P&H HC Quashes time-barred Reassessment Notices for AY 2015-16

Jay Jay Agro Industries Vs ITO (Punjab And Haryana High Court)

Punjab and Haryana High Court has quashed reassessment orders and notices issued to Jay Jay Agro Industries for the Assessment Year (AY) 2015-16, ruling them to be time-barred. This decision stems from the interpretation of recent amendments to the Income Tax Act, 1961, particularly the Finance Act, 2021, and subsequent Supreme Court rulings.

Background of Reassessment Notices

The Finance Act, 2021, which came into effect on April 1, 2021, introduced significant changes to reassessment proceedings, primarily through substituted Sections 147 to 151 of the Income Tax Act. Despite these amendments, many reassessment notices under the unamended Section 148 were issued after April 1, 2021, leading to widespread litigation across various High Courts.

Supreme Court’s Intervention: Ashish Aggarwal Case

The Union of India challenged several High Court judgments that set aside these notices before the Supreme Court in Union of India and Others Vs. Ashish Aggarwal [2022] SCC Online SC 543. The Supreme Court acknowledged the “radical and reformative changes” brought by the Finance Act, 2021, especially the introduction of Section 148A, which mandates a pre-notice inquiry and an opportunity for the assessee to be heard as a condition precedent for issuing a notice under Section 148. This new provision was deemed a “game changer” aimed at simplifying tax administration and reducing litigation.

The Supreme Court, while agreeing with High Courts that the benefit of new provisions should apply to notices issued on or after April 1, 2021, also recognized that the Revenue should not be left “remediless” due to a bona fide mistake in issuing notices under the unamended law.

Therefore, in a landmark decision, the Supreme Court, exercising its powers under Article 142 of the Constitution, modified the High Court judgments. It ordered that notices issued under the unamended Section 148 after April 1, 2021, be deemed as show-cause notices under the new Section 148A(b). Assessing Officers were directed to provide relevant information to assessees within 30 days and allow them two weeks to reply. The requirement for a prior inquiry under Section 148A(a) was dispensed with as a one-time measure for these specific notices. This order was to apply PAN INDIA, governing all similar judgments and pending writ petitions.

Subsequent Challenges and Rajiv Bansal Case

Following the Ashish Aggarwal judgment and subsequent instructions from the Central Board of Direct Taxes (CBDT), Assessing Officers issued orders under Section 148A(d) and then new notices under Section 148 (as substituted) between July and September 2022, for Assessment Years 2013-14 to 2017-18. These new notices were again challenged in High Courts, primarily on grounds of being time-barred and issued without appropriate sanction.

The Supreme Court again addressed these challenges in Union of India and Others Vs. Rajiv Bansal [2024] 469 ITR 46 (SC). The key issues framed included whether the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA), and notifications issued thereunder, applied to reassessment notices issued after April 1, 2021, and the validity of notices issued between July and September 2022.

During the arguments in Rajiv Bansal, the Additional Solicitor General of India, representing the Revenue, made a significant concession: for Assessment Year 2015-16, “all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA.”

High Court’s Ruling for Jay Jay Agro Industries

In the present case of Jay Jay Agro Industries Vs ITO, the Punjab and Haryana High Court took note of this specific concession made by the Revenue in the Rajiv Bansal judgment.

Given that the order under Section 148A(d), the consequential notice under Section 148 (new regime), and a show-cause notice for AY 2015-16 were issued to Jay Jay Agro Industries on June 30, 2022, and March 10, 2025, respectively, the Court concluded that these actions were barred by limitation based on the Revenue’s own admission in Rajiv Bansal.

The Court allowed the writ petition, setting aside the aforementioned order and notices. This ruling provides clarity for assessees facing reassessment proceedings for AY 2015-16, reinforcing the importance of adhering to the prescribed time limits under the new tax regime and the specific judicial interpretations.

FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT

The challenge in the present writ petition is to order dated 30.06.2022 passed under Section 148A(d), the consequential notice dated 30.06.2022 under Section 148 issued by respondent No.1 – Income Further challenge is to the show cause notice dated 10.03.2025 respondent No.2 – National Faceless Assessment Centre.

BRIEF FACTS

2. Brief facts of the present case are that notice under Section 148 of the Income Tax Act was issued to the petitioner on 16.04.2021 i.e. after 01.04.2021, which is the date of coming into force of Finance Act, 2021 whereby Sections 147 to 151 of the Income Tax Act, 1961 were substituted. Therefore, in compliance of judgment dated 04.05.2022 passed by the Hon’ble Supreme Court in Union of India and Others Vs. Ashish Aggarwal, respondent No.1 (Income Tax Officer, Ward-1, Karnal) issued notice under Section 148A(b) of the Act on 19.05.2022. The petitioner filed reply to the same with certain objections regarding jurisdiction under Section 147 of the Income Tax Act and after considering the reply, respondent No.1 (Income Tax Officer, Ward-1, Karnal) disposed of the objections raised by the petitioner and proceeded to pass an order under Section 148A(d) on 30.06.2022, confirming jurisdiction to reassess income of the petitioner under Section 147 of the Income Tax Act and issued consequential notice under Section 148 of the Income Tax Act dated 30.06.2022 initiating the assessment under Section 147 of the Income Tax Act. The petitioner challenged the notice dated 30.06.2022 and consequential proceedings by filing CWP -2986-2023 on 14.03.2023, which was ultimately dismissed on 20.12.2024 by this Court in terms of judgment passed in CWP -18488-2022 titled as M/s Patran Foods Pvt. Ltd. Vs. Union of India and Others . Thereafter on 28.01.2025, respondent No.2 (National Faceless Assessment Centre), restored the proceedings requesting the petitioner to furnish the information called for vide notice dated 15.01.2023 under Section 142(1) of the Income Tax Act. Another notice under Section 142(1) dated 05.02.2025 was issued by respondent No.2 (National Faceless Assessment Centre) , in reply to which the petitioner contended that the proceedings are void ab initio as the same are barred by limitation under Section 149 of the Income Tax Act , as settled by Hon’ble Supreme Court in Union of India Vs. Rajeev Bansal [2024] 469 ITR 46 (SC) . Respondent No.2 (National Faceless Assessment Centre) issued another show cause notice dated 10.03.2025 after dealing with the objections raised by the petitioner, in view of the judgment of Delhi High Court in Builder (P) Ltd. Vs. Income Tax Officer (2024) 469 ITR 657 (Delhi) requiring the petitioner to show cause as to why proposed variation should not be made.

3. Hence the present petition challenging order dated 30.06.2022 under Section 148A(d), consequential notice dated 30.06.2022 under Section 148 and show cause notice dated 10.03.2025 on the ground that the same are barred by limitation.

SUBMISSIONS  

4. Learn ed counsel for the petitioner contends :-

a) That notice dated 30.06.2022 issued under Section 148 and show cause notice dated 10.03.2025 are barred by limitation under the Income Tax Act, 1961.

b) Further, that controversy in the present writ petition is already settled by the Hon’ble Supreme Court in the case of Union of India Vs.   Rajeev Bansal [2024] 469 ITR 46 (SC) on 03.10.2024 . Therefore, the present writ petition be allowed in terms of the settled proposition of law in the case of Union of India Vs. Rajeev Bansal (Supra).

5. Learned counsel for the respondents could not rebut the legal proposition of law as settled by Hon’ble Supreme Court in Union of India Vs. Rajeev Bansal (Supra), by which the case of the petitioner is covered.

6.We have heard learned counsel for the parties and perused the whole record of the present case.

UNION OF INDIA AND OTHERS VS. ASHISH AGGARWAL [2022] SCC ONLINE SC 543 AND UNION OF INDIA VS. RAJEEV BANSAL [2024] 469  ITR 46 (SC) CONCLUDES AS UNDER:-

7. The Finance Act, 2021 substituted the entire scheme of reassessment under Sections 147 to 151 of the Income Tax Act, 1961 e.f.01.04.2021.

8. Prior to the coming into force of Finance Act, 2021 initiation of reassessment proceedings was governed by the following provisions of Income Tax Act, 1961:-

“Income escaping assessment

147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):

Provided that where an assessment under sub–section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:

Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:

Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.

Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2. -For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : –

(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;

(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;

(c) where an assessment has been made, but–

(i) income chargeable to tax has been underassessed; or

(ii) such income has been assessed at too low a rate; or

(iii) such income has been made the subject of excessive relief under this Act; or

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;

(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub -section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;

(d) where a person is found to have any asset (including financial interest in any entity) located outside India.

Explanation 3. -For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148.

Explanation 4. -For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.

Issue of notice where income has escaped assessment

148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that in a case–

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and

(b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to subsection (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice:

Provided further that in a case-

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and

(b) subsequently a notice has been served under clause (ii) of sub–section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub–section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub–section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.

Explanation.–For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.

Time limit for notice :-

149. (1) No notice under section 148 shall be issued for the relevant assessment year–

(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);

(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;

(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.

Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this subsection, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.

(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment y

Explanation.-For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.

Sanction for issue of notice :-

151 . (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.

(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.

(3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.”

3.1 In pursuance to the power vested under section 3 of the Relaxation Act, 2020, the Central Government issued following Notifications inter-alia extending the time lines prescribed under section 149 for issuance of reassessment notices under section 148 of the Income Tax Act, 1961:

Date of Notification	Original limitation for issuance of notice under Section 148 of the Act	Extended Limitation
31.03.2020	20.03.2020 to 29.06.2020	30.06.2020
24.06.2020	20.03.2020 to 31.12.2020	31.03.2021
31.03.2021	31.03.2021	30.04.2021
27.04.2021	30.04.2021	30.06.2021

The Explanations to the Notifications dated 31st March, 2021 and 27th April, 2021 issued under section 3 of the Relaxation Act, 2020 also stipulated that the provisions, as they existed prior to the amendment by the Finance Act, 2021, shall apply to the reassessment proceedings initiated thereunder.

3.2 The Parliament introduced reformative changes to sections 147 to 151 of the Income Tax Act, 1961 governing reassessment proceedings by way of the Finance Act, 2021, which was passed on 28th March, 2021. The substituted sections 147 to 149 and section 151 applicable w.e.f. 01.04.2021, passed in the Finance Act, 2021, are as under:–

Income escaping assessment–

“147. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).

Explanation.–For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 1 48A have not been complied with “.

Issue of notice where income has escaped assessment:-

148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.

Explanation 1. –For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means–

(i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;

(ii) any final objection raised by the Comptroller and Auditor-General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act.

Explanation 2. -For the purposes of this section, where-

(i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or

(ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or

(iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or under section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.

Explanation 3. -For the purposes of this section, specified authority means the specified authority referred to in section 151.”

Conducting inquiry, providing opportunity before issue of notice under section 148 –

“148A . The Assessing Officer shall, before issuing any notice under section 148–

(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

Provided that the provisions of this section shall not apply in a case where–

(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.

Explanation.–For the purposes of this section, specified authority means the specified authority referred to in section 151.”

Time limit for notice –

“149 . (1) No notice under section 148 shall be issued for the relevant assessment year–

(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:

Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:

Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:

Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly.

Explanation.-For the purposes of clause (b) of this subsection, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.’

Sanction for issue of notice-

“151. Specified authority for the purposes of section 148 and section 148A shall be–

(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;

(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. “

9. Despite the substituted Sections 147 to 151 of the Income Tax Act, 1961, by the Finance Act, 2021 which came into force on 01.04.2021 many reassessment notices under Section 1 48 of the Income Tax Act, 1961 were issued to the assessees after coming into force of Finance Act, 2021 i.e. after 01.04.2021, which were assailed before different High Courts on different grounds. Different High Courts quashed the reassessment notices under Section 148 of the Income Tax Act, 1961. Union of India challenged the judgments passed by different High Courts setting aside reassessment notices under Section 148 of the unamended Income Tax Act, which were issued after 01.04.2021 i.e. after coming into force of Finance Act, 2021 before the Hon’ble Supreme Court of India in Union of India and Others Vs. Ashish Aggarwal [2022] SCC Online SC 543. Hon’ble Supreme Court partly allowed the appeals filed by the Union of India. Relevant portion of the judgment of Hon’ble Supreme Court in Union of India and Others Vs. Ashish Aggarwal [2022] SCC Online SC 543 is reproduced as under:-

“5. We have heard Shri N. Venkataraman, learned ASG appearing on behalf of the Revenue and Shri C.A. Sundaram and Shri S. Ganesh, learned Senior Advocates and other learned counsel appearing on behalf of the respective assessee.

6. It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act (IT Act) by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended sections 147 to 149 and section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as (1) no valid “reason to believe” (2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in the case of GKN Driveshafts (India) Ltd. v. Income Tax Officer and ors; (2003) 1 SCC 72, has not been followed.

6.1 Further pre-Finance Act, 2021, the reopening was permissible for a maximum period up to six years and in some cases beyond even six years leading to uncertainty for a considerable time. Therefore, Parliament thought it fit to amend the Income Tax Act to simplify the tax administration, ease compliances and reduce litigation. Therefore, with a view to achieve the said object, by the Finance Act, 2021, sections 147 to 149 and section 151 have been substituted.

6.2 Under the substituted provisions of the IT Act vide Finance Act, 2021, no notice under section 148 of the IT Act can be issued without following the procedure prescribed under section 148A of the IT Act. Along with the notice under section 148 of the IT Act, the assessing officer (AO) is required to serve the order passed under section 148A of the IT Act. section 148A of the IT Act is a new provision which is in the nature of a condition precedent. Introduction of section 148A of the IT Act can thus be said to be a game changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation.

6.3 But prior to pre-Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in the case of GKN Driveshafts (India) Ltd. (supra).

6.4 However, by way of section 148A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under section 148, the assessing officer shall (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the show-cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under section 148 of the IT Act and (v) the AO is required to pass a specific order within the time stipulated.

6.5 Therefore, all safeguards are provided before notice under section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per section 148A(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under section 148A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment.

6.6 Substituted section 149 is the provision governing the time limit for issuance of notice under section 148 of the IT Act. The substituted section 149 of the IT Act has reduced the permissible time limit for issuance of such a notice to three years and only in exceptional cases ten years. It also provides further additional safeguards which were absent under the earlier regime pre-Finance Act, 2021.

7. Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of 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 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so.

8. However, at the same time, the judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 of the IT Act. The Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced w.e.f. 01.04.2021, under the unamended section 148. In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021. There appears to be genuine nonapplication of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law. Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under: –

(i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be show-cause notices in terms of section 148A(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter;

(ii)  The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a one-time measure vis-a-vis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts;

(iii)  The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees;

(iv)  All the defences which may be available to the assessee under section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and;

(v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not.

9. There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessees. We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. Therefore, we have proposed to pass the present order with a view avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA.

10. In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under: –

(i) 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 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show cause notices in terms of section 148A(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 assesees can reply to the show-cause notices within two weeks thereafter;

(ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a one-time measure vis – avis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required;

(iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted);

(iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.

11. The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 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 present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge.

12. The impugned common judgments and orders 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.

10. Therefore, in above referred to judgment of Hon’ble Supreme Court in case of Union of India and Others Vs. Ashish Aggarwal [2022] SCC Online SC 543l, Hon’ble the Supreme Court held that the impugned notices under Section 148 issued to the respective assessees which were issued under unamended Section 148 of the Income Tax Act and were subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under Section 148-A of the Income Tax Act as substituted by the Finance Act, 2021 and be construed or treated to be show cause notices in terms of Section 148A(b). It was further held that the Assessing Officer shall, within 30 days from the date of passing of the judgment i.e. 04.05.2022 , 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 2 weeks thereafter. It was further held by the Hon’ble Supreme Court that the requirement of conducting any enquiry, if required, with the prior approval of specified authority under Section 148A(a) is dispensed with as one time measure viz-a-viz those notices which were issued under Section 148 of the unamended Act from 01.04.2021 (Finance Act, 2021) till date i.e. 04.05.2022 (Decision in Ashish Aggarwal) . Further that the Assessing Officer shall thereafter pass orders in terms of Section 148A(d) in respect of each of the concerned assessees and thereafter, after following the procedure as required under Section 148A may issue notice(s) under Section 148 (as substituted).

11. On 11.05.2022 following the decision in Union of India and Others Vs. Ashish Aggarwal, the Central Board of Direct Taxes issued instructions for the implementation of the decision in Ashish Aggarwal’s case (supra), wherein it was clarified that the judgment in Ashish Aggarwal would apply to all the cases where extended reassessment notices were issued, irrespective of the fact whether such notices were challenged or not. These instructions further stated that reassessment notices would “travel back in time to their original date when such notices were to be issued and then new Section 149 of the Income Tax Act is to be applied at that point.” The instructions further elaborated the mechanism for issuing notices under Section 148 of the new regime. The Assessing Officers accordingly after considering the replies furnished by the assessees passed orders under Section 148A(d) and subsequently notices under Section 148 of the new regime were issued to the assessees by the Assessing Officers , between July and September 2022, for the Assessment Year 2013 -2014, 2014 -2015, 2015-2016, 2016-2017 and 2017-2018. These notices were challenged before several High Courts, who declared the notices to be invalid being time barred and being issued without the appropriate sanction of the specified authority.

12. In Ashish Aggarwal’s case (supra) Hon’ble Supreme Court did not deal with the issue as to whether or not reassessment notices were issued within the time limits prescribed under the provisions of Income Tax Act, 1961 read with relaxations provided under the Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 (TOLA). Different High Courts declared the notices under Section 148 of the new regime issued to the assessees by the Assessing Officers between July and September 2022 , for the Assessment Year 2013 -2014, 2014-2015, 2015-2016, 2016 -2017 and 2017-2018 to be invalid , being time barred and being issued without appropriate sanction of specified authority . The same were challenged by way of filing the appeals before the Hon’ble Supreme Court in Union of India and Others Vs. Rajiv Bansal . The Hon’ble Supreme Court framed the following issues in Union of India and Others Vs. Rajiv Bansal :-

“B. Issues

18. The present batch of appeals gives rise to the following issues: –

a. Whether TOLA and notification 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 ”

13. Before proceeding further it would be appropriate to reproduce the relevant portion of the judgment passed by the Hon’ble Supreme Court in the case of    Union of India Vs. Rajeev Bansal [2024] 469 ITR 46 (SC) . The same is reproduced as under : –

B. Issues

18. The present batch of appeals gives rise to the following issues: –

a. Whether TOLA and notification 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. 

C. Submissions

19. Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue:

a. Parliament enacted TOLA as a free-standing legislation to provide relief and relaxation to both the assesses and the Revenue during the time of COVID- TOLA seeks to relax actions and proceedings that could not be completed or complied with within the original time limits specified under the Income Tax Act;

b. Section 149 of the new regime provides three crucial benefits to the assesses:

(i) the four- year time limit for all situations has been reduced to three years;

(ii) the first proviso to Section 149 ensures that re-assessment for previous assessment years cannot be undertaken beyond six years; and

(iii) the monetary threshold of Rupees fifty lakhs will apply to the reassessment for previous assessment years;

c. The relaxations provided under Section 3(1) of TOLA apply “notwithstanding anything contained in the specified Act.” Section 3(1), therefore, overrides the time limits for issuing a notice under Section 148 read with section 149 of the Income Tax Act;

d. TOLA does not extend the life of the old regime. It merely provides a relaxation for the completion or compliance of actions following the procedure laid down under the new regime;

e. The Finance Act 2021 substituted the old regime for re-assessment with a new regime. The first proviso to Section 149 does not expressly bar the application of TOLA. Section 3 of TOLA applies to the entire Income Tax Act, including Sections 149 and 151 of the new regime. Once the first proviso to Section 149(1)(b) is read with TOLA, then all the notices issued between 1 April 2021 and 30 June 2021 pertaining to assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below:

Assessment Year	Within 3 years	Expiry of Limitation read with TOLA for	Within six Years	Expiry of Limitation read with TOLA for (4) (5)
2013-2014	31.03.2017	T O L A not applicable	31.03.2020	30.06.2021
2014-2015	31.03.2018	T O L A not applicable	31.03.2021	30.06.2021
2015-2016	31.03.2019	T O L A not applicable	31.03.2022	T O L A not applicable
2016-2017	31.03.2020	30.06.2021	31.03.2023	T O L A not applicable
2017-2018	31.03.2021	30.06.2021	31.03.2024	T O L A not applicable

f. The Revenue concedes that for the assessment year 2015- 16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA;

CONCLUSION

14. A perusal of para 19 (f) of the judgment passed in the case of Rajiv Bansal (supra) shows that it is conceded position of the respondents, through the Additional Solicitor General of India, that for the assessment year 2015 -16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA.

15. Admittedly, Order dated 30.06.2022 under Section 148A(d), the consequential notice dated 30.06.2022 under Section 148 and show cause notice dated 10.03.2025 for the Assessment Year 2015 -2016 were issued to the petitioner without following the procedure for issuance of notice as per law amended by the Finance Act, 2021.

16. In view of the statement made by Additional Solicitor General of India in para 19 (f) of Rajeev Bansal’s case (supra), Order dated 30.06.2022 under Section 148A(d), the consequential notice dated 30.06.2022 under Section 148 and the show cause notice dated 10.03.2025 would be barred by limitation.

17. In view of the above, the present writ petition is allowed and Order dated 30.06.2022 under Section 148A(d), the consequential notice dated 30.06.2022 under Section 148 and the show cause notice dated 10.03.2025 are hereby set aside.

18. Pending application (s), if any, also stand disposed of.