The Supreme Court on Wednesday ruled in favour of the Income Tax Department regarding the re-opening of past tax assessments following the controversy surrounding the department reassessing them if they had sufficient reason to believe that the officials may have missed out on certain part of the income that must be assessed and taxed accordingly. The report from The Hindu Business Line also states how the apex court held that all notices issued under old Section 148 will be deemed to have been issued under Section 148A.
Explaining the court ruling, a Supreme Court advocate said, “As Article 142 has been invoked, this verdict applies not only for the matters before the SC but also pending writs before the various high courts across the country. The notices quashed by the high courts have been given a fresh lease of life, with a rider that the safeguards under the new regime shall be followed. There was no legislative provision for the same. As a result, thousands of pending and already quashed cases across the country will now be processed in terms of these directions.”
The Finance Act of 2021 introduced Section 148A to streamline the procedure and protect the interests of taxpayers. The section also provided that before sending out the reassessment notice, an Income Tax officer shall look into the same with the prior approval of seniors. Furthermore, it provided an opportunity for the taxpayer of being heard and called upon by the officer who will then take cognizance of the reply given by the taxpayer.
Subject to this ruling, the Supreme Court had validated nearly 90,000 reassessment notices issued by the IT Department post-April 01, 2021, under the provisions of the unamended Section 148 of the Act. These reassessment notices have been challenged by taxpayers in as many as 9000 writ petitions across the country. Most high courts including that of Allahabad, Bombay, Calcutta, Delhi and Rajasthan had quashed these petitions with the exception of the Chhattisgarh High Court which upheld the issuance of section 148 reassessment notices after April 01, 2021, under the old provisions.
With the apex court quashing all notices by the Allahabad, Delhi and Rajasthan High Courts, the IT Department can now proceed with the reassessment of the old cases. However, the taxpayers will have recourse available under the amended law including the right to be heard.
Does it impact you?
The Supreme Court order is expected to have a tremendous impact on the taxpayers given the number of reassessment notices that have been sent out by the court. The revenue department is now consolidating the details of the cases to check if they are fit for reassessment under the new order. The revenue officials are also looking at the materials on record including the replies of the taxpayers before deciding whether a case is fit to be reopened under the new provisions of the Act.
The taxpayers can only hope that the department would conduct a fair enquiry and drop those notices that do not fall under the ambit of the provisions laid down by the new law. Further, the short window of just 30 days provided for this means that there is going to be a strain on the time of both the department officials and the taxpayers alike.