ITO Vs Innani Ritesh Kumar (Supreme Court of India)
The matter arose from a batch of writ petitions before the Telangana High Court challenging reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961. The petitioners contended that, following the Finance Act, 2021, the reassessment procedure had been substituted, but the Income Tax Department had not followed the modified statutory procedure. It was submitted that the notices issued under Section 148 could not withstand judicial scrutiny and that the consequential orders were also unsustainable.
Read HC Judgment in this case: Section 148 Notices & Order Quashed for Ignoring Finance Act, 2021 Procedure: Telangana HC
Before the High Court, both parties agreed that the issue had already been decided by a common order of the same Court dated 14.09.2023 in W.P. No.25903 of 2022 and connected matters. They requested that the present writ petitions be disposed of in terms of that common order.
Referring to its earlier decision, the High Court noted that once the reassessment notices were treated as notices under Section 148A, the respondent Department was mandatorily required to proceed under the substituted provisions introduced by the Finance Act, 2021. The earlier common order recorded that failure to follow the substituted procedure was contrary to the Finance Act, 2021 and also contrary to the directions issued by the Supreme Court in Ashish Agarwal. It further held that the reassessment notices and the proceedings initiated pursuant thereto were neither tenable nor sustainable and that the notices and the procedure adopted were illegal. Consequently, the High Court held that the consequential orders passed pursuant to notices issued under Sections 147 and 148 were also liable to be quashed, observing that where the initiation of proceedings was procedurally defective, the subsequent orders would also stand nullified. The High Court allowed the writ petitions on the jurisdictional issue and did not examine the other issues raised by the petitioners, leaving them open for appropriate proceedings. It also observed that, in view of the Supreme Court’s order in Ashish Agarwal passed under Article 142 of the Constitution of India, the Revenue retained the liberty to proceed further under the substituted provisions from the stage indicated in the Supreme Court’s order.
