Facts of the Case

The present matter comprises a batch of writ petitions, including Suman Jeet Agarwal vs Income Tax Officer & Ors., wherein the petitioners challenged reassessment notices issued under Section 148 of the Income Tax Act after the enforcement of the Finance Act, 2021.

The Revenue authorities issued reassessment notices under the old regime of Section 148, even after the new provisions introducing Section 148A (mandatory pre-notice inquiry procedure) had come into force from 01.04.2021.

Petitioners contended that such notices were illegal and void as they bypassed the newly mandated statutory safeguards.

Issues Involved

  1. Whether reassessment notices issued under the old Section 148 after 01.04.2021 are valid?
  2. Whether the Revenue can rely on relaxation provisions (like TOLA) to continue using the old reassessment regime?
  3. Whether compliance with Section 148A procedure is mandatory for all reassessment notices post Finance Act, 2021?

Petitioner’s Arguments

  • The Finance Act, 2021 introduced a completely new reassessment regime, making Section 148A mandatory.
  • Any notice issued after 01.04.2021 must comply with the new procedural safeguards, including:
    • Prior inquiry
    • Opportunity of hearing
    • Passing a speaking order
  • Notices issued under the old provisions are without jurisdiction and void ab initio.
  • Relaxation laws cannot override substantive statutory amendments.

Respondent’s Arguments

  • The Revenue relied on Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
  • It argued that due to COVID-related relaxations, the timeline for issuing notices under the old regime stood extended.
  • Therefore, notices issued under old Section 148 were claimed to be legally sustainable.

Court’s Findings / Order

  • The Delhi High Court held that the new reassessment provisions introduced by the Finance Act, 2021 are mandatory and applicable from 01.04.2021.
  • The Court clarified that:
    • The old provisions ceased to exist after the amendment date.
    • TOLA cannot override or defer the applicability of the substituted provisions.
  • Consequently:
    • Notices issued under the old Section 148 after 01.04.2021 were declared invalid.
    • The Revenue must strictly follow Section 148A procedure before initiating reassessment.

Important Clarifications by the Court

  • Procedural safeguards under Section 148A are not optional but mandatory.
  • The judgment emphasized taxpayer rights and natural justice principles.
  • The Court rejected the argument that executive notifications can override legislative amendments.
  • The ruling reinforced that jurisdictional errors cannot be cured retrospectively.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice for reassessment
  • Section 148A – Procedure before issuing notice (introduced by Finance Act, 2021)
  • Section 149 – Time limits for notice
  • Section 151 – Sanction for issue of notice

Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3971-DB/58927092022CW5112022_165154.pdf


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