The Supreme Court, in UOI v Ashish Agarwal, has upheld the validity of reassessment notices issued between the period 1 April 2021 and 30 June 2021 under the old provisions of Section 148 of the Income Tax Act, 1961 (IT Act). While modifying the orders of various High Courts, the Supreme Court held that notices issued under the erstwhile Section 148 shall be deemed as show-cause notices in terms of Section 148A(b) as substituted by the Finance Act, 2021 (FA 2021).
The decision has come as a relief to the tax department as more than 90,000 reassessment notices issued under the erstwhile reassessment provisions have been held to be valid.
The Government, through FA 2021, revamped the reassessment provisions from 1 April 2021 and made changes to the procedure governing the issuance of reassessment notices. Section 148A was inserted in the IT Act mandating procedural safeguards to be necessarily followed by the tax officers before issuing notice under Section 148.
Parallelly, the Central Government, deriving powers from the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, vide explanations to Notification No. 20/2021 and Notification No. 38/2021 (collectively, the Notifications) stipulated that the old, unamended provisions of reassessment shall continue to apply to reassessment proceedings initiated till 30 June 2021.
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