[Income Tax Act] Reassessment Notices issued under Section 148 after 2021 amendment will be deemed to be issued under Section 148A: Supreme Court

The Supreme Court on Wednesday held that notices issued to assessees under Section 148 of the Income Tax Act of 1961 shall be deemed to be issued under Section 148A of the newly-amended Act as was substituted by the 2021 Finance Act [Union of India v. Ashish Agarwal and ors.]. .A Bench of Justices MR Shah and BV Nagarthana exercised the Court's powers under Article 142 of the Constitution to say that the present ruling will apply not just to the order under challenge but to all similar judgments across the country. "There appears to be genuine non-application of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced ... [Present interpretation] 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 90,000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer," the Bench held.The top court said the Revenue in the cases under challenge had made a "bonafide mistake" in issuing notices under Section 148 of the Income Tax Act instead of the newly-amended provisions and therefore,"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"..The Supreme Court was hearing a batch of appeals filed against a judgment of the Allahabad High Court and some other High Courts that quashed the reassessment notices issued by the Income Tax Department (Revenue) under Section 148 of the Act on the ground that they are bad in law in light of the amendments and Section 148A (issue of notice where income has escaped assessment) of the Act inserted by the 2021 Finance Act. The High Courts had held that the revenue ought to have issued the notices after following the procedure under the new Finance Act and Section 148A of the new IT Act.Around 90,000 notices were issued by the Revenue under the old-regime of Section 148 even after the passing of the 2021 Finance Act and were the subject of 9,000 litigation proceedings before the Delhi, Rajasthan, Calcutta, Bombay and Madras High Courts.All the High Courts had quashed the reassesment notices. .The top court held that Section 148A of the Act is a new provision and "a game changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation".The substituted Section 149 of the Act has reduced the permissible time limit for issuance of notice to three years and only in exceptional cases to ten years all with safeguards for assessees, the top court noted. "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 judgment stated..The apex court held that the High Court ought to have considered the notices issued under Section 148 of the Act as issued under Section 148A of the amended 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.".The Supreme Court, therefore, partly allowed the appeals and modified the order of the Allahabad High Court in the following terms which would be applicable pan-India to all the pending and disposed of proceedings before High Courts: The 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 show cause notices in terms of Section 148A(b). Further, the assessing officers are given 30 days to provide the assessees with all the information and material relied in order to enable the assessees to reply to the notice within two weeks; The requirement of conducting an enquiry with the prior approval of the authority under Section 148A of the Act is dispensed with as a one time measure vis-a-vis those notices issued under Section 148 of the unamended act, including those notices which were quashed by the High Courts; The defences available to the assessees under Section 149 and rights of the officers/assessees under the Finance Act, 2021 shall be kept open and remain available; and The order shall substitute/modify respective judgments and orders of the High Courts which quashed the notices issued by the revenue under Section 148 irrespective of the fact whether the same was challenged before the Supreme Court or not. .Additional Solicitor General of India N Venkataraman appeared for the appellant while Senior Advocate CA Sundaram appeared for the respondents..[Read Judgment]