While deciding an appeal against an order of the Allahabad High Court [Union of India v. Ashish Agarwal, Civil Appeal No. 3005 of 2022] which had set aside the reassessment notices issued by the Revenue after 01.04.2021, under unamended Section 148 of the Income Tax Act, a Bench comprising Justices M.R. Shah and B.V. Nagarathna passed a slew of directions in respect of such reassessment notices.

The Supreme Court directed that reassessment notices under Section 148 of the unamended Income Tax Act which were issued beyond 01.04.2021 (the effective date of amendment of the said provision by the Finance Act, 2021) to be deemed to have been issued under Section 148A of the IT Act as substituted by the Finance Act, 2021 and be construed as show cause notices in terms of section 148A(b).

Around 90,000 reassessment notices were issued after 01.04.2021 by the Revenue under Section 148 of the unamended Income Tax Act ("IT Act"). Such issuance was challenged in more than 9000 writ petitions before various High Courts across the country.

After hearing submissions and on perusal of statutory provisions and Government notifications, the Bench exercising power under Article 142 of the Constitution of India directed the orders of the High Court to be modified as under-

1. The notices issued under unamended Section 148 of the IT Act, 1961 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 the Revenue, so that the assesees can reply to the showcause notices within two weeks thereafter;
2. The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees;
3. 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.

The Court clarified that the above directions will have a pan-India effect and not just on the impugned judgments. This means, the directions will govern all other similar notices issued under the previous regime.

The Supreme further clarified that these directions are being issued to strike a balance between revenue interest and rights of assessee.

By - C. George Thomas