Facts of the Case

  • Multiple writ petitions (including W.P.(C) 10/2022) were filed challenging reassessment notices issued by the Income Tax Department.
  • The notices were issued after 01.04.2021, when the new reassessment regime came into force.
  • However, the Department issued notices under the old provisions of Section 148 without following the mandatory procedure under Section 148A.
  • Petitioners contended that such notices were illegal and without jurisdiction.

Issues Involved

  1. Whether reassessment notices issued after 01.04.2021 under the old Section 148 are valid.
  2. Whether compliance with Section 148A (new procedure) is mandatory.
  3. Whether the Revenue could rely on relaxation notifications (COVID extensions) to continue using old provisions.
  4. Whether such notices violate principles of natural justice.

Petitioner’s Arguments

  • The Finance Act, 2021 substituted the entire reassessment scheme, making Section 148A mandatory.
  • Issuing notices under the old law after 01.04.2021 is ultra vires and void ab initio.
  • The new law provides additional safeguards, including:
    • Prior inquiry
    • Opportunity of being heard
  • Notifications extending time limits cannot override statutory amendments.
  • Violation of natural justice due to absence of pre-notice hearing.

 

Respondent’s Arguments (Income Tax Department)

  • The Department relied on relaxation notifications issued during COVID-19 to justify continuation of the old regime.
  • It was argued that:
    • Time limits were extended
    • Therefore, old provisions could still be applied
  • The Department claimed that notices were validly issued within extended timelines.

Court’s Findings / Judgment

  • The Delhi High Court held that:
    • New reassessment provisions (Sections 147 to 151 as amended) are applicable from 01.04.2021.
    • The old provisions ceased to exist after this date.
  • The Court ruled:
    • Notices issued under old Section 148 after 01.04.2021 are invalid.
    • Section 148A procedure is mandatory before issuing reassessment notice.
  • Notifications extending limitation cannot override statutory substitution made by Parliament.
  • The Court emphasized:
    • Legislative intent was to introduce safeguards and transparency.
  • Consequently:
    • Impugned reassessment notices were quashed.

Important Clarifications by Court

  • Reassessment proceedings must strictly follow new statutory framework.
  • Executive notifications cannot override statutory amendments.
  • Tax authorities must ensure:
    • Compliance with Section 148A inquiry and hearing
  • The judgment reinforced rule of law and procedural fairness in taxation.

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Issue of Notice for Reassessment
  • Section 148A – Conducting Inquiry before Issue of Notice
  • Section 149 – Time Limit for Notice
  • Section 151 – Sanction for Issue of Notice
  • Finance Act, 2021 (New Reassessment Regime)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3963-DB/58927092022CW4402022_164102.pdf

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