SC Rules in Favour of Tax Dept. | Reassessment Notice Can Be Issued After 01-04-2021 Under Old Provisions

Case Details: Union of India v. Rajeev Bansal - [2024] 167 taxmann.com 70 (SC)

Judiciary and Counsel Details

• Dr. Dhananjaya Y. Chandrachud | CJI. & J. B. Pardiwala and Manoj Misra | JJ.

Facts of the Case

In Ashish Agarwal [2022] 138 taxmann.com 64 (SC), the Supreme Court addressed whether reassessment notices issued under the old regime were valid after the new, more favorable reassessment regime came into effect. The Court ruled that all reassessment notices post 01-04-2021 should comply with the new reassessment regime. However, notices under Section 148 of the old regime were deemed to be under Section 148A(b) of the new regime.

In the Ashish Agarwal ruling, the Supreme Court did not address whether or not the reassessment notices were issued within the time limits prescribed under the provisions of the Income Tax Act, read with the relaxations provided under TOLA.

Supreme Court Held

This was the primary issue for consideration before the Supreme Court in the instant appeal. The Supreme Court held that as under:

1. TOLA extended the deadlines for certain actions under specified Acts that were due during the COVID-19 period. Section 3(1) of TOLA uses “any” to indicate that the relaxation applies to all actions due between 20-03-2020 and 31-03-2021. This section is concerned with the completion of actions under the specified Acts, and any amendment or substitution of provisions does not impact TOLA’s application as long as the action falls within the specified period.
2. Section 2(1)(b)(ii) of TOLA defines ‘specified Act’ to include the Income Tax Act and after 1 April 2021, it must be read as the Act amended by the Finance Act 2021. The substitution of Sections 147 to 151 does not impact TOLA’s purpose, which is to relax time limits for actions due between 20-03-2020 and 31-03-2021. TOLA remains applicable to the Income Tax Act after April 01, 2021 if actions under the substituted provisions fall within this period.
3. Section 3(1) of TOLA applies to the issuance of reassessment notices under Section 148 of the Income Tax Act. While TOLA did not amend the four- and six-year time limits under the Act, it provided a relaxation for issuing reassessment notices during the COVID-19 period.
4. TOLA does not apply if the time limit under Section 149 expires before 20-03-2020. When issuing a reassessment notice, the Revenue must check both the Section 149 time limit and TOLA’s relaxation period. For example, the six-year limit for AY 2013-14 expired on 31-03-2020, but TOLA extended it to 30-06-2021.
5. Accordingly, after April 01, 2021, the Income Tax Act has to be read along with the substituted provisions. TOLA will continue to apply to the Income Tax Act after April 01, 2021, if any action or proceeding specified under the substituted provisions of the Income Tax Act falls for completion between 20-03-2020 and 31-03-2021.
6. TOLA will extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20-03-2020 and 31-03-2021, then the specified authority under Section 151(i) has extended time till 30-06-2021 to grant approval.
7. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20-03-2020 and 31-03-2021, then the specified authority under Section 151(2) has extended time till 31-03-2021 to grant approval;
8. Thus, Assessing Officers were required to issue the reassessment notice under Section 148 of the new regime within the time limit surviving under the Income Tax Act read with TOLA. All notices issued beyond the surviving period are time-barred and liable to be set aside.

List of Cases Reviewed

• Rajeev Bansal v. UOI [2023] 147 taxmann.com 549 (All.) (para 115) setaside