Allahabad High Court: UOI v. Ashish Agarwal SC Ruling Applies Only To Parties Contesting Section 148 IT Act Notices

Allahabad High Court: UOI v. Ashish Agarwal SC Ruling Applies Only To Parties Contesting Section 148 IT Act Notices

The Allahabad High Court has clarified that the Supreme Court ruling in Union of India v. Ashish Agarwal did not entail a broad mandate to nullify all notices issued under Section 148 of the Income Tax Act, 1961. The court noted that the Supreme Court's directive was specifically applicable to notices that were contested in both the Apex Court and various High Courts across India.

In the case of Union of India v. Ashish Agarwal, the Union Government contested the Allahabad High Court's decision to annul the reassessment notices issued by the Revenue under Section 148. The basis of the challenge was the assertion that these notices were invalidated by the Finance Act 2021, which introduced fresh provisions concerning reassessment proceedings effective from April 1, 2021.

The Supreme Court partially granted the appeals filled by the Union of India, ruling that reassessment notices served to all assesses under Section 148 of the Income Tax Act would be considered as issued under the newly introduced Section 148A. The Court stipulated that any rulings made by High Courts concerning challenges to notices issued under Section 148 after April 1, 2021, should be adjusted accordingly. However, no instructions were provided regarding notices that were not contested before any court.

Section 148 of the Act mandates the issuance of a notice to an assessee whose income has evaded assessment before finalizing a reassessment order under Section 147. The recently introduced Section 148A necessitates an inquiry and affords an opportunity for a hearing before the issuance of a notice under Section 148.

The petitioner's original assessment order for the assessment year 2017-18 was issued in 2019. Subsequently, reassessment proceedings were initiated under Section 148 through a notice dated 31.03.2021. The final reassessment order was issued on 28.03.2022, which was not contested by the petitioner and had become conclusive.

Following this, the petitioner received another notice under Section 148 to initiate reassessment proceedings for the assessment year 2017-18. The petitioner contested this initiation of reassessment proceedings under Section 147 read in conjunction with Section 148 through a notice dated 30.07.2022.

The Revenue's counsel contended that since the notice was digitally signed on 01.04.2021, it was invalidated by the introduction of Section 148A, as ruled in Union of India v. Ashish Agarwal. The argument put forth was that the entire proceedings were thereby rendered invalid.

The Court noted that in Union of India v. Ashish Agarwal, the Supreme Court did not mandate the annulment of all notices, including those not contested before the Court. It was clarified that reassessment notices issued under Section 148 of the Income Tax Act, 1961, which were not challenged in the aforementioned case, remained unaffected. Consequently, the issuance of fresh reassessment notices under Section 148 for the same assessment year was deemed to be without jurisdiction.

The bench, consisting of Justices Saumitra Dayal Singh and Donadi Ramesh, concluded that it was undisputed by the parties that neither the petitioner contested the reassessment order nor was it revised by the Commissioner. Furthermore, there was no declaration by the Supreme Court regarding the annulment of all assessment orders other than those specifically under challenge in the proceedings before the Court.

The Court determined that the assessment order issued on 28.03.2022 remained unaffected by the Supreme Court's decision. Given the absence of any legal declaration to invalidate that assessment order, the Court deemed the initiation of fresh reassessment proceedings to be entirely without jurisdiction and consequently nullified them. As a result, the writ petition was granted.