Facts of the Case

The petitioners (including Suman Jeet Agarwal and several others in connected matters) challenged reassessment notices issued by the Income Tax Department under Section 148 of the Income Tax Act.

  • The notices were issued after 01.04.2021, when the new reassessment scheme (Section 148A) had already come into force.
  • However, the Department issued notices under the old provisions, relying on extensions granted due to the COVID-19 pandemic.
  • Petitioners contended that once the new law came into effect, the old provisions ceased to apply.

The batch consisted of numerous petitions involving similar legal questions.

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 under the old Section 148 regime are valid?
  2. Whether the Revenue could rely on relaxation notifications (COVID extensions) to continue using the old provisions?
  3. Whether the new procedure under Section 148A is mandatory for all reassessment proceedings initiated post Finance Act, 2021?

Petitioners’ Arguments

  • The Finance Act, 2021 completely substituted the reassessment provisions.
  • After 01.04.2021, the new regime (Section 148A) is mandatory.
  • Notices issued under the old law are without jurisdiction and invalid.
  • Executive notifications cannot override statutory amendments passed by Parliament.
  • The reassessment process without following Section 148A violates principles of natural justice.

Respondents’ Arguments (Revenue)

  • The Government issued notifications extending timelines due to COVID-19.
  • These notifications allowed continuation of the old reassessment provisions.
  • The Department acted within the extended timelines granted under relaxation laws.
  • Therefore, notices issued under the old regime remain valid.

Court Findings

  • The Court held that the Finance Act, 2021 introduced a new reassessment framework, which became effective from 01.04.2021.
  • Once the new provisions came into force, the old provisions ceased to operate.
  • Executive notifications cannot override statutory provisions enacted by Parliament.
  • The Department was required to follow Section 148A procedure before issuing notices.
  • Notices issued under the old Section 148 after 01.04.2021 were found to be invalid and unsustainable.

Court Order

  • The Delhi High Court quashed reassessment notices issued under the old regime post 01.04.2021.
  • Liberty was granted to the Revenue to initiate proceedings afresh under the new law, subject to limitations.

Important Clarification by Court

  • The judgment clarified that:
    • New reassessment provisions are mandatory and prospective from 01.04.2021
    • Relaxation notifications cannot revive repealed provisions
    • Procedural safeguards under Section 148A are compulsory

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice for reassessment
  • Section 148A – Procedure before issuing notice
  • Section 149 – Time limit for notice
  • Finance Act, 2021 (Reassessment Scheme Amendment)

Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3983-DB/58927092022CW9002022_174733.pdf

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