The Telangana High Court observed that notice issued under section 148 of the Income Tax Act, 1961 without following the modified procedure under Finance Act 2021 is invalid and set aside the reassessment notice.
The petitioner stated that in furtherance of Finance Act, 2021, the reassessment process stood modified but the respondents have not taken care of it and therefore notices issued under Section 148 of the Income Tax Act, 1961 cannot sustain judicial scrutiny. Since notices are bad in law, the consequential orders are also bad in law.
During hearing, counsel for the parties agreed that curtains on this issue are finally drawn by this Court in a batch of writ petitions, W.P.No.25903 of 2022 and other connected matters, decided by a common order dated 14.09.2023. The parties agreed that this matter may be disposed of in terms of the Common Order dated 14.09.2023.
The Court in the said order held that the procedure to be followed by the respondent Department upon treating the notices issued for reassessment being under Section 148A, the subsequent proceedings were mandatorily required to be undertaken under the substituted provisions as laid down under the Finance Act, 2021.
In the absence of this, we are constrained to hold that the procedure adopted by the respondent department is in contravention to the statute i.e. the Finance Act, 2021, at the first instance. Secondly, it is also in direct contravention to the directives issued by the Hon’ble Supreme Court in the case of Ashish Agarwal, supra.
It was observed by the court that the impugned notices issued and the proceedings drawn by the respondent Department are neither tenable nor sustainable. the notices issued under Section 148 after the amendment brought by the Finance Act’ 2021 i.e. on or after 01.04.2021 be treated as notices under Section 148-A as per the amended provisions.
While quashing the notices issued under Section 147 and 148 of the act, the court held that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically.
The division bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao held that the impugned Show Cause notices and consequential orders passed in writ petitions are set aside.
A.V.A.Siva Kartikeya appeared for the petitioner(s) and Ms. B.Sapna Reddy, Sri J.V.Prasad, appeared for the respondent.
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