Supreme Court Ruling on Section 148 Notices and TOLA Explained
We are accustomed to seeing endless sequels in blockbuster movie franchises. But who would have imagined that the same trend would apply to income tax law, particularly with Section 148 notices?
Supreme Court finally delivered its 100+ pager verdict on 03 October 2024 in the case of Rajeev Bansal dealing with validity of 148 notices issued during the period of 01 April 2021 to 30 June 2021 and its interplay with TOLA. This judgement has reversed unanimous judgements delivered by six High Courts in favour of taxpayer. The Supreme wisdom has overruled the unanimous higher wisdom across the country!
However, post this decision, there is ambiguity with respect how the further course of action would be unfolded, both in the minds of taxpayer and tax officers alike. Lets dive deeper.
The reasons for the same are partly in the fact that the Rajeev Bansal reiterated that this decision would apply to all 90,000 cases. These 90,000 cases can be bracketed in different categories basis their peculiarities –
CATEGORY 1: Writ filed before High Court and High Court allowed writ in favour and quashed the notices
CATEGORY 2: Writ filed before High Court and High Court stayed the operation of notice u/s 148
CATEGORY 3: Writ is filed before High Court; however, Writ matter is yet to taken up for hearing or adjudication and no interim order is passed.
CATEGORY 4: Assessees who have not filed the writ before High Court and participated in the assessment proceedings, however, final assessment order is not yet passed – frankly this category should not exist as the time to pass the assessment order in such scenario would have expired prior to 03 October 2024 in the absence of stay from the High Court.
CATEGORY 5: Assessees who have not filed the writ before High Court and participated in the assessment proceedings, and the final assessment orders are already passed on or before 03 October 2024 – few possible variations (A) no additions made (B) Additions made and matter is taken up in the appeal.
Operative order of Supreme Court in the record of proceedings:
At this stage, it is relevant to note the record of proceedings of the Rajeev Bansal from the Supreme Court’s website, which in para 3 states that – “The assessing officers will dispose of the objections in terms of the law laid down by this Court. Thereafter, the assessees who are aggrieved will be at liberty to pursue all the rights and remedies in accordance with law, save and except for the issues which have been concluded by this judgment.”
This gives rise to various issues, some of which are highlighted below –
1. How revival happens:
There is some uncertainty as to when the notice u/s 148 post Ashish Agrawal was either stayed or already quashed by the High Court in the Writ jurisdiction, how the procedure enunciated in the Rajeev Bansal should be followed. If after Rajeev Bansal calculation, the notice was issued during the surviving period, how the AO would revive such notice which stands quashed or stayed by High Court as on date. Whether one has to read that the Supreme Court has given implied directions to AO to proceed afresh to this extent, is what remains under doubt.
2. What about proceedings already completed and assessment orders are passed:
It is apparent from the above that the Supreme Court has issued the directions to the AO directly. So, neither AO nor assessee need to go to High Court for reversal of its order be it – final or interim. The proceedings ought to revive on its own basis Rajeev Bansal.
However, Supreme Court order surprising notes that AO will dispose of the objections. This is possible where the operation of either notice 148 or assessment proceedings was stayed. However, what will happen in cases falling under CATEGORY 5 which has already completed. How in those cases AO will dispose of the objections? Whether completed assessments will be redone – time will only answer.
3. When time starts ticking?
It may be noted that there is no breather period provided to the Revenue unlike a window of two weeks which was provided in Ashish Agrawal. Therefore, AO need to act immediately upon the order of Hon’ble Supreme Court in Rajeev Bansal. Recently, this understanding was also expressed by Ld. ASG Mr. N Venkatraman on the webinar.
Hence, the time will start ticking from the date of pronouncement of judgement i.e. 03 October 2024 and hence, the surviving period should be added from 03 October 2024.
4. Application of sixth proviso to section 149(1):
As a consequence, for the cases where the 148 notices were issued on say 30 June 2021, the time to pass the order as per the direction of Rajeev Bansal would get expired on 04 October 2024 itself. However, it would be interesting to see whether in such cases sixth proviso to substituted section 149(1) can be invoked by AO to get extension of 7 days i.e. till 10 October 2024.
Applicability of this decision to AY 2015-16
The million-dollar question is whether Rajeev Bansal decision applies to AY 2015-16 – be it for three years or six years cases. On fundamental reading, it is made clear by the Supreme Court that the Rajeev Bansal would apply only to cases falling for completion etc. withing TOLA period viz. the period of 20 March 2020 to 31 march 2021. For AY 2015-16 – neither three years which ended on 31 March 2019 nor six years which would have ended on 31 March 2022 falls within this period. Thus, clearly, notices issued beyond 31 March 2022 are time barred for AY 2015-16. However, based on the recent webinar by the ASG who argued this case for Revenue, indicated that cases beyond three years but within six years having income escaping assessment more than Rs 50 lakhs would not be time barred and Revenue’s concession may not apply. For sure, third round of litigation as far as AY 2015-16 is concerned!
Way forward – expecting prompt guidance from the CBDT:
It would have served the larger public interest had the CBDT promptly issued a circular or guidance to clarify the position. Surprisingly, within just seven days, the CBDT released a circular clarifying, Ashish Agrawal. Yet, despite nearly 20 days passing, no further guidance has been provided. The CBDT must urgently intervene and instruct its officers to prevent any further confusion, chaos, or—at the very least—a third round of litigation.
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