2025 (5) TMI 217 - HC - Income Tax

Validity of reopening of assessment - order passed u/s 148(A)(d) wherein their objections to the initiation of reassessment proceedings rejected - HELD THAT - We are of the view that the orders passed u/s 148(A)(d) of the Income Tax 1961 in all the above matters and any other consequential proceedings are required to be quashed and set aside with a direction upon the Assessing Officer to allow the petitioners to once again file objections and thereafter dispose of the objections in terms of the law laid down by the Supreme Court in Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT and Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) The petitioners shall be at liberty to raise new objections including jurisdictional ones and rely upon other judgments of the Apex Court as applicable. These objections should be filed by the petitioners within a period of four weeks. The authority shall thereafter grant an opportunity of hearing to the petitioners and pass orders in accordance with law. With regard to the orders passed under Section 148(A)(d) of the Income Tax Act 1961 that may have been passed beyond time as observed by the Supreme Court in paragraphs 112 113 and 114 of Rajeev Bansal (supra) we make it clear that the observations made therein shall apply.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this batch of writ petitions primarily revolve around the validity and procedural correctness of reassessment notices issued under Section 148 of the Income Tax Act, 1961. Specifically, the issues include:

• Whether the orders rejecting objections to initiation of reassessment proceedings under Section 148(A)(d) of the Income Tax Act, 1961, are legally sustainable.
• The applicability and effect of the Supreme Court's rulings in Union of India vs. Rajeev Bansal and Union of India vs. Ashish Agarwal concerning the validity of Section 148 notices issued between 1st April 2021 and 30th June 2021.
• The procedural rights of the assessees to file fresh objections and raise jurisdictional and other legal challenges post the Supreme Court's pronouncements.
• The consequences of time-barred orders under Section 148(A)(d) as discussed in the Supreme Court's judgment in Rajeev Bansal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of orders rejecting objections under Section 148(A)(d)

Relevant legal framework and precedents: Section 148(A)(d) of the Income Tax Act, 1961, mandates that the Assessing Officer must consider the objections filed by the assessee before initiating reassessment proceedings under Section 148. The Supreme Court's decisions in Union of India vs. Rajeev Bansal and Union of India vs. Ashish Agarwal have clarified the scope and limitations regarding the issuance of reassessment notices during the specified period in 2021.

Court's interpretation and reasoning: The Court observed that the orders passed rejecting the petitioners' objections under Section 148(A)(d) were not in conformity with the law as laid down by the Supreme Court. The Court emphasized that these orders require reconsideration in light of the authoritative pronouncements.

Key evidence and findings: The Court noted that the petitioners had filed objections against the initiation of reassessment proceedings, which were summarily rejected. The Supreme Court's rulings have now provided the legal framework for adjudicating such objections.

Application of law to facts: The Court directed that the orders rejecting objections be quashed and set aside, mandating the Assessing Officer to allow the petitioners to file fresh objections and dispose of them in accordance with the Supreme Court's judgments.

Treatment of competing arguments: While the Income Tax Department defended the validity of the reassessment notices and the rejection orders, the Court gave precedence to the binding Supreme Court rulings, thereby overruling the Department's stand.

Conclusions: The Court held that the petitioners must be granted an opportunity to raise fresh objections, including jurisdictional challenges, and that the Assessing Officer must reconsider objections in line with the Supreme Court's authoritative guidance.

Issue 2: Effect of Supreme Court rulings on reassessment notices issued between 1st April 2021 and 30th June 2021

Relevant legal framework and precedents: The Supreme Court in Rajeev Bansal and Ashish Agarwal dealt with the validity of Section 148 notices issued during the transitional period following amendments to the Income Tax Act, particularly focusing on procedural compliance and time limits.

Court's interpretation and reasoning: The Court recognized these rulings as final and binding, clarifying the legal position on reassessment notices issued in that period. It acknowledged that the Supreme Court had conclusively addressed the validity and procedural requirements, including the time bar issues.

Key evidence and findings: The Court relied extensively on the Supreme Court's detailed analysis and findings, particularly paragraphs 112 to 114 of Rajeev Bansal, which discuss the time limits and the consequences of non-compliance.

Application of law to facts: The Court applied these principles to the present cases, holding that any orders or proceedings inconsistent with these rulings must be set aside and reconsidered.

Treatment of competing arguments: The Department's reliance on the reassessment notices' validity was superseded by the Supreme Court's authoritative rulings, which the Court enforced strictly.

Conclusions: The Court mandated adherence to the Supreme Court's directions and required reassessment proceedings to be conducted strictly within the legal framework outlined therein.

Issue 3: Procedural rights of petitioners to file fresh objections and raise jurisdictional challenges

Relevant legal framework and precedents: The Income Tax Act provides for the filing of objections under Section 148(A)(d) before reassessment proceedings commence. The Supreme Court has recognized the importance of these procedural safeguards.

Court's interpretation and reasoning: The Court emphasized that petitioners must be afforded a meaningful opportunity to raise all objections, including fresh and jurisdictional ones, in light of the Supreme Court's rulings.

Key evidence and findings: The Court noted that the petitioners had been denied such an opportunity in the initial orders and that this procedural lapse warranted corrective action.

Application of law to facts: The Court directed that petitioners be allowed four weeks to file fresh objections and that the Assessing Officer must hear and decide these objections in accordance with law.

Treatment of competing arguments: The Department's argument that objections had already been considered was rejected, as the Court found that the earlier consideration was not in conformity with the Supreme Court's rulings.

Conclusions: Petitioners' procedural rights were restored, and the Assessing Officer was directed to conduct fresh proceedings in a fair and lawful manner.

Issue 4: Treatment of time-barred orders under Section 148(A)(d)

Relevant legal framework and precedents: The Supreme Court in Rajeev Bansal examined the consequences of orders passed beyond the prescribed time limits under Section 148(A)(d), emphasizing strict adherence to statutory timelines.

Court's interpretation and reasoning: The Court reiterated that the observations and directions in paragraphs 112, 113, and 114 of Rajeev Bansal regarding time-barred orders are binding and must be followed.

Key evidence and findings: The Court observed that some orders passed under Section 148(A)(d) in the present batch of cases may have been beyond the prescribed time limits.

Application of law to facts: The Court held that such orders are liable to be set aside and that the procedural safeguards must be strictly observed.

Treatment of competing arguments: The Department's arguments for validating such orders were rejected in light of the Supreme Court's clear directives.

Conclusions: The Court mandated strict compliance with time limits and procedural requirements, invalidating any orders passed beyond the prescribed period.

3. SIGNIFICANT HOLDINGS

The Court made the following crucial legal determinations:

"The orders passed under Section 148(A)(d) of the Income Tax, 1961, in all the above matters and any other consequential proceedings, are required to be quashed and set aside with a direction upon the Assessing Officer to allow the petitioners to once again file objections, and thereafter, dispose of the objections in terms of the law laid down by the Supreme Court in Ashish Agarwal (supra) and Rajeev Bansal (supra)."

"The petitioners shall be at liberty to raise new objections, including jurisdictional ones and rely upon other judgments of the Apex Court as applicable."

"With regard to the orders passed under Section 148(A)(d) of the Income Tax Act, 1961 that may have been passed beyond time as observed by the Supreme Court in paragraphs 112, 113 and 114 of Rajeev Bansal (supra), we make it clear that the observations made therein shall apply."

Core principles established include the binding nature of the Supreme Court's rulings on reassessment notices issued during the transitional period, the necessity of procedural fairness in considering objections under Section 148(A)(d), and strict adherence to statutory timelines.

Final determinations on each issue mandate quashing of impugned orders, allowance for fresh objections, and re-adjudication in conformity with Supreme Court precedents, thereby ensuring lawful exercise of reassessment powers.