CBDT has issued Instruction No. 1 dated 11.05.2022 to the Assessing Officers in issuing Notices under section 148A in respect of Notices already issued under section 148 in-between the period 01-04-2021 and 30-06-2021 subsequent to the decision of Hon’ble Supreme Court validating the notices so issued and directed that such notices shall be deemed to be notices issued under section 148A of the Income-tax Act, 1961 (‘Act’).
The Board has issued these instructions by exercising the powers under section 119 of the Act.
Readers are aware that Finance Act, 2021 has rewritten the reassessment proceedings under section 147 of the Act which is applicable from 01.04.2021. In the new regime, notices under section 148 can be issued only after complying with the provisions of section 148A.
In the meantime, CBDT has extended the time limit to issue notices under the erstwhile provisions of section 148 by two notifications in March 2021 and in April 2021 to 30th June 2021 under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA, 2020).
This has resulted in litigations before various High Courts which quashed the said notices so issued under erstwhile provisions of section 148 on or after 01.04.2021 holding them as void notices being time-barred and could not be issued after 31.03.2021.
Aggrieved with these decisions, the revenue has filed an appeal before the Supreme Court. In a judgment dated 04th May 2022 in the case of Union of India & Others vs. Ashish Agarwal in Civil Appeal No. 3005/2022, their Lordships, by exercising the extraordinary powers under Article 142 of the Constitution of India, have validated the notices so issued under erstwhile provisions of section 148 and modified the decisions of all the High Courts and issued the following directions-
1. All the notices issued pre-amended provisions of section 148 between 01.04.2021 to 30.06.2021 are to be treated as show cause notice u/s 148A(b) of the Act. The requirement of inquiry under section 148A(a) has been dispensed with as a one-time measure.
2. The AO has to communicate the information and other materials relied upon to the assessee within 30 days from the date of the order i.e by 2nd June, 2022.
3. The assessee has to reply within 2 weeks from the receipt of such communication from the AO.
4. The AO shall thereafter once again issue a notice under the newly amended provisions of section 148.
5. All the defences including defences available under section 149 shall be available to the assessee as well as the revenue under the amended provisions.
In view of the backdrop of these facts, the Board has issued an SOP to be followed by the AOs for implementing the decision of the Supreme Court in a uniform manner while issuing new notices under amended section 148.
The summary of the instructions issued by the CBDT on implementation of the Supreme Court Order in issuing notices under section 148A is listed below-
1. The judgment of the Supreme Court shall apply to all the reassessment notices whether challenged or not by the assessee.
2. The Board has reiterated the direction of the Court that all the defences under section 149 shall be available to the assessee and all the rights are available to the AOs under the new law.
3. In the third bullet point of para 6.3 of the Instruction, the Board has interpreted the judgment in a manner that the decision of the Supreme Court read with the time extension provided by TOLA, 2020 allows the reassessment notices issued between 01.04.2021 and 30.06.2021 to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act shall apply.
4. Fresh notices for AY 2013-14, AY 2014-15 and AY 2015-16 can be issued if the case falls under section 149(1)(b) of the new law.
5. Fresh notices under section 148 can be issued under section 149(1)(a) of the new law as they are within the period of three years from the end of the relevant assessment year.
6. Separate instruction shall be issued in respect of AY 2013-14, AY 2014-15 and AY 2015-16 where the alleged income escaped is less than Rs. 50 Lakh. Right now, these cases are instructed to be excluded.
7. By 2nd June, 2022 the AO shall provide all the information and material relied upon for issuance of the notices under erstwhile section 148 between 01.04.2021 and 30.06.2021.
8. The period of two weeks, within which the assessee to has file a reply, shall be counted from the date of last communication of information and materials.
9. The AO may allow more time to the assessee, if so requested, on merits.
10. After receiving the reply, the AO shall pass an order under section 148A(d) of the Act or not within one month from the end of the month in which the reply is received from the assessee or within one month from the end of the month in which time or extended time limit to furnish reply expires.
11. If it is a fit case for issuance of notice under section 148, then the same along with the order under section 148A(d) shall be served on the assessee after obtaining the approval under section 151.
12. If it is not a fit case for issuance of notice under section 148, then the order passed under section 148A(d) to that effect shall be served on the assessee.
In the author’s view, these instructions by the Board shall open the second round of pandora's box for litigation, at least, for AY 2013-14 and AY 2014-15.
Read the full text of the CBDT Instruction No. 01/2022 dated 11.05.2022 on Implementation of Supreme Court Order for reassessment notices under section 148
Instruction No. 01/2022
F. No 279/Misc./M-51/2022-ITJ
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
ITJ Section
New Delhi, Dated: 11th May, 2022
Subject: Implementation of the judgment of the Hon’ble Supreme Court dated 04.05.2022 (2022 SCC Online SC 543) (Union of India v. Ashish Agarwal) — Instruction regarding
1. Hon’ble Supreme Court, vide its judgment dated 04.05.2022 (2022 SCC Online SC 543), in the case of Union of India v. Ashish Agarwal has adjudicated on the validity of the issue of reassessment notices issued by the Assessing Officers during the period beginning on 1st April, 2021 and ending with 30th June 2021,within the time extended by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [hereinafter referred to as “TOLA”] and various notifications issued thereunder (these reassessment notices hereinafter referred to as “extended reassessment notices”).
2. These extended reassessment notices were issued by the Assessing Officers under the provision of section 148 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) following, the procedure prescribed under various sections pertaining to reassessment namely sections 147 to 151, as they existed prior to their amendment by the Finance Act, 2021 (hereinafter referred to as “old law”). With effect from 1st April 2021, the old law has been substituted with new sections 147-151 (hereinafter referred to as the “new law”).
3. Hon’ble Supreme Court has held that these extended reassessment notices issued under the old law shall be deemed to be the show cause notices issued under clause (b) of section 148A of the new law and has directed Assessing Officers to follow the procedure with respect to such notices. It has also held that all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available. Hon’ble Supreme Court has passed this order in exercise of its power under Article 142 of the Constitution of India.
4. The implementation of the judgment of Hon’ble Supreme Court is required to be done in a uniform manner. Accordingly, in exercise of its power under section 119 of the Act, the Central Board of Direct Taxes (hereinafter referred to as “the Board”) directs that the following may be taken into consideration while implementing this judgment.
5.0 Scope of the judgment:
5.1 Taking into account the decision of the Hon’ble Supreme Court in various paragraphs, it is clarified that the judgment applies to all cases where extended reassessment notices have been issued. This is irrespective of the fact whether such notices have been challenged or not.
6.0 Operation of the new section 149 of the Act to identify cases where fresh notice under section 148 of the Act can be issued:
6.1 With respect of operation of new section 149 of the Act, the following may be seen:
● Hon’ble Supreme Court has held that the new law shall operate and all the defences available to assessees under section 149 of the new law and whatever rights are available to the Assessing Officer under the new law shall continue to be available.
● Sub-section (1) of new section 149 of the Act as amended by the Finance Act, 2021 (before its amendment by the Finance Act, 2022) reads as under:-
149. (1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b):
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing 0fficer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (12) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021:
● Hon’ble Supreme Court has upheld the views of High Courts that the benefit of new law shall be made available even in respect of proceedings relating to past assessment years. Decision of Hon’ble Supreme Court read with the time extension provided by TOLA will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 of the Act is to be applied at that point.
6.2 Based on above, the extended reassessment notices are to be dealt with as under:
(i) AY 2013-14, AY 2014-15 and AY 2015-16: Fresh notice under section 148 of the Act can be issued in these cases, with the approval of the specified authority, only if the case falls under clause (b) of sub-section (1) of section 149 as amended by the Finance Act, 2021 and reproduced in paragraph 6.1 above. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (ii) of that section.
(ii) AY 16-17, AY 17-18: Fresh notice under section 148 can be issued in these cases, with the approval of the specified authority, under clause (a) of sub-section (1) of new section 149 of the Act, since they are within the period of three years from the end of the relevant assessment year. Specified authority under section 151 of the new law in this case shall be the authority prescribed under clause (i) of that section.
7.0 Cases where the Assessing Officer is required to provide the information and material relied upon within 30 days:
7.1 Hon’ble Supreme Court has directed that information and material is required to be provided in all cases within 30 days. However, it has also been noticed that notices cannot be issued in a case for AY 2013-14, AY 2014-15 and AY 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Hence, in order to reduce the compliance burden of assessees, it is clarified that information and material may not be provided in a case for AY 2013-14, AY 2014-15 and AY 2015-16, if the income escaping assessment, in that case for that year, amounts to or is likely to amount to less than fifty lakh rupees. Separate instruction shall be issued regarding procedure for disposing these cases.
8.0 Procedure required to be followed by the Assessing Officers to comply with the Supreme Court judgment:
8.1 The procedure required to be followed by the Jurisdictional Assessing Officer/Assessing Officer, in compliance with the order of the Hon’ble Supreme Court, is as under:
● The extended reassessment notices are deemed to be show cause notices under clause (b) of 148A of the Act in accordance with the judgment of Hon'ble Supreme Court. Therefore, all requirement of new law prior to that show cause notice shall be deemed to have been complied with.
● The Assessing Officer shall exclude cases as per clarification in paragraph 7.1 above.
● Within 30 days i.e. by 2nd June 2022, the Assessing Officer shall provide to the assessees, in remaining cases, the information and material relied upon for issuance of extended reassessment notices.
● The assessee has two weeks to reply as to why a notice under section 148 of the Act should not be issued, on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year. The time period of two weeks shall be counted from the date of last communication of information and material by the Assessing Officer to the assessee.
● In view of the observation of Hon’ble Supreme Court that all the defences of the new law are available to the assessee, if assessee makes a request by making an application that more time be given to him to file reply to the show cause notice, then such a request shall be considered by the Assessing Officer on merit and time may be extended by the Assessing Officer as provided in clause (b) of new section 148A of the Act.
● After receiving the reply, the Assessing Officer shall decide on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148 of the Act. The Assessing Officer is required to pass an order under clause (d) of section 148A of the Act to that effect, with the prior approval of the specified authority of the new law. This order is required to be passed within one month from the end of the month in which the reply is received by him from the assessee. In case no such reply is furnished by the assessee, then the order is required to be passed within one month from the end of the month in which time or extended time allowed to furnish a reply expires.
● If it is a fit case to issue a notice under section 148 of the Act, the Assessing Officer shall serve on the assessee a notice under section 148 after obtaining the approval of the specified authority under section 151 of the new law. The copy of the order passed under clause (d) of section 148A of the Act shall also be served with the notice u/s 148.
● If it is not a fit case to issue a notice under section 148 of the Act, the order passed under clause (d) of section 148A to that effect shall be served on the assessee.
Tanay Sharma
DCIT(OSD), ITJ-I
Download CBDT Instruction No. 01/2022 dated 11.05.2022 on Implementation of Supreme Court Order for reassessment notices under section 148 in PDF format
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