Home News Tax Reassessment Notices News: Tax reassessment notices issued from April ’21 upheld by SC

Tax Reassessment Notices News: Tax reassessment notices issued from April ’21 upheld by SC

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Tax Reassessment Notices News: Tax reassessment notices issued from April '21 upheld by SC


The Supreme Court on Wednesday invoked special powers under Section 142 of the Constitution to uphold all reassessment notices issued by the income tax department after March 31, 2021, dating back six years to reopening the assessment. In the FY22 Budget, the government has shortened the reopening period to three years from April 1, 2021 to reduce litigation.

The IT department extended the old regime until June 30, 2021, citing restrictions due to the second wave of Covid, and issued a series of notices to reopen past assessments. The taxpayer appealed the decision, saying it violated the March 31, 2021 deadline amended by the Finance Act. The Allahabad High Court ruled in favor of the taxpayer and quashed all notices. The department has appealed the decision to the Supreme Court.

The Supreme Court decision is a setback for thousands of taxpayers, including businesses and individuals, who will now have to prepare for the reassessment process if they are notified. The ruling will apply to all pending writs in different high courts.

According to Rakesh Nangia, chairman of Nangia Anderson India, IT departments across India have issued around 90,000 reassessment notices and around 9,000 appeals in various high courts, some of which are pending or where judges have ruled on the sector .

Provide information to assessees within 30 days The tax department issued these notices under Section 148 alleging improper disclosure of income prior to the last three assessment years.

Article 142

In an unprecedented move, Justice Mr Shah and Justice BV Nagarathna exercised special powers under Section 142 of the Constitution to hold that all notices of reassessment under Section 148 of the Income Tax Act should be deemed to have been issued under Section 148A , which was introduced in the FY22 Budget.

Section 148 deals with giving notices of income escaping a recalculation or assessment if there is “reason to believe”. Under section 148A, the taxpayer must be heard and the approval of the designated authority must be sought before a notice is given.

“A challenged section 148 notice to the relevant assessor under section 148 of the Information Technology Act, unamended, shall be deemed to have been issued under section 148A of the Information Technology Act superseded by the Finance Act 2021 , and was interpreted or dealt with as a display-cause notice under section 148A(b),” the judgment said.

Pursuant to section 142, the Supreme Court may, if necessary, make an order exercising justice on any cause or matter pending before it. The decree is enforceable across India.

Reply to notification

The court directed that assessors should provide relevant assessors with information and materials relied upon by tax authorities within 30 days so that assessors can respond to a show-cause notice within two weeks thereafter. The judge said the order would apply to the whole of India and all previous orders by the High Court had been put on hold. The order will also govern pending writ petitions pending in various high courts where similar notices issued after April 1, 2021 under section 148 of the Act are challenged.

This has brought relief to the tax department as it would not need to make any further appeals in similar cases if the notice was struck down by several high courts and the taxpayer was brought under the new law. “This is a significant relief for the tax authorities and saves them from huge revenue losses due to technical errors or oversights in the drafting of legislation. Taxpayers must be prepared to face reassessment procedures that are likely to Resume and restart at different times, said S Vasudevan, managing partner of Lakshmikumaran & Sridharan Attorneys.

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