Anand Cine Services Private Limited Vs ACIT (Madras High Court)
The Madras High Court considered a writ petition challenging a notice dated 25.05.2022 issued under Section 148A(b) of the Income Tax Act, 1961, under the reassessment regime effective from 01.04.2021 for Assessment Year 2014-15.
The petitioner company had taken over the business of M/s. Anand Cine Services Private Limited, a partnership firm, after its incorporation with effect from 11.08.2017. The partnership firm had originally filed its return of income on 28.11.2014 for Assessment Year 2014-15, following which the case was selected for scrutiny and an assessment order under Section 143(3) was passed on 27.12.2016 in the firm’s name.
Subsequently, a notice under Section 148 was issued on 30.06.2021 under the reassessment provisions existing prior to 01.04.2021. The petitioner participated in those reassessment proceedings, which culminated in an assessment order dated 28.03.2022 under Section 147 of the Act for Assessment Year 2014-15.
Thereafter, following the Supreme Court’s decision in Union of India and others v. Ashish Agarwal, later clarified in Union of India v. Rajeev Bansal, the department issued a fresh notice dated 25.05.2022 under Section 148A(b) under the new reassessment regime.
The petitioner relied upon the decisions of the Madras High Court in Vellore Institute of Technology, Represented by its Chairman and Managing Trustee v. Assistant Commissioner of Income Tax (Exemptions), Chennai and M/s. Merton v. The Deputy Commissioner of Income Tax, Chennai and another. It was contended that once reassessment proceedings initiated under the old regime had already culminated in an assessment order dated 28.03.2022 based on the return originally filed on 28.11.2014, the department could not reopen the same assessment under the new regime by issuing a fresh notice under Section 148A(b).
The respondent submitted that the earlier reassessment order had been passed in response to the notice issued under the old regime and that the impugned notice was issued strictly in accordance with the directions of the Supreme Court in Ashish Agarwal as clarified in Rajeev Bansal. It was also argued that the petitioner should submit a reply to the Section 148A(b) notice and that the writ petition was premature.
After considering the rival submissions, the High Court held that where reassessment proceedings initiated under the old regime had already been completed and had culminated in an assessment order under Section 147, the department could not reopen the assessment merely on the basis of the Supreme Court’s decision in Ashish Agarwal. The Court observed that the principles laid down in Ashish Agarwal and Rajeev Bansal apply only where assessment proceedings had not yet been completed and no assessment or reassessment order had been passed. Only in such cases could a fresh notice under Section 148A(b) under the new regime be validly issued.
The Court further observed that even if the petitioner’s defence was technical in nature, the return of income had already been subjected to reassessment resulting in an assessment order dated 28.03.2022, and such assessment could not be recalled by issuing a fresh notice under Section 148A(b). The Court also referred to and followed its earlier decision in M/s. Merton v. The Deputy Commissioner of Income Tax, Chennai and another, which reproduced the operative directions issued by the Supreme Court in Union of India and others v. Ashish Agarwal.
Holding that the impugned Section 148A(b) notice dated 25.05.2022 could not be issued in the absence of valid grounds for reassessment after completion of the earlier reassessment proceedings, the High Court allowed the writ petition, quashed the impugned notice, made no order as to costs, and closed the connected miscellaneous petitions.
Cases Discussed
- Union of India Vs. Rajeev Bansal (Supreme Court), 2024 SCC Online SC 2693 / [2024] taxmann.com 70
- Vellore Institute of Technology, Represented by its Chairman and Managing Trustee Assistant Commissioner of Income Tax (Exemptions), Chennai (Madras High Court), W.P.No.22385 of 2022, Order dated 30.06.2023
- M/s.Merton The Deputy Commissioner of Income Tax, Chennai and another (Madras High Court), W.P.No.26782 of 2022, Order dated 22.01.2025
- Union of India and others Vs. Ashish Agarwal (Supreme Court), (2023) 1 SCC 617 / 2022 SCC Online SC 543
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
In this Writ Petition, the Petitioner has challenged the Notice dated 25.05.2022 issued by the 1st Respondent under Section 148A(b) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) under the new regime as in force with effect from 01.04.2021 for the Assessment Year 2014-2015.
2. The impugned Section 148A(b) Notice dated 31.07.2022 was issued to the Petitioner under the new regime as in force with effect from 01.04.2021 in the light of the Judgment of the Hon’ble Supreme Court in Union of India and others Vs. Ashish Agarwal, (2023) 1 SCC 617 / 2022 SCC Online SC 543 on 04.05.2022 which decision stood clarified by the decision of the Hon’ble Supreme Court in Union of India Vs. Rajeev Bansal, 2024 SCC Online SC 2693 / [2024] taxmann.com 70.
3. The facts on record reveal that the impugned Section 148A(b) Notice dated 31.07.2022 was issued in the name of the Petitioner after the Petitioner’s Company took over the business of M/s.Anand Cine Services Private Limited, a Partnership Firm.
4. It is noticed that the Firm had earlier filed its Return of Income on 28.11.2014 for the Assessment Year 2014-2015. Subsequently, the case was selected for scrutiny. An Assessment Order dated 27.12.2016 came to be passed under Section 143(3) of the Act for the said Assessment Year 20142015 in the name of the said Firm. The business of the said Firm was taken over by the Petitioner after its incorporation with effect from 11.08.2017.
5. It is in this background, Section 148 Notice dated 30.06.2021 was issued under the old regime of the Act as in force till 31.03.2021 in the name of the Petitioner Company which took over the business of M/s.Anand Cine Services Private Limited.
6. The Petitioner had participated in the aforesaid re-assessment proceedings initiated under Section 148 of the Act under the old regime. It ultimately culminated in an Assessment Order dated 28.03.2022 passed under Section 147 of the Act for the Assessment Year 2014-2015.
7. Meanwhile, the Hon’ble Supreme Court delivered its Judgment in Ashish Agarwal case (cited supra), which later clarified by the decision of the Hon’ble Supreme Court in Rajeev Bansal case (cited supra).
8. It is in this background, a fresh Re-assessment Notice dated 25.05.2022 under Section 148A(b) of the Act under the new regime was issued to the Petitioner for the Assessment Year 2014-2015 in the light of the aforesaid decisions of the Hon’ble Supreme Court.
9. The learned counsel for the Petitioner would rely on the decisions of this Court in the following two cases:-
i. Vellore Institute of Technology, Represented by its Chairman and Managing Trustee Assistant Commissioner of Income Tax (Exemptions), Chennai in W.P.No.22385 of 2022 vide Order dated 30.06.2023.
ii. M/s.Merton The Deputy Commissioner of Income Tax, Chennai and another in W.P.No.26782 of 2022 vide Order dated 22.01.2025.
10. It is submitted by the learned counsel for the Petitioner that having passed an order based on the Return of Income that was filed on 28.11.2024 which ultimately culminated in the Assessment Order dated 28.03.2022 under Section 147 read with Section 144 of the Act for the Assessment Year 2014-2015, it is not open for the Department to reopen the issue under Section 148 of the Act under the new regime.
11. In this connection, the learned counsel for the Petitioner would draw attention to the decision of this Court in M/s.Merton The Deputy Commissioner of Income Tax, Chennai and another in W.P.No.26782 of 2022 vide Order dated 22.01.2025.
12. On the other hand, the learned Senior Standing Counsel for the Respondent would submit that the Assessment Order dated 28.03.2022 passed under Section 147 read with Section 144 of the Act for the Assessment Year 2014-2015 was in response to Section 148 Notice issued under the old regime in the name of M/s.Anand Cine Services Private Limited.
13. It is further submitted by the learned Senior Standing Counsel for the Respondent that Section 148 Notice was issued strictly in accordance with the directions of the Hon’ble Supreme Court in Ashish Agarwal case (cited supra) which later clarified by the decision of the Hon’ble Supreme Court in Rajeev Bansal case (cited supra).
14. It is also submitted by the learned Senior Standing Counsel for the Respondent that the Petitioner ought to file a reply to the impugned Section 148A(b) Notice dated 31.07.2022 and therefore, this Writ Petition is premature and is liable to be dismissed.
15. I have considered the submissions made by the learned counsel for the Petitioner and the learned Senior Standing Counsel for the Respondent.
16. It must be observed that once the re-assessment proceedings initiated with issuance of Section 148 Notice under the old regime as in force till 30.06.2021 has already been completed on the earlier set of facts with the issuance of an Assessment Order dated 28.03.2022 under Section 147 of the Act based on the earlier set of facts, the Department cannot reopen the assessment on the basis of the decision of the Hon’ble Supreme court in Ashish Agarwal case (cited supra).
17. The principle laid down in Ashish Agarwal case (cited supra) and Rajeev Bansal case (cited supra) applies only in cases where the assessment was yet to be completed and no Assessment or Re-Assessment Order had been passed earlier. Only in such cases, a fresh Notice under Section 148A(b) of the Act under the new regime as in force with effect from 01.04.2021 could be validly issued.
18. Even if the defense of the Petitioner is a technical defense based on the decisions of the Hon’ble Supreme Court in Ashish Agarwal case (cited supra) and Rajeev Bansal case (cited supra), the facts remains that the Return of Income filed by the Petitioner on 28.11.2014 was already the subject matter of an Assessment Order dated 28.03.2022 for the Assessment Year 2014-2015. Such an assessment cannot be recalled by issuance of a fresh Notice under Section 148A(b) of the Act.
19. This is the view taken by this Court in M/s.Merton Vs. The Deputy Commissioner of Income Tax, Chennai and another in W.P.No.26782 of 2022 vide Order dated 22.01.2025, wherein it was held as under:-
“12. The issue was examined by the Assessing Officer which has culminated in an Assessment Order dated 30.03.2022. The decision of the Hon’ble Supreme Court in Ashish Agarwal’s case (cited supra), has summarized the position as under:-
“28. In view of the above and for the reasons stated above, the present appeals are allowed in part. The impugned common judgments and orders [Ashok Kumar Agarwal v. Union of India, 2021 SCC OnLine All 799] passed by the High Court of Judicature at Allahabad in WT No. 524 of 2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under:
28.1. The impugned Section 148 notices issued to the respective assessees which were issued under unamended Section 148 of the IT Act, which were the subject-matter of writ petitions before the various respective High Courts shall be deemed to have been issued under Section 148-A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of Section 148-A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assessees can reply to the show-cause notices within two weeks thereafter.
28.2. The requirement of conducting any enquiry, if required, with the prior approval of specified authority under Section 148-A(a) is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts.
28.3. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the assessing officers concerned to hold any enquiry, if required.
28.4. 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).
28.5. All defences which may be available to the assessees including those available under Section 149 of the IT Act and all rights and contentions which may be available to the assessees concerned and Revenue under the Finance Act, 2021 and in law shall continue to be available.
29. The present order shall be applicable PAN INDIA and all judgments and orders passed by the different High Courts on the issue and under which similar notices which were issued after 1-4-2021 issued under Section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that the present order shall also govern the pending writ petitions, pending before various the High Courts in which similar notices under Section 148 of the Act issued after 1-42021 are under challenge.
30. The impugned common judgments and orders [Ashok Kumar Agarwal v. Union of India, 2021 SCC OnLine All 799] passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only.
31. All these appeals are accordingly partly allowed to the aforesaid extent. In the facts of the case, there shall be no order as to costs.”
20. Therefore, the impugned Section 148A(b) Notice dated 25.05.2022 issued under the new regime as in force with effect from 01.04.2021 cannot be issued by the Respondent. It cannot be issued without any valid grounds for reassessment.
21. Therefore, this Writ Petition deserves to be allowed and is accordingly allowed. No costs. Connected Writ Miscellaneous Petitions are closed.
