The present update is in continuation to our earlier update issued in March 2023,^[1] wherein, we highlighted the controversy in relation to the legality and validity of notices issued under Section 148 of the IT Act read with the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘TOLA’) and the Finance Act, 2021 (‘FA’), from April 1, 2021 till June 30, 2021 (‘Relevant Period’).

Recently, the Supreme Court of India (‘SC’) in the case of UOI v. Rajeev Bansal,^[2] upheld the initiation of reassessment proceedings for Assessment Year (‘AY’) 2013-14 & 2014-15 by way of notice under Section 148 of the IT Act, by the Revenue, whilst seeking shelter under the provisions of TOLA.

The SC noted that pursuant to its earlier decision in Ashish Agarwal v. UOI,^[3] notices issued under Section 148 of the IT Act (under old regime as existed prior to commencement of FA) during the Relevant Period were treated as show-cause notice issued under Section 148A(b) of the IT Act under the new regime. Further, the SC whilst harmoniously interpreting the first proviso to Section 149 of the IT Act (as amended by way of the FA) along with the provisions of TOLA, categorically held that the use of the term “any time limit” and the non-obstante clause under Section 3 of the TOLA indicate that the limitation getting expired for issuance of notice under the IT Act between March 20, 2020 till March 31, 2021 was extended till June 30, 2021. Hence, the notices issued for AY 2013-14 and 2014-15 during the Relevant Period passes the test of limitation.

At this juncture, it is worthwhile to highlight that the SC also opined on the applicability of the first proviso to Section 149 of the IT Act (as amended by way of the FA) and observed that the limitation of six years provided under the old regime would still be applicable till AY 2020-21 along with the pre-condition that the income chargeable to tax escaping assessment during such AY must not be less than INR 50,00,000 (Indian Rupees Fifty Lakh). Furthermore, the SC whilst reiterating the applicability of Article 142 of the Constitution of India, observed that the directions issued by the SC in the case of Ashish Agarwal v. UOI (supra), would be applicable on a pan India basis, meaning thereby, such directions issued therein would be applicable on matters already adjudicated or pending adjudication before the different judicial forums.

In a nutshell, the SC set aside the decisions of the various High Courts being the Bombay High Court, Delhi HC, Allahabad High Court, Gujarat High Court et. al. which granted relief to the taxpayers and as a natural corollary, reassessment proceedings initiated for AY 2013-14 and 2014-15 during the Relevant Period would be continued. In substance, the decision of the SC yet again gives a second inning to the Revenue to conduct reassessment proceedings on the taxpayers, including non-residents.^[4]

[1]    For the sake of brevity, the issue involved herein is not repeated again and can be accessed at https://www.azbpartners.com/bank/reassessment-conundrum-continues/.

[2]    Union of India v. Rajeev Bansal, [2024] INSC 754 (SC).

[3]    Ashish Agarwal v. UOI, [2022] 444 ITR 1 (SC).

[4]    Depending on the facts and circumstances of each case.