The Supreme Court of India, instructed Assessing Officers (AO) to decide objections in income tax reassessment proceedings in line with the law laid down in the Rajeev Bansal judgment.

The Assistant Commissioner of Income Tax challenged a Bombay High Court order that had quashed a Section 148 notice, a Section 148A(d) order, and related demands against Sodexo India Services Private Limited.

The Bombay High Court relied on the ruling in Godrej Industries Ltd. and quashed the notices on limitation grounds, leaving other issues open to be raised separately if needed.

Complete Guide to Reassessment: Comprehensive Topic-wise Analysis, Circulars, Case Laws & Practical Insights, Click Here

In Godrej Industries Ltd., the petition had challenged a show cause notice dated 24 May 2022, an order dated 31 July 2022 under Section 148A(d), and a notice issued the same day under Section 148. The petitioner argued that these actions violated the requirements of Sections 147, 148, 148A, 149, and 151 of the Income Tax Act.

It was contended that the notice was time-barred under Section 149, issued while reassessment from an earlier notice dated 21 May 2021 was pending, and lacked fresh information. It was also argued that no income represented in the form of an asset justified the extended limitation, the Section 151 approval was mechanical, and the reassessment amounted to a mere change of opinion.

The Bombay High Court had first examined the limitation and noted that if the petitioner succeeded on this point, other issues need not be addressed. It also recorded that several similar petitions for AY 2014-15 were pending on the same question.

In the present matter, the Supreme Court condoned the delay in filing and refiling the petitions and noted that the issue was covered by its earlier judgment dated 3 October 2024, in Union of India & Ors. vs. Rajeev Bansal, reported in 2024 (11) Scale 473.

In Rajeev Bansal, the Apex Court interpreted the first proviso to Section 149(1)(b), which barred reassessment notices for assessment years beginning on or before 1 April 2021 if they were already time-barred under the old law. Under the earlier regime, reassessment could be done within four years in all cases, and up to six years if the escaped income was ₹1 lakh or more.

From 1 April 2021, the new regime reduced the limit to three years, with reopening up to ten years only if the escaped income exceeded ₹50 lakh. The proviso ensured that the new ten-year limit applied prospectively and could not revive cases already closed under the old timelines.

Tax Planning For Trusts and cooperation Societies - Click Here

The Supreme Court stated that the old law allowed reopening for income above ₹1 lakh, while the new law raised the threshold to ₹50 lakh. It relied on Ashish Agarwal, where it was held that reassessment notices issued under the old regime after 1 April 2021 would be treated as show-cause notices under Section 148A(b) of the new regime. This meant the new safeguards applied, including the requirement to share information with taxpayers and allow them to respond.

The Apex Court also explained how the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) temporarily extended deadlines falling between 20 March 2020 and 31 March 2021 up to 30 June 2021 due to the COVID-19 pandemic. TOLA did not change the three-year or six-year limits but only extended time for notices due in that window.

Section 151, which required prior sanction before issuing Section 148 notices, was also discussed. The Finance Act 2021 tightened this safeguard by raising the approval levels needed for notices beyond three years. In Ashish Agarwal, the Court waived certain approvals for old notices deemed as show-cause notices but kept the requirement for approvals at later stages.

The Supreme Court clarified that its Article 142 powers were used to balance fairness but could not override legal rights or create new ones. In Ashish Agarwal, about 90,000 reassessment notices issued under the old regime after 1 April 2021 were converted into show-cause notices under Section 148A(b) rather than being treated as reassessment notices.

The Apex Court directed the department to provide supporting material to taxpayers and paused further action until responses were received. The time the notices were effectively “stayed,” plus two weeks for replies, was excluded from limitation.

Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here

The Supreme Court explained that the directions in Ashish Agarwal applied to all such notices issued between 1 April and 30 June 2021. Assessing officers had to issue reassessment notices within whatever time remained under the Act and TOLA,any notice beyond that time was barred.

Justice J.B. Pardiwala and Justice R. Mahadevan, in line with above ruling, in the present matter, disposed of the petitions and directed the assessing officers to decide the objections in accordance with the law laid down in the Rajeev Bansal judgment.

The Apex court further clarified that the respondent could pursue appropriate legal remedies for any grievance, except for issues conclusively settled by that judgment. All pending applications were also disposed of.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates