Summary
High Courts had quashed reassessment notices issued after 1 April 2021 under the superseded income-tax provisions. The Court agreed that the new regime applied, but used Article 142 to treat the impugned notices as show-cause notices under section 148A(b). It prescribed disclosure and reply steps, granted a one-time dispensation of the preliminary inquiry requirement and preserved statutory defences, including limitation. The directions applied across India.
Issues
- Whether reassessment notices issued after 1 April 2021 were governed by the substituted provisions even for earlier assessment years.
- What transitional relief should address notices issued under the old provisions and corresponding High Court decisions.
Provisions considered
- Sections 147, 148, 148A and 151, as substituted by the Finance Act, 2021, Income Tax Act, 1961Required the new reassessment framework while converting the impugned old-law notices into preliminary show-cause notices and prescribing the ensuing process. (¶¶ 3.2, 6-10)
- Section 149, as substituted by the Finance Act, 2021, Income Tax Act, 1961Preserved the assessees’ limitation and other statutory defences rather than treating conversion as proof that every reassessment was timely or valid. (¶¶ 3.2, 6.6, 8, 10(iv))
- Article 142, Constitution of IndiaIssued exceptional pan-India transitional directions modifying similar decided cases and governing pending writ challenges. (¶¶ 2.1, 9-12)
Held
- The substituted reassessment regime applied where section 148 notices were issued on or after 1 April 2021, including proceedings for past assessment years. The High Courts were right on that point; the old-law notices ought to have followed the amended framework. (¶ 6-8)
- To address the Revenue’s bona fide transitional mistake without extinguishing proceedings otherwise legally permissible, the Court deemed the impugned notices to be section 148A(b) show-cause notices. This conversion did not itself establish a valid reassessment or determine escaped income. All applicable defences and the parties’ lawful rights remained open. (¶ 8-10)
- The Assessing Officers must supply the information and material relied on within thirty days of judgment, allowing replies within two weeks thereafter, then pass individual section 148A(d) orders and follow the statutory procedure before any fresh section 148 notice. The section 148A(a) inquiry requirement was dispensed with only as a one-time measure for the specified old-law notices issued from 1 April 2021 to the judgment date, including quashed notices; inquiry was otherwise conditional on being required. (¶¶ 8, 10)
- Under Article 142 the directions modified similar High Court judgments whether appealed or not and also governed pending writ petitions challenging similar post-1 April 2021 old-law notices. Their purpose was to avoid thousands of repetitive appeals, while retaining the statutory safeguards. (¶¶ 2.1, 9, 11-12)
Result
Appeals partly allowed without costs. The High Court orders modified only to the extent of the pan-India conversion and procedural directions. Limitation and all other available defences, rights and contentions of assessees and Revenue preserved.