applicability of the amendments by the assessing officers (AO’s) while issuing notices u/s 148 of the Act was due to a bonafide belief that these amendments were not applicable from 1st April 2021 on the basis of the understanding derived from the explanation inserted in the notifications by the CBDT. Although, the notices were to be issued in line with the amended provisions but the High Court quashed the notices issued, and thus the revenue cannot be made remediless and in order to show leeway to the revenue the following were held:
• The notices which were issued under pre-amended provisions of section 148 of the Act shall be deemed to have been issued under amended section 148A of the Act and are to be consider as show cause notice under section 148A(b) of the Act.
• The AO’s shall provide information/ material relied upon by revenue to the respective taxpayer within thirty days from the order date which is 4th May, 2022. Thereafter, the taxpayer can respond within two weeks.
• The requirement of conducting an enquiry with prior approval of the specified authority as per the provisions of section 148A(a) have been dispensed with as a one-time measure for such notices issued till date of this order.
• The order shall be applicable PAN India.

Notices issued pertaining to AY 2013-14 and AY 2014-15 will be time-barred as per the section 149(a) and 149(b) read with the first proviso of the Act.
Notices issued pertaining to AY 2015-16 to AY 2017-18 will be time-barred wherein they do not meet the conditions for invoking the 10-year time limit under the provisions of amended section 149(b) of the Act.

Prateek Sharma, Tax Associate, SW India