Finance Act 2021 revamped the entire reassessment proceedings with effect from 01 April 2021, wherein the pre-existing regime was substituted with the corresponding new regime along with introduction of new section 148A of the Income Tax Act, 1961 (‘the Act’) and changes in time limitation for issuance of notices.

 

On the other hand, the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (‘TOLA’) was enacted on 29 September 2020, which provided relaxation of limitation period in respect of several compliance deadlines on account of general hardship faced by the taxpayers upon the spread of COVID -19 pandemic. Under the TOLA, Central Board of Direct Taxes (‘CBDT’) through several notification(s), extended the time limitation for issuance of reassessment notices under the unamended section 148 of the Act till 30 June 2021. The extension of time period through notifications and existence of parallel sections become the main bone of litigation between the taxpayers and the revenue authorities.

 

Approximately 90,000 reassessment notices were issued to the taxpayers under the erstwhile section 148 of the Act between 01 April 2021 to 30 June 2021. The validity of such reassessment notices was challenged in various Hon’ble High Courts on the ground that the provisions of newly inserted section 148A has not been complied with and subjected to more than 9,000 writ petitions. Majority of the High Courts had held that the reassessment notices issued under the unamended provisions were bad in law and accordingly set aside all such notices wherever assailed. Revenue had filed Special Leave Petition in one such case, before the Hon’ble Supreme Court to consider the matter which has now been pronounced.

 

In its order, the Hon’ble Supreme Court has validated the notices issued under erstwhile section 148 considering the genuine non-application of the amendments due to bonafide belief of the Revenue that the amendments may not yet have been enforced and has held that such notices shall be deemed to have been issued under section 148A of the Act. Hon’ble SC also noted all the defences available to the Assessees under the amended section 149 shall continue to be available.

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