Completed Assessment Can’t Be Invalidated/Reopened Merely Relying Upon SC’s Ruling in Ashish Agarwal Case | HC

Case Details: Anindita Sengupta vs. Assistant Commissioner of Income-tax - [2024] 161 taxmann.com 39 (Delhi)

Judiciary and Counsel Details

• Yashwant Varma, Purushaindra Kumar Kaurav, JJ
• Ajay Vohra, Sr. Adv., Sachit Jolly, Rishabh Malhotra & Devansh Jain, Advs. for the Petitioner. 
• Shubhendu Bhattacharya, Adv. for the Respondent.

Facts of the Case

The issue before the Delhi High Court was

“Is it permissible for the Assessing Officer (AO) to issue a notice regarding concluded assessments, taking into consideration the Supreme Court ruling in the Ashish Agarwal case [2022] 138 taxmann.com 64 (SC)?”

High Court Held

The High Court held that in the instant case, the reassessment proceedings initiated pursuant to the notice had attained a closure consequent to a final order of assessment that was not disputed. The petitioner never questioned the validity of the original notices and chose to contest the reassessment proceedings on merits.

The family of provisions dealing with reassessment underwent significant statutory amendments consequent to promulgating the Finance Act 2021. The provisions so recast saw the introduction and placement of Section 148A in the statute book, which, for the first time, placed an express provision providing an opportunity for the assessee to question the initiation of reassessment and assumption of jurisdiction. Section 148A made provisions for such an opportunity being availed of by an assessee by clause (b).

In terms of Section 148A(d), the AO was placed under a statutory obligation to decide whether circumstances warranted assessment being undertaken in terms of Section 148 after taking into consideration the material available on the record as well as the objections or replies that an assessee may have tendered.

The procedure laid out in Ashish Agarwal stood confined to matters where, although notices may have been issued, proceedings have yet to attain finality. The Supreme Court prescribed a procedure where the Revenue was rendered remedied to assess escaped income even though material may have merited such an action being pursued solely because of a misinterpretation of the correct legal position.

In order to carve out an equitable solution, the Supreme Court invoked its powers conferred by Article 142 of the Constitution and ordained that all such notices would be treated as being under Section 148A(b) and for proceedings to be taken forward in accordance with law thereafter.

However, it was opined that Ashish Agarwal’s case neither intended nor mandated that the concluded assessments be reopened. The AO appeared to have erred in proceedings for the following reasons.

The judgement was principally concerned with judgments rendered by various High Courts’ striking down Section 148 notices holding that the AO had erred in proceeding based on the unamended family of provisions relating to reassessment. They had essentially held that the procedure constructed regarding the amendments introduced by the Finance Act 2021 would apply. None of those judgements were primarily concerned with concluded assessments. This indubitable position constrained the Supreme Court to frame directions requiring those notices to be treated as being under Section 148A(b) and for the AO proceeding after that to frame an order as contemplated by Section 148A(d).

The Supreme Court significantly observed that instead of quashing the impugned notices, the High Courts should have framed directions for those notices being construed and deemed to have been issued under Section 148A.

Ashish Agarwal’s case cannot possibly be read as mandating the hands of the clock being rewound and reversing final decisions that may have come to be rendered in the interregnum. There was, therefore, no justification for the respondent to have issued notices afresh seeking to reopen proceedings that had been rendered closed prior to the judgment rendered in Ashish Agarwal.

List of Cases Referred to

• Union of India v. Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC) (para 2)
• High Court Bar Association, Allahabad v. State of U.P 2024 SCC OnLine SC 207 (para 11)
• Man Mohan Kohli v. CIT 2021 SCC ONLine Del 5250 (para 13)
• GKN Driveshafts (India) Ltd. v. ITO (2003) 1 SCC 72 (para 18).