Re-assessment concluded prior to SC judgment in Ashish Agarwal can not be opened afresh

Re-assessment concluded prior to Supreme Court judgment in Ashish Agarwal can not be opened afresh

In a recent judgment, Hon’ble Delhi High Court has held that Income Tax Department was not justified in issuing notices afresh seeking to reopen the proceedings u/s 147 which had been concluded prior to passing of the Supreme Court judgment in Ashish Agarwal

ABCAUS Case Law Citation:
4251 (2024) (09) abcaus.in HC

In the instant case a writ petition was filed for quashing/setting aside of the order under Section 148A(d) and notice under Section 148 of the Income Tax Act, 1961 (the Act) on the ground that petitioner had not substantiated the source of cash and credit deposit during the Assessment Year 2014-15.

The Petitioner was the proprietor of a firm which was engaged in dealing in electronic goods and components. The Income Tax Department/Revenue issued a notice under Section 148 proposing to assess/reassess the income of the petitioner. Petitioner filed his return of income in response to such notice along with copies of Trade and P&L Account and balance sheet of the Propitiatory Firm.

After considering the submissions and the document by the petitioner, an Assessment Order under Section 147 was passed on 26.03.2022, accepting the returned income of the petitioner.

However, on 31.05.2022, yet another notice under Section 148A(b) purportedly in accordance with the judgment of the Supreme Court in Union of India v. Ashish Agarwal was issued to the assessee. Despite the fact that an order under Section 147 dated 26.03.2022 was already passed, order under Section 148A(d) was passed on the same information which was the subject matter of the order passed under Section 147 dated 26.03.2022.  Consequent to the aforesaid order, a notice under Section 148 of the Act was also issued on 20.07.2022.

The Hon’ble High Court observed that there was no dispute that the order under Section 148A(d) and the notice under Section 148 of the Act were passed on identical facts as posed in the earlier reassessment, which had preceded the proposed action for reassessment.

The Hon’ble High Court observed that the Revenue had reopened the concluded assessment based on a perceived reading of the decision of the Supreme Court in Ashish Agarwal wherein, the Supreme Court modified the judgments/orders passed by the Hon’ble Allahabad High Court. The Hon’ble Supreme Court stated that the impugned Section 148 notices issued to the respective assessees which were issued under unamended Section 148 of the Act, which were the subject-matter of writ petitions before the various respective High Courts shall be deemed to have been issued under Section 148A of the Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148A(b).  That the assessing officers shall thereafter pass orders in terms of Section 148-A(d) in respect of each of the assessees concerned; Thereafter after following the procedure as required under Section 148-A may issue notice under Section 148 (as substituted).

The Hon’ble High Court noted that the right of the Revenue to reopen the concluded assessment on the basis of the decision of the Supreme Court in Ashish Agarwal was the question which had already fell for its consideration. It was observed that the judgment of the Hon’ble Supreme Court was primarily concerned with the validity of various notices which had been promulgated and proceedings drawn in accordance with the statutory procedure which stood in place prior to 01 April 2021, In order to carve out an equitable solution which would redress the deadlock, the Supreme Court invoked its powers conferred by Article 142 of the Constitution and ordained that all such notices would be treated as being under Section 148A(b) and for proceedings to be taken forward in accordance with law thereafter. However, judgment in Ashish Agarwal neither intended nor mandated concluded assessments being reopened. It was held that judgment in Ashish Agarwal was not an edict which required completed assessments to be invalidated and reopened. It cannot possibly be read as mandating the hands of the clock being rewound and reversing final decisions which may have come to be rendered in the interregnum.

The Hon’ble High Court held that since, in the instant case, assessment proceedings had already concluded on 26.03.2022 and the reassessment action was reinitiated on the same set of reasons vide Show Cause Notice under Section 148A(b), the impugned action of reassessment can not be sustained.

The writ petition was accordingly allowed and the impugned order under Section 148A(d) as well as consequential notice under Section 148 were quashed.

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