CBDT issues instructions for AOs to implement Supreme Court’s ruling

Instruction No. 01/2022, dated 11-05-2022

The Supreme Court of India in the case of Ashish Agarwal [2022] 138 taxmann.com 64 (SC) has adjudicated the validity of the reassessment notices issued by the Assessing Officers during the period 01-04-2021 to 30-06-2021 under the old provisions.

The Supreme Court held that the reassessment notices issued under old provisions shall be deemed as show-cause notices issued under new provisions of Section 148A. It also directed AO to follow the new procedure of reassessment with respect to such notices and complete the proceedings accordingly.

To implement the judgment of the Supreme Court uniformly, the Central Board of Direct Taxes (CBDT) has an instruction that may be taken into consideration while implementing the ruling.

The board has clarified that the judgment applies to all cases where extended reassessment notices have been issued irrespective of the fact whether such notices have been challenged or not.

Further, the ruling of the Supreme Court read with the time extension provided by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) will allow extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new section 149 is to be applied at that point.

1. Assessment Years for which reassessment proceedings can be initiated pursuant to SC ruling

a) Assessment Years 2013-14, 2014-15, and 2015-16
Fresh notice under section 148 can be issued with the approval of the specified authority, only if the case falls under section 149(1)(b). This means notices can be issued for these Assessment Years if the income escaped assessment amount is Rs. 50 lakh or more.

b) Assessment Years 2016-17 and 2017-18
Fresh notice under section 148 can be issued with the approval of the specified authority under section 149(1)(a) since they are within the period of three years from the end of the relevant assessment year.

2. Disposing cases not falling within the period of limitation

Notices cannot be issued in a case for AY 2013-14, AY 2014-15, and AY 2015-16 if the income escaping assessment amount is less than Rs. 50 lakh. Thus, the board shall issue a separate instruction prescribing the procedure to dispose of notices issued under old provisions under these cases.

3. Procedure to be followed by AOs to comply with the Supreme Court judgment

The board has specified the AO is required to follow the following procedure to comply with the order of the Hon’ble Supreme Court:

a) AO shall provide the information and material relied upon by him for the issuance of extended reassessment notices by 02-06-2022. The assessee has two weeks to reply as to why a notice under section 148 of the Act should not be issued.

b) If the assessee makes a request seeking more time to file a reply to the show-cause notice, then such a request shall be considered by AO on merit.

c) After receiving the reply, AO shall decide based on material available on record including the reply of the assessee, whether or not it is a fit case to issue a notice under section 148.

d) If it is a fit case to issue a notice under section 148, AO shall serve on the assessee a notice under section 148 after obtaining the approval of the specified authority under section 151 of the new law.

e) If it is not a fit case to issue a notice under section 148 of the Act, the order passed under section 148A(d) to that effect shall be served on the assessee.

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