Supreme Court upholds I-T dept. reassessment notices

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Supreme Court upholds I-T dept. reassessment notices

The Supreme Court on Wednesday invoked its extraordinary powers under Article 142 of the Constitution to uphold all reassessment notices issued after March 31, 2021 by the income tax department, reopening assessments going back six years. The government had reduced the opening period to three years with effect from April 1, 2021, to reduce litigation in the budget for FY 22, according to the budget for FY22. The I-T department extended the old regime until June 30, 2021, citing restrictions due to the Covid second wave, and sent out a flurry of notices reopening past assessments. The taxpayers appealed against the decision, saying it was in violation of the March 31, 2021 deadline, as amended by the finance bill. The High Court of Allahabad had ruled in favor of taxpayers and quashed all notices. The department appealed the decision to the Supreme Court. The decision of the Supreme Court was a blow to thousands of taxpayers, including businesses and individuals who will have to gear up for a reassessment process if they hadn't been served a notice. The ruling will apply to all pending writs at different high courts. Nearly 90,000 reassessment notices were issued by the I-T department in India, and about 9,000 appeals were filed in various high courts, some of which are pending or the bench has ruled against the department, according to Rakesh Nangia, chairman, Nangia Anderson India. The tax department issued notices under Section 148, alleging improper disclosure of income for the period prior to the last three assessment years. In an unprecedented move, the division bench of justices MR Shah and BV Nagarathna exercised extraordinary powers under Article 142 of the Constitution to hold that all reassessment notices issued under Section 148 of the Income Tax Act should be treated as notices issued under Section 148 A, which was introduced in the FY 22 budget. Section 148 deals with the issuance of a notice on income that has escaped re-computation or assessment if there is reason to believe that's the case. The taxpayer must get approval from the specified authority before a notice can be issued under section 148 A. The unamended Section 148 notices issued to the assessees under Section 148 A of the IT Act are deemed to have been issued under the 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 judgement said. A Supreme Court may pass an order as needed to exercise justice in any cause or matter pending before it, under Article 142. The decree is enforceable throughout India. The court ordered that the assessing officer must provide to the assessees information and material needed by the revenue department within 30 days so that they can respond to show-cause notices within two weeks thereafter. The bench said the order will be applicable across India and all previous orders by high courts have been set aside. The order will also govern pending writ petitions pending before various high courts in which similar notices under Section 148 of the Act were issued after April 1, 2021 are under challenge. This relief will be brought to the department of revenue as it would not have to file any more appeals in similar cases where notices were quashed by several high courts and initiate proceedings against taxpayers as per the new law. This is a major relief to the tax department and saves them from huge revenue loss due to technical error or oversight in legislative drafting. The taxpayers will have to prepare to face the reassessment proceedings, which are likely to get restored and reinitiated at different stages, said S Vasudevan, executive partner, Lakshmikumaran Sridharan Attorneys.