Income Tax Department moves to Supreme Court challenging Allahabad HC’s order quashing Reassessment Notices

The Income Tax Department has knocked the doors of the Supreme Court while challenging the Allahabad High Court’s order quashing reassessment notices.

The Taxpayers moved the Allahabad High Court contesting the notices on the grounds that they were contradictory to the provisions of the new tax regime.

The Allahabad High Court had said that the new tax regime did not empower the Income Tax department to reopen cases after March 31, 2021.  This was followed by similar orders by other high courts, including the Rajasthan High Court, Delhi High Court and Calcutta High Court, preventing the income-tax department from reopening cases for reassessment.

The government had amended a provision governing reassessment proceedings under Section 148 of the Income-Tax Act, 1961. The amendment had limited the period for issuing notices with respect to reopening past years' assessment to three years from six earlier.  The amendment, which was aimed at reducing litigation, was to take effect from April 1, 2021.

However, the income tax authorities extended the time limit to June 30, 2021, citing the second wave of Covid-19.

It then went ahead and issued notices to thousands of taxpayers between April 1, 2021, and June 30, 2021, for reopening past assessment proceedings.

The tax department issued these notices under Section 148, alleging improper disclosure of income for years prior to the last three assessment years.

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