Income Tax Re-assessment notices under old regime period can be issued after 01.04.2021 under TOLA – Supreme Court
In a recent judgment, the Hon’ble Supreme Court has held that time extension under TOLA will continue to apply for issue of re-assesment notice after 1st April 2021 if any action or proceeding specified under the substituted provisions falls for completion between 20 March 2020 and 31 March 2021.
ABCAUS Case Law Citation:
4270 (2024) (10) abcaus.in SC
The instant judgment deals with the batch of appeals dealing with the question whether TOLA and notifications issued under it will also apply to reassessment notices issued after 1 April 2021; and b. Whether the reassessment notices issued under Section 148 of the new regime between July and September 2022 are valid?.
With the enactment of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020 (TOLA), which came into force with retrospective effect from 31 March 2020, the time limit for completion or compliance of actions under the “specified Act” (which included the Income Tax Act 1961) which fell for completion or compliance during the period from 20 March 2020 and 31 December 2020, was extended to 31 March 2021.
TOLA empowered the Central Government to extend the time limit beyond 31 March 2021 by a notification. In pursuance of its powers, the Central Government issued several notifications to extend the period of relaxation till 30 June 2021. The last being Notification No. 38 of 2021 dated 27 April 2021 which extended the time limit for completion or compliance of actions till 30 June 2021.
Later, the Finance Act 2021 substituted the entire scheme of reassessment and section 148A was introduced requiring the assessing officer to provide an opportunity of being heard to the assessee before deciding to issue a reassessment notice under Section 148. The time limit under Section 149 was also reduced. Further, proviso to Section 149 prohibits the issuance of a reassessment notice under the new regime if such notices have become time-barred under the old regime. The sanctioning authorities specified under Section 151 of the new regime are also different from those specified under the old regime.
The Hon’ble Supreme Court in the case of Ashish Agarwal held that the benefit of the new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided Section 148 notice has been issued on or after 01.04.2021. It was directed that the reassessment notices issued under the old regime shall be deemed to have been issued under Section 148A(b) of the new regime.
CBDT issued Instruction No. 01/2022 dt. 11 May 2022 to clarify that direction in Ashish Agarwal will apply to all cases where extended reassessment notices have been issued irrespective of the fact whether such notices have been challenged or not. The Instruction made a presumption that the notices issued under Section 148 of the new regime will travel back in time to their original dates, that is, the date when the Section 148 notice under the old regime was issued.
The AO accordingly considered the replies furnished by the assesses and passed orders under Section 148A(d). Subsequently, notices under Section 148 of the new regime were issued to the assesses by the assessing officers between July and September 2022 for the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018. These notices were challenged before several High Courts. The High Courts declared the notices to be invalid on the ground that they were: (i) time-barred; and (ii) issued without the appropriate sanction of the specified authority.
The matter travelled to the Hon’ble Supreme Court.
A full bench of the Hon’ble Supreme Court heard the matter and Hon’ble Dr Dhananjaya Y Chandrachud, the Chief Justice of India, pronounced the judgment of the Bench as under:
1. After 1 April 2021, the Income Tax Act has to be read along with the substituted provisions;
2. TOLA will continue to apply to the Income Tax Act after 1 April 2021 if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20 March 2020 and 31 March 2021;
3. Section 3(1) of TOLA overrides Section 149 of the Income Tax Act only to the extent of relaxing the time limit for issuance of a reassessment notice under Section 148;
4. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has extended time till 30 June 2021 to grant approval;
5. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has extended time till 31 March 2021 to grant approval;
6. The directions in Ashish Agarwal will extend to all the ninety thousand reassessment notices issued under the old regime during the period 1 April 2021 and 30 June 2021;
7. The time during which the show cause notices were deemed to be stayed is from the date of issuance of the deemed notice between 1 April 2021 and 30 June 2021 till the supply of relevant information and material by the assessing officers to the assesses in terms of the directions issued by this Court in Ashish Agarwal (supra), and the period of two weeks allowed to the assesses to respond to the show cause notices; and
8. The assessing officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time barred and liable to be set aside
All the judgments of the various High Courts including judgment of the Allahabad High Court holding otherwise have been set aside and the appeals filed by the Revenue have been allowed.
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