Tax reassessment notices issued from April ’21 upheld by SC

The Supreme Courtroom on Wednesday invoked its extraordinary powers beneath Article 142 of the Structure to uphold all reassessment notices issued after March 31, 2021, by the earnings tax division reopening assessments going again six years. Within the finances for FY22, the federal government had decreased this reopening interval to 3 years with impact from April 1, 2021, to cut back litigation.

The I-T division prolonged the outdated regime until June 30, 2021, citing restrictions as a result of Covid second wave and despatched out a flurry of notices reopening previous assessments. Taxpayers appealed in opposition to the choice, saying it violated the March 31, 2021, deadline as amended by the finance invoice. The Allahabad Excessive Courtroom had dominated in favour of taxpayers and quashed all notices. The division had appealed in opposition to the choice within the Supreme Courtroom.

The Supreme Courtroom determination is a setback to hundreds of taxpayers, together with companies and people who will now should gear up for reassessment proceedings if they’d been served a discover. The ruling will apply to all pending writs at totally different excessive courts.

About 90,000 reassessment notices have been issued by the I-T division throughout India and about 9,000 appeals have been filed in numerous excessive courts, a few of that are both pending or the bench has dominated in opposition to the division, in line with Rakesh Nangia, chairman, Nangia Anderson India.

Assessees to be Supplied Data in 30 Days

The tax division issued these notices beneath Part 148, alleging improper disclosure of earnings for the interval previous to the final three evaluation years.


In an unprecedented transfer, the division bench of justices MR Shah and BV Nagarathna exercised extraordinary powers beneath Article 142 of the Structure to carry that each one reassessment notices issued beneath Part 148 of the Revenue Tax Act needs to be handled as notices issued beneath Part 148A, which was launched within the FY22 finances.

Part 148 offers with the issuance of a discover on earnings that has escaped re-computation or evaluation if there’s “cause to imagine” that is the case. Below Part 148A, the taxpayer must be heard and approval sought from the desired authority earlier than a discover might be issued.

“The impugned Part 148 notices issued to the respective assessees which have been issued beneath unamended Part 148 of the IT Act, shall be deemed to have been issued beneath Part 148A of the IT Act as substituted by the Finance Act, 2021, and construed or handled to be show-cause notices by way of part 148A(b),” the judgement mentioned.

Below Article 142, the Supreme Courtroom might cross an order as wanted for exercising justice in any trigger or matter pending earlier than it. The decree is enforceable all through India.


The court docket directed that the assessing officer shall inside 30 days present to the respective assessees info and materials relied upon by the income division in order that assessees can reply to show-cause notices inside two weeks thereafter. The bench mentioned the order might be relevant throughout India and all earlier orders by excessive courts had been put aside. The order will even govern pending writ petitions pending earlier than numerous excessive courts wherein related notices beneath Part 148 of the Act have been issued after April 1, 2021, are beneath problem.

This brings aid to the division of income as it will not be required to file any extra appeals in related instances the place notices have been quashed by a number of excessive courts and provoke proceedings in opposition to taxpayers as per the brand new regulation. “This comes as a serious aid to the tax division and saves them from enormous income loss as a result of technical error or oversight in legislative drafting. Taxpayers must get ready to face the reassessment proceedings, that are prone to get restored and reinitiated at totally different phases,” mentioned S Vasudevan, government associate, Lakshmikumaran & Sridharan Attorneys.
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