[Income Tax Act] Supreme Court Decision In UOI v. Ashish Agarwal Applicable To Parties Who Challenged Notice U/S 148: Allahabad High Court

The Allahabad High Court has held that Supreme Court in Union of India v. Ashish Agarwal had not issued a general mandamus quashing all notices issued under Section 148 of the Income Tax Act, 1961. The Court observed that the order of Supreme Court was limited to those notices which had been challenged before the Apex Court and various High Courts in India.

In Union of India v. Ashish Agarwal, the Union Government had challenged the order of the Allahabad High Court quashing the reassessment notices issued by the Revenue under Section 148 as being barred by the Finance Act 2021 which had introduced new provisions regarding reassessment proceedings with effect from 01.04.2021.

The Supreme Court partly allowed the appeals filed by the Union of India, holding that notices of reassessment issued to all the assesee under Section 148 of the Income Tax Act shall be deemed to be issued under the newly added Section 148A. It was held that any order passed by any High Court regarding challenge to notices issued under Section 148 after 01.04.2021 shall be modified accordingly. However, no direction was issued regarding the notices which were not under challenge before any court.

Section 148 of the Act provides for issuance of notice to an assesee whose income has escaped assessment before passing reassessment order under Section 147. Newly added Section 148A provides for inquiry and opportunity of hearing prior to issuance of notice under Section 148.

Original assessment order of the petitioner for assessment year 2017- 18 was passed in 2019. Thereafter, reassessment proceedings were initiated under Section 148 by notice dated 31.03.2021. Final reassessment order was passed on 28.03.2022 which was not challenged by the petitioner and had attained finality.

Subsequently, petitioner was issued another notice under Section 148 for initiating reassessment proceedings under Section 148 for assessment year 2017- 18. Petitioner challenged this initiation of re-assessment proceedings under Section 147 read with Section 148 vide notice dated 30.07.2022.

Counsel for Revenue argued that since the notice was digitally signed on 01.04.2021, it was vitiated by virtue of introduction of Section 148A as held in Union of India v. Ashish Agarwal. It was argued that the entire proceedings were vitiated.

The Court observed that the Supreme Court in Union of India v. Ashish Agarwal had not directed annulment of all notices including those which were not challenged before the Court. The Court held that reassessment notices issued under Section 148 of the Income Tax Act, 1961 which were not challenged before the Supreme Court in Union of India v. Ashish Agarwal were not quashed. Subsequent issuance of fresh reassessment notices under Section 148 for the same assessment year is without jurisdiction.

The bench comprising of Justice Saumitra Dayal Singh and Justice Donadi Ramesh held that parties did not dispute that “neither the petitioner challenged that reassessment order nor that order was revised by the Commissioner nor there was any declaration made by the Supreme Court in rem to annul or in all assessment orders other than those that may have been specifically under challenge in the proceedings before the Supreme Court.”

The Court held that the assessment order was passed on 28.03.2022 was not affected by the decision of the Supreme Court. Since there was no declaration in law for setting aside that assessment order, the Court held that fresh reassessment proceedings were wholly without jurisdiction and set aside.

Accordingly, the writ petition was allowed.

Case Title: M/S Arvind Kumar Shivhare vs. Union Of India And Another 2024 LiveLaw (AB) 249 [WRIT TAX No. - 1238 of 2022]

Case Citation: 2024 LiveLaw (AB) 249

Counsel for Petitioner: Puneet Arun

Counsel for Respondent: Anant Kumar Tiwari, Manu Ghildyal

Click Here To Read/Download Order