ITO Vs Ashish Acharatlal Varaiya (Supreme Court of India)
The Supreme Court considered the Special Leave Petitions arising from the Gujarat High Court judgment concerning reassessment notices issued under Section 148 and orders under Section 148A(d) of the Income Tax Act, 1961, for Assessment Years 2013-14 and 2014-15. The Gujarat High Court had dealt with five Special Civil Applications together because they involved similar facts and identical issues. The petitioners challenged Section 148 notices and consequential Section 148A(d) orders issued in July 2022, contending that the reassessment proceedings were barred by limitation.
Read HC Judgment in this case: Gujarat HC Holds Amended Section 149 Cannot Revive Time-Barred Reassessment Notices
Before the High Court, the petitioners relied upon the pre-Finance Act, 2021 limitation regime under Section 149, under which a Section 148 notice could, subject to the prescribed conditions, be issued beyond four years but within six years from the end of the relevant assessment year. They also relied upon the first proviso to the substituted Section 149 introduced with effect from 01.04.2021, which provided that a notice could not be issued for an assessment year beginning on or before 01.04.2021 where it could not have been issued at that time because it was beyond the limitation under the earlier provision.
The High Court examined the transition from the old reassessment regime to the regime introduced by the Finance Act, 2021, including Section 148A and the substituted Section 149. It also considered the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and notifications extending reassessment timelines during the relevant period, including Notification No.38 of 2021 dated 27.04.2021, which extended the time limit until 30.06.2021.
The High Court noted the Supreme Court’s decision in Union of India vs. Ashish Agarwal, under which notices issued under the unamended Section 148 between 01.04.2021 and 30.06.2021 were deemed to have been issued under Section 148A and treated as show-cause notices under Section 148A(b). The Supreme Court in that decision had also kept available to assessees all defences, including those under Section 149, and the rights and contentions available under the Finance Act, 2021 and law.
Relying principally on its earlier decision in Keenara Industries Pvt. Ltd. vs. The Income Tax Officer, the Gujarat High Court held that notices under Section 148 issued after expiry of the six-year limitation applicable under the old regime could not be revived under the new Section 149. It recorded that the six-year period for AY 2013-14 expired on 31.03.2020 and for AY 2014-15 on 31.03.2021. The Court also agreed with the Allahabad High Court’s decision in Rajeev Bansal vs. Union of India concerning the TOLA 2020 relaxation and the first proviso to Section 149.
Consequently, the Gujarat High Court held the impugned Section 148 notices relating to AYs 2013-14 and 2014-15 to be beyond the permissible time limit and therefore illegal and without jurisdiction. It set aside the respective Section 148 notices and Section 148A(d) orders in all five petitions. The other factual and legal issues concerning the reasons for reopening were left open, as the petitions were allowed on the limitation issue alone. All petitions were allowed and the Rule was made absolute.
The matter thereafter reached the Supreme Court in ITO Vs Ashish Acharatlal Varaiya. The Supreme Court first condoned the delay and then disposed of the Special Leave Petitions in terms of its judgment in Union of India vs Rajeev Bansal. It directed the Assessing Officers to dispose of the objections in accordance with the law laid down in Rajeev Bansal. Thereafter, assessees who remain aggrieved were given liberty to pursue all rights and remedies in accordance with law, except on issues concluded by Rajeev Bansal. Pending applications, if any, were also disposed of.
Thus, the Supreme Court did not independently decide the reassessment limitation controversy in the supplied order or expressly affirm or reverse the Gujarat High Court’s reasoning. Instead, it disposed of the Special Leave Petitions in terms of Rajeev Bansal and directed consideration of the assessees’ objections in accordance with that judgment.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. The Special Leave Petitions are disposed of in terms of the judgment of this Court in Union of India vs Rajeev Bansal1.
3. The assessing officers will dispose of the objections in terms of the law laid down by this Court in Rajeev Bansal (supra). 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 the judgment of this Court in Rajeev Bansal (supra).
4. Pending applications, if any, stand disposed of.
